Requirements for Listing on the Main Board of SEHK, July 2018

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Listing on the Main Board of the Stock Exchange of Hong Kong Limited (SEHK) requires new applicants to meet specific criteria, including trading records of at least 3 financial years and passing one of the Profit Test, Market Cap/Revenue Test, or Market Cap/Revenue/Cash Flow Test. Additional requirements involve revenue thresholds, market capitalization, ownership continuity, management stability, public shareholding, independent directors, and financial reporting.


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  1. INTRODUCTION OF LISTING ON THE MAIN BOARD (MB) INTRODUCTION OF LISTING ON THE MAIN BOARD ( MB ) OF THE STOCK EXCHANGE OF HONG KONG LIMITED OF THE STOCK EXCHANGE OF HONG KONG LIMITED ( SEHK ( SEHK ) ) July 2018

  2. Listing Requirements for the Listing Requirements for the MB MB A new applicant for the MB listing must have a trading record of not less than 3 financial years and should meet one of the following 3 tests: (I) Profit Test; (II) Market Cap/Revenue Test; and (III) Market Cap/Revenue/ Cash Flow Test.

  3. Market Cap/Revenue Test Profit Test Market Cap/ Revenue/ Cash Flow Test (i) Revenue of at least HK$500 million for the most recent audited financial year (i) Profits of HK$20 million for the most recent year and of aggregate of HK$30 million for the first 2 years; (ii) Market capitalisation of at least HK$4 billion at the time of listing (i) Revenue of at least HK$500 million for the most recent audited financial year (ii) Market capitalisation of at least HK$500 million at the time of listing (iii) Continuity of ownership and control prior to listing (1 year) (ii) Positive cash flow from operating activities of at least HK$100 million in aggregate for the 3 preceding financial years (iii) Continuity of ownership and control prior to listing (1 year) (iv) Substantially same management (3 years) (v) 25% or more of total issued capital held by public (iii) Market capitalization of at least HK$2 billion at the time of listing (iv) Substantially same management (3 years) (v) 25% or more of total issued share capital held by public (vi) At least 300 public shareholders and not more than 50% of securities in public hands at the time of listing beneficially owned by 3 largest public shareholders (iv) Continuity of ownership and control prior to listing (1 year) (vi) At least 300 public shareholders and not more than 50% of securities in public hands at the time of listing beneficially owned by 3 largest public shareholders (v) Substantially same management (3 years) (vi) 25% or more total issued share capital held by public (vii) At least 3 independent directors representing at least one third of the board (vii) At least 3 independent directors representing at least one third of the board (vii) At least 300 public shareholders and not more than 50% of securities in public hands at the time of listing beneficially owned by 3 largest public shareholders (viii) Semi-annual financial reporting (viii) Semi-annual financial reporting (viii) At least 3 independent directors representing at least one third of the board Listing Requirements for the MB Main Board (ix) Semi-annual financial reporting

  4. Suitability for Listing on the Suitability for Listing on the MB MB The SEHK has considered the following types of companies as unsuitable for listing: a company which fails to comply with all applicable laws and regulations and where such non- compliance may affect the validity of the business; a company which is unable to carry on its business independently; a company whose business is heavily reliant on transactions with connected persons or related parties during the track record period and after listing; and a company whose assets consist wholly or substantially of cash or short-dated securities, e.g., bills, short-term bonds or other investments with a maturity term of less than a year. (Note: This restriction is not applied to investment companies.)

  5. Listing Process Listing Process Step 1: Listing Preparation Evaluate the listing feasibility of the new applicant, Appointment of sponsor and other professional parties, confirmation on the listing group structure, and formulation of the listing timetable Step 2: Documents Preparation Conducting due diligence on business operation(s), legal and financial aspects, drafting prospectus, auditing work for 3 recent financial years, assets valuation, preparation of internal control report, A1 Documents preparation, Drafting underwriting agreement Step 3: Listing Application Submit Form A1 Listing Application Form, Reply SEHK & SFC queries, obtain listing approval upon listing committee hearing and select underwriting team members (marketing activities begin)

  6. Listing Process Listing Process Step 4: Share Offer Prepare marketing materials, research report, discuss & liaise with analysts and underwriting team, pre-roadshow, issue prospectus, pricing and decision on placement list, end of marketing activities, listing (Official trading of company s shares commences) LISTING OF SHARES

