Hong Kong Exchange GEM Listing Reforms Effective 1st January 2024, Allow Eligible GEM Issuers to Transfer to Main Board without Sponsor Due Diligence or Standard Prospectus, New Listing Requirement for High Growth Enterprises in R&D, Reduced Post-IPO Share Lock-Up Period to 12 Months, Removed Mandatory Quarterly Reporting Requirements
20th December 2023 | Hong Kong
Hong Kong Exchange (HKEX) GEM listing reforms will be effective from 1st January 2024, with new changes include 1) allowing eligible GEM issuers to transfer to Hong Kong Exchange Main Board without sponsor due diligence or standard prospectus (Prospectus-standard), 2) implementing a new listing requirement for high growth enterprises in R&D, 3) reducing post-IPO share lock-up period to 12 months, and 4) removing mandatory quarterly reporting requirements. HKEX: “The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published conclusions (Consultation Conclusions) to its Consultation Paper on GEM Reforms (Consultation Paper). The Exchange received 58 non-duplicate responses to the Consultation Paper from a broad range of respondents. All the Exchange’s proposals received majority support. The Exchange will adopt those proposals with minor modifications and clarifications as set out in the Consultation Conclusions.” More info below | View Consultation Conclusions and Respondents’ submissions
“ Hong Kong Exchange GEM Listing Reforms Effective 1st January 2024, Allow Eligible GEM Issuers to Transfer to Main Board without Sponsor Due Diligence or Standard Prospectus, New Listing Requirement for High Growth Enterprises in R&D, Reduced Post-IPO Share Lock-Up Period to 12 Months, Removed Mandatory Quarterly Reporting Requirements “
HKEX Head of Listing, Katherine Ng: “We are very pleased to have had strong support for our GEM proposals, and HKEX is excited about implementing reforms next year. We believe these will greatly enhance GEM’s attractiveness to SMEs seeking a listing. In addition, our adjustments to ongoing listing requirements will help to reduce compliance costs for current GEM issuers, whilst at the same time upholding market quality and investor protection.”
Hong Kong Exchange GEM Listing Reforms Effective 1st January 2024
15th December 2023 – The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published conclusions (Consultation Conclusions) to its Consultation Paper on GEM Reforms (Consultation Paper). The Exchange received 58 non-duplicate responses to the Consultation Paper from a broad range of respondents. All the Exchange’s proposals received majority support. The Exchange will adopt those proposals with minor modifications and clarifications as set out in the Consultation Conclusions. The key proposals adopted include:
- Introducing a new streamlined transfer mechanism to enable eligible GEM issuers1 to transfer to the Main Board without the need to appoint a sponsor to carry out due diligence or produce a “prospectus-standard” listing document;
- Introducing a new alternative “market capitalisation/ revenue/ R&D test”2 for an initial listing on GEM that targets high growth enterprises heavily engaged in research and development (R&D) activities;
- Reducing the post-IPO lock-up period imposed on GEM issuers’ controlling shareholders to 12 months; and
- Removing mandatory quarterly reporting requirements and aligning other continuing obligations of GEM with those of the Main Board3.
The revised GEM Listing Rules and Main Board Listing Rules to implement the GEM Reforms will come into effect on Monday, 1 January 2024.
Notes:
- The qualifications of a streamlined transfer required for an eligible GEM issuer are set out in Section III in Chapter 2 of the Consultation Conclusions.
- The requirements that a GEM listing applicant must meet under the new test are set out in Section I(A) in Chapter 2 of the Consultation Conclusions.
- The proposal to align continuing obligations of GEM with those of the Main Board include:
- Removing the requirement to appoint a compliance officer of a GEM issuer;
- Shortening the engagement period of the compliance adviser of a GEM issuer to a period that is equivalent to the relevant Main Board requirement; and
- Aligning GEM’s periodic reporting timeframes for annual reports, interim reports, and preliminary announcement of results for the first six months of each financial year with the relevant timeframes under the Main Board.
- For details, please see Section II in Chapter 2 of the Consultation Conclusions.
Hong Kong Exchange Released Consultation Paper on GEM Listing Reforms, Including New Transfer Process from GEM to Main Board, New Eligibility Test for High-Growth Segment & Removal of Quarterly Reporting Requirements
30th September 2023 – The Hong Kong Exchange (HKEX) has released a Consultation Paper on GEM listing reforms (GEM ~ formerly known as the Growth Enterprise Market), including new transfer process from GEM to Main Board, new eligibility test for high-growth segment and removal of quarterly reporting requirements. HKEX: “The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Tuesday) published a consultation paper seeking market feedback on GEM listing reforms (the Consultation Paper). The consultation window is open for a six-week period, concluding on 6 November 2023. The proposals presented include a new streamlined transfer mechanism for eligible GEM companies to transfer to the Main Board, a new alternative eligibility test for companies in the high-growth segment, and removal of quarterly reporting requirements … … The groups of stakeholders that the Exchange engaged in preparing its proposals for consultation included industry associations, professional bodies and industry practitioners (e.g. law firms, sponsor firms and investment managers) in Hong Kong, and institutional investors in Mainland China that actively invest in Beijing Stock Exchange’s listed issuers. The Exchange is seeking market feedback on its proposals and the proposed Listing Rules to implement them. The public comment period ends on 6 November 2023. Interested parties are encouraged to respond to the Consultation Paper by completing and submitting a questionnaire on the HKEX website.” More info below:
HKEX CEO, Nicolas Aguzin: “The stock exchange is one of a range of options available for SMEs seeking capital to drive growth, sustain innovation and create value. At HKEX we are fully committed to providing a supportive environment where SMEs across the region can thrive and contribute to the continued prosperity of Hong Kong and the broader community. We look forward to receiving the market’s feedback on our consultation.”
