Changes to the GEM and Main Board Listing Rules

Global |  Publication |  December 2017

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Changes to the GEM and Main Board Listing Rules

On 15 December 2017, the Stock Exchange published its consultation conclusions on the Review of the Growth Enterprise Market (GEM) and Changes to the GEM and Main Board Listing Rules.

The GEM Board will be re-positioned as a standalone board. The streamlined process for GEM issuers to be transferred to the Main Board will be removed.

The changes to the rules will take effect on 15 February 2018.

The authority to approve GEM listing applications, which is now with the Listing Department, will be assumed by the Listing Committee. This change will be implemented at a later date.

GEM Listing Rules

The key changes to the GEM Listing Rules are summarised below:

Current GEM Listing Rules New GEM Listing Rules
Name English name: Growth Enterprise Market, Chinese name: 創業板 Rename as GEM for both English and Chinese names.
Rename as GEM for both English and Chinese names. Emerging and growth companies Small and mid-sized companies
Track record requirement A GEM applicant has to include financial results for at least two financial years in its listing document. This two-year track record requirement remains unchanged.
Qualified for listing on the Main Board It is unlikely that companies which are qualified to list on the Main Board will apply for a listing on GEM. No prohibition for the listing of such companies on GEM. However, the Stock Exchange will continue to require such GEM applicants to justify their decisions to list on GEM instead of the Main Board when there is indication in its GEM listing application that the applicant could potentially list on the Main Board.
Cashflow requirement A GEM applicant is required to have an adequate trading record of at least two financial years with positive cash flow generated from operating activities in the ordinary and usual course of business, before changes in working capital and taxes paid, of at least HK$20 million. Increase to HK$30 million.
Minimum market capitalisation requirement The expected market capitalisation of a GEM applicant at the time of listing must be at least HK$100 million. Increase to HK$150 million.
Minimum market capitalisation in public hands The market capitalisation of equity securities of a GEM applicant in public hands must be at least HK$30 million. Increase to HK$45 million.
Offering structure No restriction – subject to full disclosure in the listing document. Mandatory public offer of at least 10% of the total offer size.
Offering mechanism No specific requirement under the GEM Listing Rules. Align the allocation of offer shares between the public and placing tranches and the clawback mechanism to make them consistent with those in Practice Note 18 to the Main Board Listing Rules.
Placing to core connected persons, etc. Selected persons are allowed to participate in the placing provided that full disclosure is made in the listing document. Align the GEM Listing Rules on placing to core connected persons, connected clients and existing shareholders, and their respective close associates, with those under Appendix 6 to the Main Board Listing Rules and Guidance Letter HKEx-GL-85-16 “Placing to connected clients, and existing shareholders or their close associates under the Rules”.
Lock-up requirements

Controlling shareholders are prohibited from disposing of shares in the GEM issuer:

  • in the first six months after listing; and
  • in the second six months after listing where a disposal would result in that person or a group of persons ceasing to be a controlling shareholder(s).

Controlling shareholders are prohibited from disposing of shares in the GEM issuer:

  • in the first 12 months after listing; and
  • in the second 12 months after listing where a disposal would result in that person or a group of persons ceasing to be a controlling shareholder(s).
Eligibility for transfer of listing from GEM to the Main Board

GEM issuers:

  • must have published and distributed at least one full financial year of financial statements after their GEM listings; and
  • must not have been subject to any disciplinary investigation by the Stock Exchange in relation to a serious breach or potentially serious breach of any GEM Listing Rules for 12 months before transfer.
 No change.

Main Board Listing Rules

The key changes to the Main Board Listing Rules are summarised below:

Current Main Board Listing Rules New Main Board Listing Rules
Minimum market capitalisation requirement The expected market capitalisation of a Main Board applicant at the time of listing shall be at least HK$200 million. Increase to HK$500 million.
Minimum market capitalisation in public hands The market capitalisation of equity securities of a Main Board applicant in public hands shall be at least HK$50 million. Increase to HK$125 million.

Transitional Arrangements

  • Listing applicants: Main Board and GEM listing applicants which submit their applications before 15 February 2018 will be subject to the current listing rule requirements. If the applications are subsequently renewed for more than once, then the applicants will be subject to the new listing rule requirements.
  • GEM transfer applicants: GEM transfer applicants which submit their applications before 15 February 2018 and the applications have not lapsed, been rejected or returned as at 15 February 2018 will be subject to the current listing rule requirements and the streamlined process. If the applications are subsequently renewed for more than once, then the applicants will be subject to the new listing rule requirements.
  • Grace period applicable to eligible GEM issuers:
    • Eligible GEM issuers are those issuers listed on GEM and all GEM applicants who have submitted a valid listing application for listing on GEM as at the date of the consultations paper (that is, 16 June 2017) and successfully listed on GEM subsequently (with only one refreshed application after the date of the consultation paper permitted).
    • Eligible GEM issuers which submit their GEM transfer applications during the three-year grace period (that is, three years from 15 February 2018) will be subject to the eligibility requirements for the Main Board assessed in accordance with the current Main Board Listing Rules as at the date of the consultation conclusions (that is, 15 December 2017), but such eligible GEM transfer applicants are subject to the following requirements:
    Applicants that have changed their principal businesses and/or controlling shareholders since listing on GEM Applicants that have not changed their principal businesses and/or controlling shareholders since listing on GEM
    • Appoint a sponsor to conduct due diligence.
    • Appoint a sponsor to conduct due diligence in respect of the applicants’ activities during the most recent full financial year and up to the date of the GEM transfer announcement to ensure that the information in the GEM transfer announcement is accurate, complete and not misleading
    • Publish a listing document as a new listing applicant to the Main Board.
    • Publish a GEM transfer announcement which sets out the applicants’ affairs during the most recent full financial year and up to the date of the GEM transfer announcement as required in Appendix 28 to the Main Board Listing Rules.
  • Please refer to the FAQ on the consultation conclusions for further details.



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