  7. Major Professional Parties involved in the Major Professional Parties involved in the MB Listing MB Listing Parties Duties coordination Conducting due diligence Addressing all matters raised by the SEHK in relation to listing Accompanying the directors of the Company to meetings with the SEHK Advising and guiding the directors through the listing process Advising on the corporate structure and steps required to effect a group reorganisation Drafting and preparing the listing documents Assisting the company in drafting responses to queries from the SEHK Advising on the negotiation of the various agreements entered into by the company with the banks and other parties Responsible for the submission of the listing application to the SEHK and the overall Sponsor Legal Advisers to the Company Drafting the underwriting agreements Conducting verification on the listing Assist the sponsor to conduct due diligence Legal Advisers to the Sponsor Preparing accountants report and the unaudited pro forma financial information included in prospectus Reporting Accountants

  8. Major Professional Parties involved in the Major Professional Parties involved in the MB Listing MB Listing Parties Duties Editing and printing prospectus and application forms Coordinating the translation of the prospectus into Chinese Providing conference rooms and business services to the working group during the drafting process Financial Printer Determining the valuations of and providing information on certain property interests of the company for inclusion in the prospectus Property Valuer Conducting internal control reviews of the company s internal control systems and procedures and providing recommendations Assisting the sponsor in assessing the company s ability to meet the internal control requirements under Listing Rules Internal Control Consultant Conducting market research study Independent Industry Consultant

  9. IPO VETTING PROCEDURES (HKEx IPO VETTING PROCEDURES (HKEx- -GL61 GL61- -13, Appendix (2)) 13, Appendix (2))

  10. Post Post- -IPO Obligations IPO Obligations Obligations Details Answering queries made of the Company by the SEHK concerning unusual movements in the price or trading volume of listed securities of any other matters Compliance with the prescribed minimum percentage of listed securities in public hands at all times Pre-emptive rights, being circumstances under which the directors of the listed company must obtain the consent of shareholders in general meeting prior to allotment, issue or grant of securities Arrangement of annual general meetings and board meetings Disclosure of financial information Inform the SEHK for any proposed changes of the Company s Articles of Association, changes in directorate or supervisory committee, change in the rights attaching to any class of listed securities, change in its auditors or financial year and change in its secretary or registered address Submission of announcements, circulars or other documents to the SEHK for review Arrangement of trading and settlement Disclosure of directors dealings, service contracts, nominations and contact information General obligations to immediate disclose insider information

  11. Post Post- -IPO Obligations IPO Obligations Obligations Details Appointment of Compliance adviser Appointment of a compliance adviser acceptable to the SEHK for the period commencing on its listing date and ending on publication of financial results for the first full financial year after listing. (MB Listing Rule 3A.19) Fundamental change in the business nature With the exception of a listed issuer that has successfully transferred its listing from GEM to the MB, upon the first 12 months after listing, a company may not effect any acquisition or disposal resulting in fundamental change in its principal business activities described in the prospectus. (Note: the SEHK may grant a waiver from its requirement if the circumstances are exceptional and prior independent shareholders approval is obtained (controlling shareholders are not allowed to vote) (Please refer to MB Listing Rule 14.89 for details) Financial Disclosure Listed Companies are required to publish their financial results on a timely basis The SEHK will normally require suspension of trading in a Company s securities if it fails to publish financial information according to the reporting timeframe as below: Issuers must publish: a) preliminary annual results not later than 3 months after the end of the financial years; and b) half-yearly results not later than 2 months after the end of that period of 6 months; and (Please refer to MB Listing Rules 13.49, 13.49(6) for details)

  12. Post Post- -IPO Obligations IPO Obligations Obligations Details A controlling shareholder at the time of listing cannot dispose of his shares for a period of 6 months from the date of listing and; A controlling shareholder cannot, for the further period of 6 months, dispose any shares that would result in such person ceasing to be controlling shareholder of the company. Note: Controlling shareholder(s) of a new applicant must undertake to the issuer and the SEHK to disclose any pledge/charge of any securities beneficially owned by him/them in favour of an authorized institution for a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder(s) is made in the listing document and ending on the date which is 12 months from the date on which dealings in the securities of a new applicant commence on the SEHK. Exception: Transfer listing from GEM to the MB An issuer that has successfully transferred its listing from GEM to the MB provided that any plan by controlling shareholders of the issuer to dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of those securities of the issuer has been predominantly disclosed in the listing document. [MB Listing Rule 10.07(4)] Lockups (MB Listing Rule 10.07)

  13. Post-IPO Obligations Obligaitons Details Insider information Immediately disclose price sensitive information Continuing Obligations Issue announcements, in charge of corporate information, share capital, directors, supervisors and chief executive, auditors, compliance advisers and others, specific transactions, financial information, shareholders meeting and closure of books and record date

  14. Post-IPO Obligations Obligations Details Restrictions on the issue of new shares (MB Listing Rule 10.08) SEHK does not normally permit further issues of shares or securities convertible into equity securities of a listed issuer within 6 months of listing. Exception: Transfer listing from GEM to the MB E.g. the issue of shares/securities to be traded on the MB by a listed issuer that has successfully transferred its listing from GEM to the MB, provided that any plan to raise funds within 6 months from the date of the transfer of the issuer s listing to the Main Board has been prominently disclosed in the listing document [MB Listing Rule 10.08(5)]

