Question:

HappyTech Limited is listed on the Hong Kong Stock Exchange. The Chairman, Mr. Wong, owns 30% of HappyTech's shares. His son Jason recently started a software company called SmartSoft Limited.

HappyTech's board is now considering three transactions with SmartSoft:

• HappyTech plans to purchase software licenses from SmartSoft for HK$10 million as a one-off transaction.

• HappyTech wants to lease one floor of its office building to SmartSoft for HK$2 million per year for three years.

• HappyTech intends to invest HK$5 million for a 20% stake in SmartSoft's new artificial intelligence project.

Questions:

1. Explain why these transactions would be considered connected transactions under the Listing Rules.

2. What are the compliance obligations for HappyTech regarding these three transactions? Consider whether announcement and shareholder approval are required.

3. The board asks what documents need to be prepared for these transactions. What would you advise?

4. If these transactions are spread across 12 months, what additional considerations should the board be aware of?

5. What are the consequences if HappyTech proceeds with these transactions without following the proper connected transaction requirements?