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Amendments to Main Board and GEM Listing Rules

INTRODUCTION

The Stock Exchange of Hong Kong Limited (the “Exchange”), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (“HKEx”) issued consultation paper for feedback on 27 November 2020.

The Exchange further published conclusions to its consultations on (1) the Main Board Profit Requirement and (2) review of Listing Rules relating to disciplinary powers and sanctions on 20 May 2021 (“Consultation Paper”). The revised profit requirement will take effect from 1 January 2022 and will apply to all Main Board listing applications, including renewal of previously submitted applications and applications to transfer from GEM, submitted on or after 1 January 2022.

One of the recent key changes to the Main Board Listing Rules is that the aggregate profit requirement over the three-financial year track record period will be raised by 60% from HK$50 million to HK$80 million. The aggregate profit requirement for the first two financial years will be increased from HK$30 million to HK$45 million and the profit requirement for the final financial year will be increased from HK$20 million to HK$35 million. The HKEX has also provided flexibility by granting relief from the profit spread within the track record period based on case-specific circumstances, provided that the listing applicants meets the new aggregate profit threshold of HK$80 million. The profit requirement was increased despite the current economic uncertainty, as the main reason for the increase is to combat market misconduct that have arisen since the market capitalisation was last increased in 2018. It is important for the Exchange to address misconduct that has been identified to ensure that the Hong Kong stock market attracts quality companies.

Key changes to the Main Board and GEM Listing Rules are as follows:

 

Listing Rules
Main Board
GEM

Financial Requirementses

At least HK$80 million (previously HK$50 million) in the last three (3) financial years with HK$35 million (previously HK$20 million) recorded in the most recent year and aggregate profit of at least HK$45 million (previously HK$30 million) recorded in the two (2) years before that

A positive cashflow generated from operating activities in the ordinary course of business of at least HK$30 million (previously HK$20 million) in aggregate for two (2) financial years immediately preceding the issue of the listing document

Operating History and Management

Trading record period of at least three (3) years with:
Management continuity for at least the three (3) preceding financial years; and
Ownership continuity and control for at least the most recent audited financial year
Trading record of at least two (2) financial years with:
Substantially the same management throughout the two (2) full financial years; and
A continuity of ownership and control throughout the full financial year immediately preceding the issue of the listing document
Minimum Market Capitalisation HK$500 million
(previously HK$200 million)
HK$150 million
(previously HK$100 million)
Minimum Public Float (25% of the issuers' total issued share capital at the time of listing)
HK$125 Million
(previously HK$50 million)
HK$45 million
(previously HK$30 million)
Spread of Shareholders
Minimum 300 holders
Minimum 100 persons

Offering Mechanism

A new applicant may not list by way of placing only if there is likely to be significant public demand for its securities
Offering to the public of not less than ten (10) percent of all securities offered, (previously, shares are allowed to be fully placed out)
Post-IPO Lock-up period on controlling shareholdersperating History and Management
Cannot sell shares for the first six (6) months upon listing
For the subsequent six (6) months controlling shareholders may sell shares but should retain control
Cannot sell shares for the first year (previously 6 months) upon listing
For the subsequent one year (previously 6 months), controlling shareholders may sell shares but should retain control

 

DIAGRAM OF THE BASIC LISTING RULES FOR MAIN BOARD OF HKEX

 

DIAGRAM OF THE BASIC LISTING RULES FOR GEM OF HKEX

 

Despite the changes to the Listing Rules, the Exchange remains an attractive platform for foreign investors to make a name for themselves in the global financial hub and historically, Hong Kong had been recognised as one of the most vibrant capital markets in Asia and globally. In recent years it appears that there will be an increasing interest amongst Malaysian companies to list their companies’ shares on the Exchange and we anticipate that this trend will continue.

Listing in Hong Kong is perennially attractive as the Exchange remains a premier stock exchange that offers a trusted platform to reach a broad range of investors to help fuel the issuer’s business growth. As the Exchange’s market sentiment continues to be strong coupled  with its ability to provide sustainable growth and ample liquidity, the Exchange is a much sought after IPO destination especially for companies in Asia.

 

 

 

 

 




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