Workshops for listing on HKEX

Vincent Li

Listing on the Hong Kong Exchanges and Clearing markets is a complex and challenging process. It requires professionals to be fully-aware of their roles and responsibilities, and be up to date with the latest regulatory developments. To help, the Institute is holding a series of workshops for listing on HKEX starting in the coming months.

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Vincent Li


The Hong Kong Stock Exchange ranked first globally in initial public offerings (IPO) five times in the past nine years, with over HK$2 trillion in IPO funds raised by issuers.

Listing is a complex process, and the Hong Kong Exchanges and Clearing (HKEX) might reject an issuer’s application if there are any material deficiencies in legal, accounting and tax issues of the company. HKEX focuses on the suitability and eligibility of each applicant and is prepared to reject unsuitable applications. In 2018, HKEX rejected 25 listing applications, a substantial increase from 2017’s eight rejections.

The recently published Listing Decisions revealed that HKEX has heightened scrutiny on the commercial rationale for listing. Factors considered include: funding needs, business expansion issues, application of raised IPO funds, and the price: earnings characteristics of the applicant compared to industry norms.

With this in mind, it is important for accountants or finance heads assisting companies to list in Hong Kong to note that though the financial requirements of the listing applicants are met, the exchange has a discretion to accept or reject applications and in reaching their decision will pay particular regard to the whether the applicants are suitable for listing, such as 1) whether the listing applicants are compliant with law, rules and regulations; 2) the suitability of the listing applicants, such as sustainability of the business; reliance on a parent company; suitability of directors, including potential shadow directors; and 3) whether there are any material disclosure deficiencies of the listing applicants, etc. Accountants or financial heads should be aware of these issues to ensure the issuer’s application gets approved or to effectively respond to enquiries and challenges by the exchange.

Continuing obligations

A company’s successful listing is only the beginning of its capital market journey. Listed companies are governed by a mix of rules and regulations which set out a number of continuing obligations, such as ongoing disclosures, periodic reporting, disclosure of interest filings, corporate governance requirements, and notifiable and connected transactions. These are designed to ensure the maintenance of a fair and orderly securities market.

HKEX is active in enforcing its rules after listing and will suspend companies not in compliance with them. In March, HKEX issued the new Guidance Letter on listed issuer’s suitability for continued listing, the assessments include: shell characteristics, non-compliance with laws and regulations, material internal control failures, fraud, and a business structure which means the company is unable to safeguard its assets and shareholders’ interests.

Where there are concerns that an issuer has suitability issues, HKEX has discretion to suspend trading in the issuer and give the issuer a reasonable period to address and correct concerns. If the issuer still fails to address such concerns within a reasonable period, the exchange may cancel its listing.

Accountants, therefore, need to be prepared for common issues relating to post-listing obligations, such as the continuing obligations to disclose price sensitive information. One of my clients was challenged by the exchange to publish the profit warning announcement promptly for its decline of the operating profit in accordance with the listing rules and the Inside Information Provisions of the Securities and Futures Ordinance. I discussed with the management of the company and noted that the decline was due to a significant drop in sales in last several months. The company regularly disclosed to the market its operating data in the preceding period and that such information will have a direct bearing on the company’s performance, and will therefore provide those investing in the company’s shares a better idea on the financial performance of the company. Further, the company regularly consulted its legal advisors over its operating performance and discussed with them the appropriate responses for the company. As a result, the exchange was satisfied with the company’s explanation and no further actions or concerns have been raised.

The workshops

The Institute’s continuing professional development course “Workshops for Listing on HKEX” will run later in the year. The workshops cover planning and pre-IPO considerations, IPO listing process, as well as the continuing obligations of a listed entity. The workshops aim to enhance participants’ understanding of the key aspects for listing, and merger and acquisition of listing or listed entities.

By the end of the course, participants will know how to prepare prospectus, circulars, announcements, reports, letters and checklists required by the HKEX to avoid rejections and suspensions for companies. Watch for enrolment details on the Institute’s website.

Vincent Li is Audit Partner of ShineWing Certified Public Accountants LLP, a Practising Fellow of the Institute, and fellow member of ICAEW and ACCA. Li has extensive experience in providing assurance, corporate and business advisory services to international and multinational enterprises in Hong Kong and Mainland China. He has helped over 10 companies and state-owned enterprises to list on stock exchanges in Hong Kong, South Korea and Singapore.

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August 2019
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