- GEM and Main Board listing requirements will be aligned more closely
- GEM will become a standalone market for small and mid-sized companies instead of a stepping stone to the Main Board
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published its consultation conclusions (GEM Consultation Conclusions) on the Consultation Paper on the Review of the Growth Enterprise Market (GEM) and Changes to the GEM and Main Board Listing Rules (GEM Consultation Paper).
HKEX also published today its conclusions on the New Board Concept Paper. The GEM Consultation Paper and the New Board Concept Paper were published pursuant to a holistic review of the Hong Kong equity market. The Exchange considered responses to the proposals holistically in order to reach a balanced conclusion on the most appropriate listing framework for Hong Kong.
The GEM Consultation Conclusions represent the results of a public consultation held from 16 June 2017 to 18 August 2017. The Exchange received 100 responses. The respondents included listed companies, corporate finance and advisory firms, professional organisations, accounting firms, HKEX Participants and individuals.
Based on the responses received on the proposals in the public consultation and discussions with the Securities and Futures Commission, the Exchange decided to implement substantially all of the proposals in the GEM Consultation Paper.
Listing Rules amendments will be introduced to reflect the new role of GEM as a market for small and mid-sized companies and to ensure that there is a clear distinction between issuers listed on GEM and the Main Board. The key changes are listed below.
To reflect the new role of GEM as a market for small and mid-sized companies, the names “Growth Enterprise Market” and「創業板」will be changed to “GEM”.
“Our proposed amendments to the GEM and Main Board Listing Rules received broad market support and the revised Rules reflect what we believe are acceptable standards in the market and help address concerns on the quality and performance of GEM applicants and listed issuers”, said David Graham, HKEX’s Chief Regulatory Officer and Head of Listing. “GEM will become a standalone market, and the revised Main Board requirements will preserve its position as a market for larger companies that can meet our highest standards.”
Key Listing Rules changes
- the removal of the streamlined process for GEM transfers to the Main Board;
- the introduction of a mandatory sponsor requirement for transfer of listing from GEM to the Main Board, and a sponsor must be appointed at least two months before the submission of a listing application;
- an increase in the minimum expected market capitalisation of GEM applicants at the time of listing from $100 million to $150 million and a corresponding increase in the minimum public float value of GEM companies at the time of listing from $30 million to $45 million;
- an increase in the minimum expected market capitalisation of Main Board applicants at the time of listing from $200 million to $500 million and a corresponding increase in the minimum public float value of Main Board companies at the time of listing from $50 million to $125 million;
- an increase in the minimum cash flow requirement for GEM applicants from $20 million to $30 million;
- the introduction of a mandatory public offering requirement of at least 10 per cent of the total offer size for all GEM IPOs; and
- an extension of the post-IPO lock-up requirement on controlling shareholders from one year to two years for GEM while there will be no change to the post-IPO lock-up requirement for the Main Board.
Unwinding the delegated authority
The unwinding of the authority to approve GEM listing applications from the Listing Division to the Listing Committee will be implemented following a proposed consultation on the system for decisions of the Listing Committee in 2018 or such earlier date as considered appropriate1 .
Rule Amendment Effective Date
The revised GEM Listing Rules and Main Board Listing Rules will become effective on 15 February 2018 (Rule Amendment Effective Date).
Implementation and transitional arrangements
For new listing applicants that submit their applications for listing on either the Main Board or GEM before the Rule Amendment Effective Date, the listing qualifications and requirements under the Listing Rules currently in force shall apply, with only one renewal of such applications permitted thereafter.
All GEM transfer applications that are submitted before the Rule Amendment Effective Date and have not lapsed, been rejected or returned as at the Rule Amendment Effective Date will continue to be processed under the current streamlined process and their eligibility for the Main Board will be assessed in accordance with the Main Board Listing Rules currently in force, with only one renewal of such applications permitted thereafter.
To minimise the impact of the reform of GEM on stakeholders who have chosen to list on GEM as a “stepping stone” to the Main Board, certain GEM transfer applicants (Eligible Issuers2) are entitled to transitional arrangements which provide for less stringent GEM transfer requirements for a grace period of three years from the Rule Amendment Effective Date. Please refer to Chapter 4 of the GEM Consultation Conclusions for details of the transitional arrangements for Eligible Issuers.
The GEM Consultation Conclusions and copies of submissions can be downloaded from the “News – Market Consultation” section of the HKEX website.
Amendments to the GEM Listing Rules can be downloaded from the “Listing - Rules and Guidance – Listing Rules – Amendments to GEM Listing Rules” section of the HKEX website.
Amendments to the Main Board Listing Rules can be downloaded from the “Listing - Rules and Guidance – Listing Rules – Amendments to Main Board Listing Rules” section of the HKEX website.
A set of Frequently Asked Questions relating to the Listing Rules amendments can be downloaded from the “Listing – Interpretation and Guidance – Frequently Asked Questions” section of the HKEX website.
||See paragraph 138 of the GEM Consultation Conclusions published today.
||Eligible Issuers refer to:
all issuers listed on GEM as at 16 June 2017; and
||all GEM applicants who have submitted a valid listing application for listing on GEM as at 16 June 2017 and subsequently listed on GEM pursuant to such application with only one renewal of such application permitted.