  15. HKEx HKEx Consultation Consultation Conclusions on Companies from Emerging and Innovative Sectors Companies from Emerging and Innovative Sectors Conclusions on Listing Regime for Listing Regime for 3 new chapters of the MB listing rules: 1. Biotech companies for pre-revenue companies (MB Listing Rule Chapter 18A) 2. Issuers with Weighted Voting Rights (WVR) structure for non-standard governance companies (MB Listing Rule Chapter 8A) 3. Secondary Listing Rules new concessionary secondary listing route for mainland and international companies (MB Listing Rule Chapter 19C)

  16. Biotech Companies Suitability Criteria for listing of Biotech companies (For details please refer to HKEX-Guidance Letter ( GL )-92- 18) PRODUCT Must have developed at least 1 Core Product beyond the concept stage, meaning the Core Product must have completed Phase 1 clinical trials or the clinic trial on human subjects required by Competent Authority (1) Note: For details of pharmaceutical, biologics, medical devices and other biotech products beyond the concept stage, please refer to paragraph 3.3-3.5 of HKEX-GL92-18. RESEARCH AND DEVELOPMENT ( R&D ) Must have primarily engaged in R&D for the purposes of developing its Core Product(s) IPO Must have its primary reason for listing and the raising of finance for R&D to bring its Core Product(s) to commercialization PATENTS Must have registered patent(s), patent application(s) and/or intellectual property in relation to its Core Product(s) SOPHISTICATED INVESTOR (2) Notes: (1)A Competent Authority includes but not limited to US Food and Drug Administration (FDA), China Food and Drug Administration (CFDA), and European Medicines Agency (EMA). Other authorities will be considered on a case-by-case basis. (2) HKEX-GL92-18 provides, for illustrative purposes only, the examples of types of Sophisticated Investor: (i) a dedicated healthcare or Biotech fund or an established fund with a division/department that specializes or focuses on investments in the biopharmaceutical sector; (ii) a major pharmaceutical/healthcare company; (iii) a venture capital fund of a major pharmaceutical/healthcare company; and (iv) an investor, investment fund or financial institution with minimum assets under management of HK$1 billion. Must have previously received meaningful third party investment from at least one Sophisticated Investor at least 6 months before the proposed listing date

  17. What is meaningful investment? According to HKEX-GL92-18, the following investment amount, for indicative purpose, will generally be considered as meaningful investment : (i) an investment of not less than 5% of the issued share capital of the applicant at the time of listing if the market capitalization of the applicant is between HK$1.5 billion and HK$3 billion (ii) an investment of not less than 3% of the issued share capital of the applicant at the time of listing if the market capitalization of the applicant is between HK$ 3 billion and HK$ 8 billion (iii) an investment of not less than 1% of the issued share capital of the applicant at the time of listing if the market capitalization of the applicant is more than HK$ 8 billion

  18. Biotech Companies Additional Listing Requirements and Shareholders Protections Initial Market Capitalisation At least HK$1.5 billion at the time of listing (MB Listing Rule 18A.03(2)) Track Record In operation in its current line of business for at least 2 financial years prior to listing under substantially the same management (MB Listing Rule 18A.03(3)) Working Capital At least 125% of the group s costs for at least 12 months from the publication date of its listing document (after taking into account the proceeds of the IPO) The group s cost must substantially consist of (a) general, administrative and operating costs; and (b) R&D costs Restriction on Cornerstones Any share allocated to a cornerstone investor and any shares subscribed by existing shareholders of the Biotech Company at the time of listing shall not be considered as held by the public. (MB Listing Rule 18A.07) Special Measures to Manage Risks If there is fundamental change of principal business of a Biotech Company, prior consent from the SEHK is required. (MB Listing Rule 18A.10) Accelerated de-listing process (12 months to re-comply with the requirement to maintain a sufficient level of operations or have tangible assets of sufficient value and/or intangible assets for which a sufficient potential value, if failed, the SEHK will cancel the listing) (MB Listing Rule 13.24 & 18A.09) Stock marker B at the end of its stock name (MB Listing Rule 18A.11)

