Select Page

Initial public offering – Listing on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited



Hong Kong: A Leading International Stock Market


By market capitalisation, Hong Kong is the world’s 8th largest and Asia’s 4th largest (after Japan, Shanghai and Shenzhen) exchange (as at the end of November 2016).

Source: SFC based on data from the World Federation of Exchanges and Bloomberg. Figures for the London Stock SE Group include those of London Stock Exchange and Borsa Italiana; figures for the NYSE Euronext include those of Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris; and Figures for the Japan Exchange Group includes those of Tokyo Stock Exchange and Osaka Securities Exchange.

HKEx: Top IPO Funds Raising Platform


  • The Stock Exchange of Hong Kong (SEHK or the Exchange) was the top IPO market in 2016 in terms of funds raised and number of new listings.
  • A total of US$25.1 billion IPO funds was raised in Hong Kong in 2016.
  • There were 126* new listings in 2016:
    • Main Board – 81
    • GEM – 45

* Includes 6 companies which moved their listings from GEM to the Main Board

Source: Hong Kong Exchanges and Clearing Limited and Bloomberg

Top 10 GEM Listings in 2016

  Company name Industry IPO funds raised (US$m)
1 China Industrial Securities Int’l Financial Group Ltd. Financials – Securities & Brokerage 1,330.0
2 China Digital Video Holdings Ltd. Consumer Services – Broadcasting 294.5
3 Gudou Holdings Ltd. Consumer Services – Hotels & Resorts 156.0
4 Astrum Financial Holdings Ltd. Financials – Other Financials 120.0
5 China Golden Classic Group Ltd.

Consumer Goods

Cosmetics & Personal Care

6 Luk Hing Entertainment Group Holdings Ltd.

Consumer Services

– Leisure & Recreational Facilities

7 Dining Concepts Holdings Ltd. Consumer Services – Restaurants 90.0
8 Altus Holdings Ltd. Financials – Other Financials 85.0
9 Ching Lee Holdings Ltd. Properties & Construction  -Building Construction 84.9
10 PFC Device Inc. Information Technology -Semiconductors 83.4

Source: Hong Kong Exchanges and Clearing Limited

Ten Largest IPO on the HKEx

Company name Industry IPO funds raised (HK$bn)
AIA Group Ltd. Financials 159.08
Industrial and Commercial Bank of China Ltd. – H Shares Financials 124.95
Agricultural Bank of China Ltd. – H Shares Financials 93.52
Bank of China Ltd. – H Shares Financials 86.74
Glencore International plc Resources 77.75
China Construction Bank Corporation – H Shares Financials 71.58
Postal Savings Bank of China Co Ltd – H Shares
(listed in 2016)
Financials 59.15
China Unicom Ltd. Telecommunications 43.61
Huatai Securities Co., Ltd. – H Shares Financials 38.76
China CITIC Bank Corporation Ltd. – H Shares Financials 32.92

Source: Hong Kong Exchanges and Clearing Limited

HKEx Attracts a Diverse Portfolio of Issuers

Number of GEM IPO by Industry (2016 Q1-Q3)


  • Issuers from “Retail, Consumer Goods & Services” sector dominate the new listing markets in 2016 Q1-Q3
    • About half of the new GEM issuers were from the Retail, Consumer Goods & Services industry

Source: PwC

HKEx: A Strong Equity Fund Raising Platform

Total Equity Funds Raised in 2016 (HK$ bn)


  • A Strong equity fund raising platform:
    • A total equity funds of HK$486.7 billion was raised in 2016.
  • Remains top IPO fundraising platform:
    • A total amount of HK$195 billion was raised in 2016 – despite a decline of 26% from the previous year, Hong Kong remains the world’s top IPO fundraising platform
  • A Strong secondary capital raising market:
    • A total of HK$292 billion was raised from post-IPO fundraising activities in 2016

Source: Hong Kong Exchanges and Clearing Limited

HKEx: A Highly Active Stock Exchange

Average Daily Equity Turnover (HK$ m)


  • High-level market liquidity:
    • HKEx is a highly active stock exchange with a total equity turnover of HK$11,173,111 million in 2016
    • The average daily equity turnover was amounted to HK$45,604.5 million
    • Deep liquidity is partly driven by a diverse investor base

Source: Hong Kong Exchanges and Clearing Limited, HKEx Cash Market Transaction Survey 2014/15

HKEx: Diverse Investor Base

Distribution of Cash Market Trading Value by Origin (2014/15)


^ others includes investors from Australia, Japan and Taiwan

Source: Hong Kong Exchanges and Clearing Limited, HKEx Cash Market Transaction Survey 2014/15

