The Securities and Futures Commission of Hong Kong (SFC) and the Stock Exchange of Hong Kong (Exchange) published on 18 October 2024 a Joint Statement on Enhanced Timeframe for New Listing Application Process. The initiatives contained in the joint statement provide more certainty as to the timeframe (the Enhanced Application Timeframe) required for an application to list new equity securities on the Exchange (a New Listing). Importantly, the SFC and Exchange expressed their wills to complete the New Listing application process within the six-month application validity window.
DUAL FILING SYSTEM FOR NEW LISTING APPLICATION IN HONG KONG
Under the dual filing system in Hong Kong, a listing applicant in a Hong Kong IPO will file its listing application with both the SFC and the Exchange. The filing of the listing application with the SFC is done through the Exchange, which serves as the frontline regulator to enforce the Listing Rules and makes decisions under the Listing Rules concerning issues such as assessing eligibility for listing. The SFC, acting as the statutory regulator, oversees the Securities and Futures (Stock Market Listing) Rules (SMLR) and the Securities and Futures Ordinance (SFO). Both the SFC and the Exchange will review New Listing applications and raise comments and queries on the listing application.
APPLICATIONS FULLY MEETING REQUIREMENTS
While the dual filing system remains, the Enhanced Application Timeframe will provide a greater degree of certainty in terms of the timeline:
- Where an applicant and its sponsor submit a New Listing application and related materials that meet all applicable requirements and guidance under the SFO, the SMLR and/or the Listing Rules (Applications Fully Meeting Requirements), the SFC and the Exchange will, after close communication to avoid duplication of comments, individually assess and indicate any material regulatory concerns (via a Regulators’ Assessment) after a maximum of two rounds of regulatory comments.
- In this scenario, each regulator will take no more than 40 business days to complete the Regulators’ Assessment. Upon confirmation of no material regulatory concern, the Exchange will work with the applicant and its sponsor to finalise the disclosure in the listing document, following which the application will move forward to a hearing with the Listing Committee of the Exchange to determine whether the New Listing application will be approved.
- The applicant and its sponsor are expected to take a total of approximately 60 business days to satisfactorily address the regulators’ comments. Subject to obtaining approvals from the Listing Committee and other authorities or regulators, the application process would be completed within the six-month application validity window.
ACCELERATED TIMEFRAME FOR ELIGIBLE A-SHARE LISTED COMPANIES
Specifically for companies listed on either the Shanghai or Shenzhen stock exchange (A-share Listed Companies), the Enhanced Application Timeframe provides an accelerated timeframe for the New Listing application process (the Accelerated Timeframe):
- A-share Listed Companies that meet the following criteria will be eligible for the Accelerated Timeframe: (1) has a minimum market capitalisation of HK$10 billion; and (2) be able to confirm, with the support of legal advisers’ opinion, that the company has complied with all laws and regulations, in all material respects, applicable to its listing throughout the two full financial years immediately preceding the New Listing application and up to the date of submitting the New Listing application.
- Under the Accelerated Timeframe, if an eligible A-share Listed Company submits an application that fully meets requirements, the SFC and the Exchange’s assessment on material regulatory concerns will be completed after one round of regulatory comments.
- In this scenario, each regulator will take no more than 30 business days to complete its regulatory assessment.
APPLICATIONS REQUIRING LONGER PROCESS
If the SFC and/or the Exchange has material concerns regarding an applicant’s compliance with the SFO, the SMLR and/or the Listing Rules, the quality of listing document preparation, or if there are new material developments or incomplete responses to the regulators’ comments, the timeline of the application process may be lengthened. After the issue of the first comment letter, the SFC and the Exchange, where necessary, will engage with the key representatives of the applicant and its sponsor, as well as other advisers, to facilitate their understanding of the material regulatory concerns and outline the regulators’ expectations on their subsequent responses.
If any subsequent responses to the regulatory comments are materially incomplete, the applicant and its sponsor will be informed of the deficiency and the vetting process suspended until a complete and satisfactory reply is received. If the applicant and its sponsor do not adequately address the material regulatory concerns after two rounds of regulatory comments (or one round under the Accelerated Timeframe), a direct requisition letter will be issued under the SMLR and/or a major concerns letter as appropriate. The progress of the application will then be subject to the applicant and its sponsor satisfactorily addressing the material regulatory concerns set out in the SMLR Letter and/or the major concerns letter.
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