Hong Kong: Listing on the Hong Kong Stock Exchange by Introduction

Last Updated: 23 August 2010

Listing on the Hong Kong Stock Exchange by way of introduction received some attention recently as a result of the suspension of trading in the shares of Asian Citrus Holdings Ltd, China's biggest orange plantation just 2 hours after trading on the opening day and in June 2010, the listing of London listed insurer Prudential PLC where Prudential added another trading venue in Hong Kong without raising additional funds as no new shares were issued in Hong Kong.

(A) Qualifications of Listing by Introduction

1.The issuer should have a sufficient spread of public shareholders and it does not wish to raise further new capital.

2.The securities for which listing is sought are already of such an amount and so widely held that their adequate marketability when listed can be assumed.

3.Introductions will normally be appropriate in the following circumstances :-

  1. where the securities for which listing is sought are already listed on another stock exchange;
  2. where the securities of an issuer are distributed in specie by a listed issuer to the shareholders of that listed issuer or to the shareholders of another listed issuer; or
  3. where a holding company is formed and its securities are issued in exchange for those of one or more listed issuers.

4.An introduction must be supported by a listing document which is compiled in compliance with the Listing Rules (Listing Rules 7.17).

5.The issuer must be duly incorporated or otherwise established under the laws of the place where it is incorporated or otherwise established and must be in conformity with those laws and its memorandum and articles of association or equivalent documents (Listing Rules 8.02).

6.Both the issuer and its business must, in the opinion of the Exchange, be suitable for listing (Listing Rules 8.04).

7.The issuer must have (i) a trading record of not less than 3 financial years; (ii) management continuity for the last 3 financial years; (iii) ownership continuity for at least the most recent audited financial year; and (iv) satisfied, either :-

  1. profit test – a profit in the most recent year of not less than HK$20,000,000.00, and in respect of the previous 2 years, an aggregate profit of not less than HK$30,000,000.00 (such profits should exclude any income or loss of the issuer, or its group, generated by activities outside the ordinary and usual course of business of the issuer); or
  2. market capitalization/revenue/cash flow test - a market capitalization of at least HK$2,000,000,000.00 at the time of listing, revenue of at least HK$500,000,000.00 for the most recent audited financial year, and positive cash flow from operating activities carried out by the issuer, or its group, that are to be listed of at least HK$100,000,000.00 in aggregate in the last 3 financial years; or
  3. market capitalization/revenue test - a market capitalization of at least HK$4,000,000,000.00 at the time of listing, and revenue of at least HK$500,000,000.00 for the most recent audited financial year, and at least 1,000 shareholders at the time of listing.

8.The most recent financial period reported on in the listing document must not have ended more than six months before the date of the listing document (Listing Rules 8.06).

9.The shares held by the public must constitute at least 25% of the issued shares of the issuer. There must be a minimum of 300 public shareholders and not more than 50% of the shares in public hands at the time of listing can be beneficially owned by the 3 largest public shareholders (Listing Rules 8.08). Any employee of the issuer who is a connected person of the issuer as defined under the Listing Rules will not be classified as a public shareholder.

10.The expected initial market capitalization of the issuer at the time of listing must be at least HK$200,000,000.00, with at least HK$50,000,000.00 held by members of the public (Listing Rules 8.09).

11.If the controlling shareholder or any director of the issuer has an interest in a business which competes or is likely to compete, either directly or indirectly, with the issuer's business, disclosures must be made in the listing document (Listing Rules 8.10).

12.The share capital of the issuer must not include shares which have a voting power which does not bear a reasonable relationship to the equity interest of such shares (Listing Rules 8.11).

13.The issuer must have a sufficient management presence in Hong Kong. At least 2 of the executive directors must be ordinarily resident in Hong Kong (Listing Rules 8.12).

14.The securities for which listing is sought must be freely transferable (Listing Rules 8.13).

15.Each director of the issuer must satisfy the requirements of the Listing Rules including (i) satisfying the Stock Exchange that he/she has the necessary character, experience and integrity, and (ii) the board must include at least 3 independent non-executive directors and at least one of these independent non-executive directors must have appropriate professional qualifications or accounting or related financial management experience (Listing Rules 8.15).

(B) Restrictions of Listing by Introduction

An introduction will not be permitted if :-

  1. there has been a marketing of the securities in Hong Kong within the six months prior to the proposed introduction where such marketing was made conditional on listing being granted for those securities;
  2. there is a pre-existing intention to dispose of securities, a likelihood of significant public demand for the securities or an intended change of the issuer's circumstances; or
  3. a change in the nature of the business of the issuer is in contemplation.

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