HKEx: Primary Financing Platform for Mainland Enterprises

  Unit Total Mainland Enterprise^ % of Total
As at 30 December 2016
No. of listed companies No. 1,973 1,002 50.8%
Market capitalisation HK$bn 24,761.3 15,663.9 63.3%
As of 30 December 2016
Average daily equity turnover HK$bn 45.6 32.2 70.6%
Total equity funds raised HK$bn 486.7 347.2 71.3%
  – IPO funds raised HK$bn 194.8 182.4 93.6%
  – Post IPO funds raised HK$bn 291.9 164.8 56.5%
  • Given a diverse investor base, HKEx has been the primary financing platform for Chinese enterprises that seek to go international:

    • Chinese companies account for over 50% of Hong Kong’s listed market in terms of number of listed companies as well as market capitalisation

^ refers to H-share companies, red chip companies and Mainland private enterprises

Source: Hong Kong Exchanges and Clearing Limited

Hong Kong: a Bridge between China and the World

Advantages to List International Companies in Hong Kong

  • Access to Mainland Chinese investors, currently through:
    1. Qualified Domestic Institutional Investor (QDII) scheme: allowing Chinese institutional investors to invest in offshore capital markets
    2. China-Hong Kong Stock Connect: Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect were launched in November 2014 and October 2016 respectively, allowing Mainland Chinese investors to invest directly in Hong Kong listed stocks. The stock connect schemes help broaden investor base and add liquidity to Hong Kong market adding momentum to the market
  • Raise company’s reputation and brand awareness in China and other Asian markets
  • Strong and sound legal and regulatory framework: Hong Kong legal system is based on English common law providing a solid foundation for companies to raise funds, as well as confidence to investors.
  • World’s freest economy: Hong Kong ranked top in 2016 Index of Economic Freedom adopting a free market policy with no capital flow restrictions. Hong Kong also enjoys the freedom of information.

Source: Heritage Foundation/Wall Street Journal, Hong Kong Exchanges and Clearing Limited

Selected International Listings in Hong Kong


Source: Hong Kong Exchanges and Clearing Limited

Hong Kong’s Markets

  • Main Board
    • For established companies able to meet its profit or other financial requirements.
  • Growth Enterprise Markets (“GEM”)
    • Is a second board for smaller growth companies
    • Has lower admission criteria
    • Provides a stepping stone to Main Board listing

Accepted Jurisdictions

  • The Main Board and GEM Listing Rules allow the listing of companies incorporated in Hong Kong, China, Bermuda and the Cayman Islands
  • The Exchange has accepted 24 jurisdictions as acceptable jurisdictions of incorporation –
    • Australia, Brazil, the British Virgin Islands, Canada (Alberta, British Columbia and Ontario), Cyprus, France, Germany, Guernsey, the Isle of Man, India, Italy, Japan, Jersey, Luxembourg, Republic of Korea, Labuan, Russia, Singapore, the United Kingdom and the United States (State of California, State of Delaware and State of Nevada).

Principal GEM Listing Requirements

Operating History and Management A GEM applicant must have a trading record of at least 2 full financial years with:

  1. substantially the same management for the 2 preceding financial years; and
  2. continuity of ownership and control for the preceding full financial year.
Financial tests A GEM applicant must have:

  1. positive cash flow from operating activities of >HK$20 million (US$2.6 million) in aggregate for the 2 preceding financial years; and
  2. market cap of >HK$100 million (US$13 million) at the time of listing
Public Float
  • At least 25% of the issuer’s total issued share capital must be held by the public at all times.
  • The market capitalisation at the time of listing of the publicly held shares must be at least HK$50 million (US$6.4 million) (for Main Board issuers) and HK$30 million (US$3.8 million) (for GEM issuers).
Spread of Shareholders
  • There must be at least 100 public shareholders (which can include employee shareholders)
  • At the time of listing, not more than 50% of the publicly held securities can be beneficially owned by the 3 largest public shareholders

Other Listing Requirements

  • Accountants’ Report: A listing document must include an accountant report on the financial information for the track record period. The latest period reported on must end no more than 6 months before the date of the listing document.
  • Independent non-Executive Directors: Must be at least 3: one must have appropriate professional qualifications or accounting or related financial management expertise. INEDs must comprise at least 1/3 of the Board.
  • Authorised Representatives: Must be at least 2: either 2 directors or a director and the company secretary.
  • Company Secretary: Must be professionally qualified in HK.
  • Share Registrar: Issuer must employ an approved share registrar in HK to maintain register of members.
  • Audit Committee: Must be made up of non-executive directors only; have 3 or more members; one must have appropriate professional qualifications or accounting or related financial management expertise; majority of members must be INEDs.
  • Remuneration Committee: Majority of members (incl. Chairman) must be INEDs.
  • Process Agent for Overseas Issuer: An overseas company must appoint a person authorised to accept service of process and notices on its behalf in Hong Kong.
  • Compliance Adviser: Newly listed companies must appoint a Compliance Adviser for the period starting on the listing date and ending on the date of publication of results for the second full financial year commencing after listing (for GEM issuers).
  • Compliance Officer (for GEM issuers only): GEM issuers must appoint one of their executive directors as a compliance officer.