HKEX Head of Listing, Katherine Ng: “In response to preliminary market feedback, we engaged with a broad range of stakeholders, including SMEs and their representatives, to hear their views regarding GEM and its development. Our resulting proposed reforms aim to broaden GEM’s appeal to issuers, while maintaining market confidence, and important high standards of investor protection.”
Hong Kong Exchange Released Consultation Paper on GEM Listing Reforms, Including New Transfer Process from GEM to Main Board, New Eligibility Test for High-Growth Segment & Removal of Quarterly Reporting Requirements
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Tuesday) published a consultation paper seeking market feedback on GEM listing reforms (the Consultation Paper). The consultation window is open for a six-week period, concluding on 6 November 2023. The proposals presented include a new streamlined transfer mechanism for eligible GEM companies to transfer to the Main Board, a new alternative eligibility test for companies in the high-growth segment, and removal of quarterly reporting requirements.
Key Proposals
1) Transfer Mechanism
- A new streamlined transfer mechanism to enable qualified GEM issuers to transfer to the Main Board without the need to: (a) appoint a sponsor to carry out due diligence, or (b) produce a “prospectus-standard” listing document.
- Instead a transfer applicant must:
- meet all the qualifications for listing on the Main Board;
- have published financial results for three full financial years as a GEM issuer with ownership continuity and control and no fundamental change in its principal business;
- meet:
- a daily turnover test – a streamlined transfer applicant must have reached a prescribed minimum daily turnover threshold on at least 50% of the trading days over a prescribed reference period of 250 trading days1 before the transfer application and until the commencement of dealings on the Main Board (Reference Period);
- a volume weighted average market capitalisation test – a streamlined transfer applicant must have a volume weighted average market capitalisation over the Reference Period that could meet the minimum market capitalisation requirement for Main Board listing; and
- a clean compliance record requirement over the 12 months preceding the transfer application and until the commencement of dealings on the Main Board.
- A GEM issuer that cannot meet these eligibility requirements may apply for a transfer under existing requirements.
2) Initial Listing Requirements
A new alternative eligibility test that targets high growth enterprises that are heavily engaged in research and development (R&D) activities. A GEM listing applicant using this test must, among other criteria, have R&D expenditure of at least HK$30 million in aggregate for the two financial years prior to listing, where the R&D expenditure incurred for each financial year must be at least 15% of the total operating expenditure for the same period.
3) Continuing Obligations
The removal of mandatory quarterly reporting requirements and the alignment of other ongoing obligations with those of the Main Board.
The groups of stakeholders that the Exchange engaged in preparing its proposals for consultation included industry associations, professional bodies and industry practitioners (e.g. law firms, sponsor firms and investment managers) in Hong Kong, and institutional investors in Mainland China that actively invest in Beijing Stock Exchange’s listed issuers.
The Exchange is seeking market feedback on its proposals and the proposed Listing Rules to implement them. The public comment period ends on 6 November 2023. Interested parties are encouraged to respond to the Consultation Paper by completing and submitting a questionnaire on the HKEX website.
Notes:
- The reference to “trading days” excludes the number of trading days on which trading of the applicant’s securities was halted or suspended.
- A streamlined transfer applicant must: (a) not have been held to have committed a serious breach of any Listing Rules in the 12 months preceding the transfer application and until the commencement of dealings in its securities on the Main Board; and (b) not be the subject of any investigation by the Exchange, or any ongoing disciplinary proceedings under Chapter 3 of the GEM Listing Rules, in relation to a serious breach or potentially serious breach of any Listing Rules as at the date of the transfer application and the date when dealing in its securities commences on the Main Board.
- These include (a) the removal of the existing requirement for one of the executive directors of a GEM issuer to assume responsibility for acting as the issuer’s compliance officer, (b) the shortening of engagement period of a GEM issuer’s compliance adviser so that it ends on the date on which the issuer publishes its financial results for the first (instead of the second) full financial year commencing after the date of its initial listing; and (c) the removal of other requirements relating to a compliance adviser’s responsibilities that only apply to GEM issuers.
About HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly-traded company (HKEX Stock Code:388) and one of the world’s leading global exchange groups, offering a range of equity, derivative, commodity, fixed income and other financial markets, products and services, including the London Metal Exchange. As a superconnector and gateway between East and West, HKEX facilitates the two-way flow of capital, ideas and dialogue between China and the rest of the world, through its pioneering Connect schemes, increasingly diversified product ecosystem and its deep, liquid and international markets. HKEX is a purpose-led organisation which, across its business and through the work of HKEX Foundation, seeks to connect, promote and progress its markets and the communities it supports for the prosperity of all.
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