Hong Kong: New Proposals on Listing Matters in Hong Kong

Last Updated: 14 October 2002

The local securities market in the last quarter was characterised by uncertainty and gloom, due partly to global market upheavals and partly to policy reform announcements by the Hong Kong industry regulators. Such reforms relate to the listing approval process and, more controversially, certain circumstances that may lead to a company losing its listing status.

A revised adjudication structure

In May The Stock Exchange of Hong Kong Limited (Stock Exchange) announced proposals to reorganise the adjudication structure for various matters relating to listing approvals and listed companies.

Among the proposed reforms were abolishing the Listing Committee and putting in its place "one-stop listing decision making" and "one-stop appeals".

It will be remembered that, whilst the front-line work in processing listing applications and enforcing the Listing Rules is handled by the Stock Exchange’s internal Listing Division, the power to approve a listing rests with the Listing Committee (or, in the case of the Growth Enterprise Market (GEM), the GEM Listing Committee). The Listing Committee currently comprises representatives from listed companies as well as industry professionals such as brokers, investment bankers, fund managers and accountants.

The current structure

Firstly let’s look at the listing approval structure in force today. Currently, a listing application goes first to the Listing Division. The Listing Division may reject the application or recommend it to the Listing Committee. The applicant may have a ruling of the Listing Committee reviewed by the Committee twice (in the second instance the Listing Committee sits as the Listing (Review) Committee). Where the application is rejected on the ground of unsuitability for listing, the decision may be reviewed firstly by the Listing (Review) Committee and finally by the Listing Appeals Committee.

Many other kinds of non-disciplinary matters come under the jurisdiction of the Stock Exchange. Generally speaking, the adjudication structure for listing approvals applies also to other non-disciplinary matters.

The adjudication process for disciplinary matters relating to listed companies is similar, but not entirely the same. Under the current rules, an investigation is first carried out by the Listing Division. Where there is a potential breach of the Listing Rules, the matter is referred to the Listing Committee. The decision of the Listing Committee is subject to its own review and an appeal to the Listing Appeals Committee.

The May proposals

In May this year, the Stock Exchange proposed certain modifications to the current system. The changes included the setting up of a new division and two new governance committees, as well as a re-distribution of the functions and duties of the various units. The aim of the proposals was to remove the complicated review and appeal structure and replace it with a simpler process involving fewer adjudication authorities. The proposed reforms would also involve the abolition of the current Listing Committee and Listing Appeals Committee.

Under the May proposals, listing matters would continue to be handled by the Stock Exchange’s internal Listing Division. Applications for listing, as well as other non-disciplinary matters, would be considered firstly by an "internal group" comprising executives in the Listing Division and the Chief Executive of the Stock Exchange. Decisions of this internal group would be subject to appeals to a new Listing Matters Committee (LMC), which would comprise non-executive directors of the Stock Exchange and external market professionals In relation to disciplinary matters, when the Listing Division found a potential breach of the Listing Rules, it would refer the matter to a new Adjudication Division to be set up for this purpose. The decisions of the Adjudication Division would be subject to appeals to another new governance committee, the User Appeal Committee (UAC), which would again comprise non-executive directors of the Stock Exchange and external market professionals.

The May proposals revised and re-issued

Implementation of the May proposals was planned for later this year. Much controversy, however, was stirred up after the initial announcement over the abolition the Listing Committee.

The proposals were therefore modified. On 24 July 2002 the Stock Exchange released the revised plans in the form of a 3-pronged programme:

a) a new Listing Committee

there will be a re-constituted combined Listing Committee for both the Main Board and GEM

the Stock Exchange, listed companies, financial intermediaries and investors will have representation on the committee

the new Listing Committee will commence operation on 1 January 2003

b) a streamlined listing process

the Listing Division will continue to process non-disciplinary matters (including listing applications), subject to the approval of the Listing Committee and appeal to the LMC, renamed as the Listing Policy and Appeals Committee

for disciplinary matters, the Listing Division again takes the front-line investigatory role, with suspected cases of rule breaches to be referred to the new Adjudication Division, whose decisions are subject to appeals to the UAC, renamed as the Disciplinary Appeals Committee

c) strengthening of back-end enforcement of disclosure requirements

the prospectus-vetting process, including the staffing arrangements, will be reorganised

during the prospectus-vetting process, managers at the Stock Exchange will comment only on principal issues and leave ancillary matters, such as consistency and presentation of the prospectus, to the listing applicant and its advisers

issuers and advisers will be held strictly to the timelines for document submission set out in the Listing Rules

Subject to relevant amendments to the rules and appointment of personnel, his three-pronged programme will be implemented in stages towards the last quarter of this year.

Market professionals engaged in listing work should beware the back-end enforcement issue. The Stock Exchange said that there will be a clearer division of work between the Listing Division and the listing sponsors. Listing applicants and their sponsors will be held responsible for the standard and quality of prospectuses, whilst the quality of the sponsors themselves will also be a target for closer regulation. As far as the degree of professionalism expected of advisers working on listings is concerned, the Stock Exchange seems settled on a major break with the past.

Finally, it is important to note that none of the proposals discussed above are intended to alter the standards which a company is required to meet before its securities can be listed in Hong Kong.

Continued compliance with listing criteria

On 25 July the Stock Exchange released plans to tighten up the listing eligibility rules for the Main Board in a new consultation paper, the "Consultation Paper on Proposed Amendments to the Listing Rules Relating to Initial Listing and Continuing Listing Eligibility and Cancellation of Listing Procedures".

The consultation paper is in five parts: (a) initial listing eligibility criteria, (b) continuing listing eligibility criteria, (c) continuing obligations, (d) cancellation of listing procedures and (e) disclosure requirements at the time of initial listing. The proposed rules affect different stages of the life of a listed company on the Main Board:

(a) when a listing is first sought

Firstly, the Stock Exchange aims to impose a sufficiently high initial threshold. Examples of the proposed new criteria include:

  • in addition to the current requirement for management continuity during the 3-year track record period, continuity of ownership and control for at least the most recent year will be required
  • new quantitative tests based on market capitalisation, revenue and cash flow will be introduced to assess the listing applicant’s financial performance, as alternatives to the current profit test
  • sufficient working capital for current needs and at least the next 12 months
  • at least 300 shareholders
  • minimum issue price of HK$ 2 The Stock Exchange also plans to impose additional disclosure requirements at the time of listing. These include, for example, details about over-allotment options and price stabilisation activities, the company’s corporate governance practices during the track record period and whether it is able to carry on its business independently from its controlling shareholders.

(b) after a company is listed – how to stay listed

The Stock Exchange seeks to ensure that companies that are already listed continue to comply with certain criteria. Failure to comply may result in the company being de-listed. Some examples of the circumstances that may lead to de-listing are:

  • the company being loss-making for three consecutive years and having negative equity
  • the company being loss-making for three consecutive years and having an average market capitalisation of less than HK$ 50 million over 30 consecutive days
  • the company having an average market capitalisation of less than HK$ 50 million over 30 consecutive days and a shareholders’ equity of less than HK$ 50 million
  • the company or its principal subsidiaries being served with a winding up order or becoming the subject of other insolvency proceedings
  • the moving average of the company’s daily volume-weighted share price over 30 consecutive days being less than HK$ 0.5

These "continuing listing eligibility criteria", i.e. minimum standards that the company must meet in order to maintain its listing, proved to be extremely unsettling for the market. In particular, the minimum requirement for a HK$ 0.5 minimum share price sparked off a panic dumping of penny stocks, causing disruption and much discontent. Reacting to the generally hostile public reception, the Stock Exchange has withdrawn for separate consideration the entire chapter of the consultation paper on continuing listing eligibility criteria.

(c) after a company is listed – disciplinary proceedings

Separate from but related to the issue of "how to stay listed", the Stock Exchange has proposed certain additional continuing obligations. Failure to perform such obligations may lead to disciplinary action against the truant company but will not necessarily result in its being de-listed. Such obligations include, for example:

  • maintaining the same public float as that existing at the time of listing
  • maintaining at least the minimum number of shareholders required at the time of listing
  • publishing financial results on the due date

(d) when a company is to be de-listed

The Stock Exchange also proposes to streamline the de-listing procedure. For example, a company that is in danger of being de-listed will be given an opportunity to submit not more than one proposal (as opposed to multiple proposals currently permitted) within a specified period for bringing itself back to long-term compliance with the listing criteria.

Also proposed are time frames for completing the de-listing procedure. Where no proposal is made for turning the company around (or where the proposal made is rejected by the Stock Exchange), de-listing will take place within 6 months; where a proposal has been made and approved, but the company fails to implement it, de-listing will take place within 12 months.

At the time of writing, the proposals discussed above are still under public consultation. Depending as much on how the market reacts as the feasibility of the rules themselves, they may not be put into practice some time yet, if at all.

© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.