Documents Required to be Submitted in Support of a GEM Listing Application

❶ Documents as per GEM LR 12.22 – 12.23 ❷ Before bulk printing documents as per GEM LR 12.23A and 13.19 ❸ After notification of approval in principle but before the date of issue of the listing documents as per GEM LR 12.24A (and LR12.25 where applicable) ❹ After the date of issue of the listing document but before dealings commence documents as per GEM LR 12.26
  • AP’s as required by HKEx and 2 CD-ROMs
  • legal advisers that the new applicant’s articles of association are not inconsistent with the GEM Listing Rules
  • advanced draft of any statement of adjustments relating to the accountants’ report
  • final proof of the formal notice
  • a final proof of any application forms
  • advanced draft of a letter from its Sponsor re sufficiency of working capita
  • an advanced draft of the board’s profit forecast memorandum
  • cash flow forecast memorandum covering at least 12 months from the expected date of publication of the listing document
  • final or an advanced draft of any waiver application
  • sponsor’s undertaking and statement of independence
  • written confirmation signed by each director/supervisor that the information in the AP is accurate
  • written confirmation signed by each director/supervisor re biographical details
  • a certified copy of the new applicant’s certificate of incorporation or equivalent document
  • any document as may be required by the HKEx in support of the application for listing
  • a final letter from the Sponsor, confirming that it is satisfied that the statement re sufficiency of working capital
  • copy of all draft documents which have been submitted to the Exchange in support of the application for listing
  • A signed and certified true copy of the undertakings from the applicant’s controlling shareholder in relation to pledged/charged securities
  • Sponsor’s declaration in Appendix 7G
  • Signed English and the Chinese listing document
  • If signed by an agent a certified copy of the power of attorney
  • a copy of the formal notice, where applicable
  • a copy of notification issued by HKSCC stating the securities will be Eligible Securities
  • any written undertakings and
  • where a listing document which constitutes a prospectus under the Companies Ordinance
    • – application for authorization for registration
    • – 2 printed copies of the prospectus, duly signed in accordance with section 38D(3) or section 342C(3) of the Companies Ordinance
  • – Translators certificate
  • certified copies of the resolution(s) of the new applicant in general meeting (if any) authorising the issue of all securities and resolution(s) of the board of directors delegating powers
  • copy of the placing letter (where applicable)
  • completed company information sheet in Appendix 5F
  • In the case of a placing of securities
    • – a copy of the placing letter and separate marketing statements in Appendix 5D signed by each of: (i) the lead broker; (ii) any distributors; and (iii) any HKEx Participant referred to in that Appendix
    • – a list from each placing broker setting out the names, addresses and identity card or passport numbers (where individuals) and the names, addresses and business registration numbers (where companies) of all its placees, the names and addresses of the beneficial owners
  • declaration substantially as in Appendices 5E, Appendix 7I, Appendix 6

GEM IPO Timeline



  • Charltons’ extensive experience in corporate finance makes us uniquely qualified to provide a first class legal service
  • Charltons have representative offices in Shanghai, Beijing and Yangon
  • Charltons was named the “Corporate Finance Law Firm of the Year in Hong Kong” in the Corporate Intl Magazine Global Award 2014
  • “Boutique Firm of the Year” was awarded to Charltons by Asian Legal Business for the years 2002, 2003, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 and 2016.
  • “Hong Kong’s Top Independent Law Firm” was awarded to Charltons in the Euromoney Legal Media Group Asia Women in Business Law Awards 2012 and 2013
  • “Equity Market Deal of the Year” was awarded to Charltons in 2011 by Asian Legal Business for advising on the AIA IPO
  • Excellent links and networks with law firms worldwide.
  • Julia Charlton was named a “Leading Lawyer” by Asia Law & Practice for the years 2002, 2003, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 and 2016
  • “Asian Restructuring Deal of the Year” 2000 awarded to Charltons by International Financial Law Review for their work with Guangdong Investment Limited.
  • Finalist for China Law & Practice’s “Deal of the Year (M&A)” 2007 for the work on Zijin Mining Group Co Ltd.’s bid for Monterrico Metals plc.