  19. WVR Companies suitable to list with a WVR Structure (HKEX-GL93-18) Nature of company (Innovative Company) Success is demonstrated to be attributable to the application, to the company s core business, of (1) new technologies; (2) innovations; and/or (3) a new business model R&D is a significant contributor of its expected value and constitutes a major activity & expense Success is demonstrated to be attributable to its unique features or intellectual property Has an outsized market capitalization/intangible asset value relative to its tangible asset value Success of company The applicant must demonstrate a track record of high business growth measured by operational metrics such as business operations, users, customers, unit sales, revenue, profits and/or market value (as appropriate) and its high growth trajectory is expected to continue Contribution of WVR holders Each WVR beneficiary must have been materially responsible for business growth with company s value largely attributable to intangible human capital Role of WVR holders Each WVR must be an individual with active executive role within the business, and has contributed to a material extent to ongoing growth of the business Each WVR beneficiary must be a director of the issuer at the time of listing External validation The applicant must have received meaningful third party investment from at least one Sophisticated Investor (which must remain at IPO, and is required to retain an aggregate 50% of the investment at the time of listing for a period of at least 6 months post-IPO.

  20. WVR Additional Listing Requirements (i) (ii) Expected Market Capitalisation An applicant seeking a listing with a WVR structure must satisfy one of the following: a market capitalization of at least HK$40 billion at the time of listing; or a market capitalization of at least HK$10 billion at the time of listing and revenue of at least HK$1 billion of revenue in its most recent audited financial year (MB Listing Rule 8A.06) Ring-fencing Only new applicants able to list with a WVR structure (MB Listing Rule 8A.05) A listed issuer must not increase the proportion of shares that carry weighted voting rights above the proportion in issue at the time of listing. (MB Listing Rule 8A.13) Minimum Economic Interest at Listing The beneficiaries of weighted voting rights must beneficially own collectively at least 10% of the underlying economic interest in the applicant s total issued share capital at the time of its initial listing. (MB Listing Rule 8A.12) Note: SEHK may accept lower minimum shareholding percentage if lower percentage shareholding still represents a very large amount in absolute dollar terms. For example, if the expected market capitalization of an applicant is over HK$80 billion at the time of its initial listing. Ongoing requirements for WVR beneficiaries Restricted to individuals who are directors of the issuer at listing and remain directors afterwards (MB Listing Rule 8A.11, 8A.17) WVR lapses permanently if WVR beneficiary: (a) dies; (b) ceases to be director; (c) is deemed incapacitated for the purpose of performing his/her duties as a director; (d) is deemed by the SEHK to no longer meet directors requirement or; (e) transfer his beneficial/economic interests or voting rights attached to third party. (MB Listing Rule 8A.17, 8A.18)

  21. WVR Limits on WVR Power and Shareholder Protections Limits on WVR Power (MB Listing Rule 8A.10) Voting power attached to WVR shares capped not more than 10 times of the voting power of ordinary shares Non-WVR Shareholders right to vote (MB Listing Rule 8A.09) Non-WVR shareholders must have at least 10% of voting power at listed issuer s general meetings. Note: It means an issuer cannot list with a WVR structure that attaches 100% of the right to vote at general meetings to the WVR beneficiaries. Matters remained to be decided on one-share one- vote basis (MB Listing Rule 8A. 24) (a) Changes to issuer s constitutional documents; (b) Variation of rights attached to any class of shares; (c) INED appointment & removal; (d) Auditor appointment & removal; (e) Voluntary winding-up of the listed issuer Disclosure (Warnings) (MB Listing Rule 8A.37) An issuer with a WVR structure must include the warning a company controlled through weighted voting rights and describe WVR structure, the issuer s rationale to have WVR structure and the associated risks for shareholders on front page of all of its listing documents and periodic financial reports. Enhanced Corporate Governance Corporate governance committee to review, monitor & report on the compliance of an issuer with a WVR structure with WVR safeguards and for the benefit of all its shareholders (MB Listing Rule 8A.30) Ongoing compliance adviser to advise issuers on any matters related to the WVR Structure; transactions in which any WVR beneficiary in the issuer has an interests; and where there is a potential conflict of interest between the issuer, its subsidiary and/or shareholders of the issuer and any WVR beneficiary in the issuer. (MB Listing Rule 8A.34)

  22. Secondary Listing Qualifications for Listing A Qualifying issuer suitable for secondary listing must have a good record of compliance for at least 2 full financial years on a Qualifying Exchange (The New York Stock Exchange LLC, Nasdaq Stock Market or the Main Market of the London Stock Exchange plc (and belonging to the UK Financial Conduct Authority s Premium Listing segment) (MB Listing Rule 19C.04) A Non-Greater China issuer without a WVR structure must have an expected market capitalization at the time of secondary listing of at least HK$10 billion. All other Qualifying Issuers must satisfy one of the following: (1) a market capitalization of at least HK$40 billion at the time of listing; or (2) a market capitalization of at least HK$10 billion at the time of listing and revenue of at least HK$1 billion for the most recent audited financial year. (MB Listing Rule 19C.05)

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