Optimize Listing Mechanism! HKEX: Voting Rights Disparity Can Reach 20x, Strengthen "Clawback" Mechanism

On March 13, the Hong Kong Exchanges and Clearing Limited (HKEX) published a consultation document seeking market opinions on several proposals to enhance the competitiveness of Hong Kong’s listing mechanism. The consultation aims to create a more diverse and vibrant market environment, meet global investors’ demand for high-quality innovative assets, and further strengthen Hong Kong’s position as a leading international financial center.

The “Daily Economic News” reporter found that this consultation focuses heavily on significantly optimizing the listing mechanism.

The core reform proposals concentrate on three key areas. First, HKEX recommends substantially lowering the financial criteria for the “Different Voting Rights” (DVR) listing mechanism (also known as dual-class share structures). The Class A standard market capitalization threshold will be reduced from HKD 40 billion to HKD 20 billion, and the Class B threshold from HKD 10 billion to HKD 6 billion, with the income requirement lowered from HKD 1 billion to HKD 600 million. For issuers with a market value of HKD 40 billion at listing, the maximum ratio of voting rights can be relaxed to 20 times, and the relevant beneficiaries must hold at least 5% of the shares and meet a HKD 4 billion economic interest requirement.

Entities issuing DVR shares must meet HKEX’s criteria as “Innovative Industry Companies.” HKEX also plans to further refine the definition of “Innovative Industry Companies,” dividing them into “Technology Path” and “Business Model Path,” and automatically consider all qualified biotech and specialized tech companies (even if not listed under Chapters 18A or 18C) as “Innovative Industry” companies without the need for individual proof.

Second, for overseas issuers, HKEX proposes to simultaneously lower the financial eligibility threshold for secondary listings. The market value requirement for “Same Class, Same Rights” (no differential voting rights) issuers will be reduced from HKD 10 billion to HKD 6 billion, aligning with the standards for DVR issuers. Additionally, the guidelines for transferring to a main board listing will be optimized, clarifying compliance steps to facilitate overseas issuers listing in Hong Kong.

Regarding initial public offering (IPO) rules, HKEX suggests including scenarios where “control changes but management influence remains unchanged” within the scope of compliance to avoid misjudging “packaged listings.” It also proposes expanding the scope of the U.S. Generally Accepted Accounting Principles (GAAP), removing the requirement for auditors to review reconciliation statements in delisted companies’ financial reports, and deleting the rule that “unaudited financial reports must be reviewed by auditors.” Companies that have already commercialized biotech and specialized tech firms may choose to apply under the special chapters of the Main Board Listing Rules.

Finally, the previously rumored expansion of the scope for confidential IPO applications has been officially proposed. HKEX suggests extending the confidentiality application scope from biotech and specialized tech companies to all new applicants.

Additionally, HKEX plans to strengthen the return mechanism. Previously, incomplete application materials could be rejected, and the sponsor’s identity would be published on the HKEX website upon rejection. Now, HKEX recommends that, when an application is rejected, the identities and roles of all professional institutions involved in preparing the application (not just sponsors) be disclosed.

HKEX Listing Department Head Wu Jiexuan stated: “Since 2018, we have successfully implemented a series of listing reforms that fundamentally reshaped Hong Kong’s stock market and attracted many innovative companies to list here. These proposals are based on the成果 of those reforms. We welcome public feedback on these proposals and look forward to continued communication with stakeholders. Let’s work together to strengthen Hong Kong’s position as the preferred fundraising destination for growth companies and the leading market for global capital deployment in Asia.”

The consultation period will last until May 8, 2026. The public can submit written comments via designated websites or QR codes. HKEX stated that after the consultation period, market feedback will be considered to formulate decisions on next steps and to prepare a summary report, with a phased approach planned for this competitiveness review.

Source: Daily Economic News

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