Practice Areas

  • Capital markets
  • Corporate and commercial
  • Securities
  • Mergers and acquisitions
  • Investment funds: China and offshore
  • Derivatives
  • Restructuring
  • Venture capital
  • Investment
  • Capital Markets
    • – Global offerings and GDRs
    • – IPOs and Placings
    • – Listing on the Hong Kong, Shanghai, Shenzhen, London and Luxembourg stock exchanges
  • Corporate and Commercial
    • – Mergers and Acquisitions
    • – Joint ventures
    • – Stock exchange advisory
    • – Corporate governance
    • – Stock options
    • – Employment law
  • Securities
    • – Compliance and disclosure
    • – Dealing and advisory authorisations in Hong Kong and Mainland China
    • – Options
  • Investment Funds: China and Offshore
    • – Authorised and unauthorised funds
    • – Stock exchange listing (including Hong Kong, Dublin, London, Cayman, Bermuda stock exchanges)
    • – Closed-end and open-ended structures
    • – Hedge funds
  • Mergers and Acquisitions
    • – Hong Kong Code on Takeovers and Mergers
    • – Public offerings
    • – Reverse takeovers
    • – Private acquisitions
    • – Due diligence in China and elsewhere in Asia
  • Derivatives
    • – Structuring listed and unlisted derivatives
    • – Placings on Hong Kong and Luxembourg listed warrants and other structured products
    • – Compliance and regulatory
  • Restructuring
    • – Schemes of arrangement
    • – Workouts
    • – Corporate recovery
    • – Asset injections
  • Investment
    • – China investment regulations
    • – Structuring a major foreign direct investment projects
    • – Evaluation and due diligence
  • Private Equity and Venture Capital
    • – Optimum PRC and offshore structures
    • – Preferred stock financing
    • – PRC regulations
    • – Exit Strategies

Professional Experience

  • Charltons has considerable experience in assisting companies to list on both the Main Board and the Growth Enterprise Market (“GEM”) of the HKSE
  • We are experienced in acting as the Hong Kong legal adviser to both the company and the sponsor in public offerings and placings
  • Charltons is also an expert in regulatory compliance and corporate governance

The Charltons Team

The team is composed of individuals with the following knowledge and skills:

  • A detailed knowledge of Hong Kong law and practice in relation to IPOs and equity fund raising transactions of public companies.
  • Extensive experience of providing legal services for Hong Kong and PRC-related IPO transactions.
  • In depth knowledge of the Listing Rules of both GEM and the Main Board of the Hong Kong Stock Exchange.
  • Depth and range of experience in advising companies in connection with IPO and Listing transactions.

The Regulatory Regime for IPO Sponsors

  • The sponsors regulatory regime includes:
    • Prospectus liabilities
      • The amended Companies Ordinance clearly states that sponsors have both civil and criminal liabilities for misstatements in prospectus.
    • New Paragraph 17 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”)
      • And higher standards applicable to IPO sponsors, emphasising the standard of due diligence and requirements in relation to the recording of the work undertaken.
    • Listing Rules by the HKEx covering listing timetable, guidance materials and templates.
  • Paragraph 17 of the Code of Conduct sets out the outcomes expected by the SFC, but does not address how such outcomes are to be achieved.
  • In order to help sponsors and other IPO participants better understand the revised standards contained in the Code of Conduct, Charltons initiated and acted as the co-ordinating law firm in relation to the publication of the Hong Kong Sponsors Due Diligence Guidelines (“Due Diligence Guidelines”) produced jointly by leading Hong Kong law firms, two of the Big Four accounting firms and more than 40 banks or financial advisory businesses.
  • In addition to drafting the Due Diligence Guidelines, Charltons is responsible for managing and leading the publication of the Due Diligence Guidelines.
  • The Due Diligence Guidelines can be downloaded for free at, a web site created and managed by Charltons.
  • The Due Diligence Guidelines are 762 pages long and were completed over a year of extensive consultation.
  • A number of international and PRC investment banks in Hong Kong, medium-sized local sponsors and professional institutions (e.g. CCB International (Holdings) Limited, Linklaters and KPMG) were involved in the consultation process.
  • The Due Diligence Guidelines include chapters on :
    • Knowing the Listing Applicant and its Management
    • Verification Practice
    • Business Model
    • Interviews of Major Business Stakeholders
    • Controlling Shareholders’ Relationship with the Listing Applicant
    • Connected Persons and Connected Transactions
    • Financials
    • Internal Controls
    • Material Contracts
    • Biological Assets

Listing on Growth Enterprise Market of HKEx

GEM listing requirements

Form A in Appendix 5 to the GEM Listing Rules

GEM Listing Committee

GEM Listing Approval Group

Hong Kong regulatory regime for IPO sponsors

Hong Kong Sponsor Due Diligence Guidelines

Paragraph 17 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission