Key Regulatory Waivers, Corporate Governance Changes, and Tax Considerations: Critical Updates for Shareholders

Executive Summary

This report contains a comprehensive update on the regulatory waivers, exemptions, and significant changes to the corporate governance and legal framework of the Company following its continuation to Switzerland. It also outlines key tax implications for shareholders and material changes that may impact share value. All directors collectively and individually accept responsibility for the accuracy and completeness of this information, and commit to update shareholders if material changes occur.

Highlights Investors Must Know

• Major Waivers from HKEX Rules: The Company has received multiple waivers from strict compliance with Hong Kong Stock Exchange Listing Rules. These waivers encompass areas such as the use of US GAAP, share option pricing, connected person placings, collaboration agreements (no fixed terms or monetary caps), and requirements relating to share certificates, proxies, shareholder voting, and financial reporting.
• Transition to Swiss Law: The Company has continued as a Swiss stock corporation, effective May 27, 2025. This means key corporate actions (such as introducing new share classes, amending rights, or voluntary dissolution) now require a super-majority of two-thirds of shareholder votes present or represented at a general meeting.
• New Articles of Association: The New Articles enforce dual majority thresholds for certain resolutions and adjust requirements for special resolutions, class rights variations, and auditor appointments.
• Shareholder Protection: Despite differences in legal standards between HKEX and Swiss law, the Company asserts that shareholder protection remains substantially equivalent, especially in voting rights, inspection of registers, and class right variations.
• Financial Reporting: The Company continues to use US GAAP for its financial statements, subject to reconciliation with IFRS for Hong Kong reporting. This is significant for investors who rely on financial metrics comparable across jurisdictions.
• Tax Implications: The report details Swiss, US, and Mainland China tax consequences on dividends, distributions, and share sales, including risks related to Controlled Foreign Corporation (CFC) and Passive Foreign Investment Company (PFIC) status, which can materially affect after-tax returns for shareholders.

Potentially Price Sensitive or Value Affecting Issues

1. Waivers and Exemptions: Impact on Corporate Actions

The Company has received waivers allowing it to:

• Prepare accounts under US GAAP rather than HKFRS or IFRS. This may affect comparability for Hong Kong-based investors.
• Set share option exercise prices based on Nasdaq trading prices, potentially impacting dilution risk and employee incentive alignment.
• Issue shares to connected persons (such as Baker Bros. Advisors LP, Hillhouse Capital Management, Ltd., and Amgen) under general mandates, subject to certain conditions. This could impact share supply, dilution, and market perception of insider transactions.
• Enter into long-term collaboration agreements without fixed terms or monetary caps, raising both opportunity and risk for future revenue streams and obligations.

These waivers mean the Company may act more flexibly and quickly in capital raises, option grants, and strategic partnerships, but also introduce risks of dilution and governance concerns for minority shareholders.

2. Special Resolutions and Voting Changes

Under Swiss law, the threshold for special resolutions is now two-thirds, not three-fourths as previously required under HKEX rules. This change applies to:

• Introduction of new share classes
• Amendment of existing share class rights
• Voluntary dissolution of the Company

For value-sensitive decisions like mergers, acquisitions, or winding-up, the lower threshold may facilitate passing significant resolutions, but also increases the risk of major changes being approved with less consensus.

3. Shareholder Rights and Register Inspection

The New Articles allow any branch register in Hong Kong to be open for inspection by shareholders of record, but the Company may close the register in terms equivalent to Hong Kong Companies Ordinance. This may affect the timing of shareholder rights participation, especially around general meetings.

4. Financial Reporting and Timelines

The Company remains a U.S. reporting entity, filing annual financials within 60 days of fiscal year end, and delivering proxy materials at least 21 days before the annual meeting. If the Company ceases to be Nasdaq-listed or subject to SEC rules, it will transition to IFRS or HKFRS, potentially impacting financial statement comparability and investor confidence.

5. Tax Risks: CFC, PFIC, and Cross-Border Implications

The Company’s status as a CFC or PFIC under U.S. tax law can trigger penalty taxes, reporting requirements, and loss of step-up in basis for U.S. shareholders. These risks can materially affect after-tax returns, especially in the event of a sale or excess distributions. The Company will endeavor to provide IRS Form 5471 or necessary information to help shareholders comply with U.S. reporting requirements.

For Swiss holders, dividends and distributions are taxable. For Mainland China investors, distributions may be taxed as dividends, repayment of par value, or qualifying paid-in capital. Investors should consult their own tax advisors, as the Company does not guarantee the accuracy or completeness of tax advice.

6. Changes to Auditor Appointment and Remuneration

The appointment and removal of statutory auditors now require shareholder approval at a general meeting. Remuneration may be delegated to the board, but shareholders can also resolve this directly. This change centralizes more control at the shareholder level, potentially impacting oversight and governance.

Additional Details for Investors

• Proxy Voting: The Company undertakes to send two-way voting forms to shareholders, ensuring participation even if the Articles do not explicitly require this.
• Share Repurchases: Repurchases of shares are subject to agreement with the relevant shareholder and approval by directors or ordinary resolution, aligning with U.S. tender offer rules and Hong Kong Codes on Takeovers and Share Repurchases.
• Corporate Communications: Waivers permit electronic communications for holders of RMB shares, streamlining information delivery and reducing reliance on physical mail.
• Ownership Restrictions: The Company can restrict transfers of shares or ADSs if they would breach limits in the Articles or applicable law, including possible mandatory sale or disposition by holders exceeding those limits.
• Reporting Obligations: Shareholders must comply with disclosure requests to identify beneficial owners and interests, including compliance with stock exchange rules and Swiss law.

What Investors Should Watch For

• Potential dilution or insider participation in capital raises due to waivers on connected person placings.
• Flexibility in option grants and collaboration agreements, which could lead to new revenue opportunities or unforeseen liabilities.
• Changes in shareholder protection standards, especially voting thresholds for major corporate actions.
• Tax risks, especially for U.S. shareholders, relating to PFIC or CFC status, which may trigger penalty taxes.
• Transition risk if the Company ceases to be Nasdaq-listed or subject to SEC rules, requiring a change in accounting standards and possibly affecting investor confidence.

Disclaimer

This article is for informational purposes only and does not constitute legal, tax, or investment advice. Investors should consult their own advisors regarding the impact of these changes on their holdings. While the information herein is believed to be accurate as of the date of publication, the Company and the reporter accept no liability for any errors or omissions, or for decisions made based on this information. Shareholders are advised to monitor Company announcements for further updates.

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