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Listing on the GEM of the Hong Kong Stock Exchange

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Listing on the GEM of the Hong Kong Stock Exchange


The GEM was established as an alternative market to the Main Board in November 1999 to provide capital formation opportunities for growth companies. As GEM is a listing venue for smaller, growth companies, the listing eligibility criteria are lower than for the Main Board. The continuing obligations of GEM listed companies are however virtually identical to those of Main Board listed companies.


Chapter 11 of the GEM Listing Rules sets out the basic requirements that must be met before any initial listing of equity securities on GEM. Chapters 24 and 25 contain additional requirements, modifications and exceptions to those requirements which apply to overseas companies and companies incorporated in the People’s Republic of China (the PRC), respectively. This note deals with the general requirements for listing on GEM.

The main requirements for GEM listing are summarised below. The Exchange retains an absolute discretion to accept or reject applications for listing and compliance with the relevant conditions will not necessarily ensure that a listing will be granted. The requirements set out below are not exhaustive and the Exchange may impose additional requirements in any particular case.

  1. Incorporation
    The Exchange will accept companies incorporated in Hong Kong, Bermuda, the Cayman Islands and the PRC (Recognised Jurisdictions) for listing on GEM. It will also accept companies incorporated in any other jurisdictions where the standards of shareholder protection are at least equivalent to those provided in Hong Kong.
    The opening of Hong Kong’s equity listing regime to issuers from more overseas jurisdictions is one of the key policy issues for the Exchange. With the aim of facilitating the listing of more overseas companies on the Exchange, the Exchange and the Securities and Futures Commission published a Joint Policy Statement Regarding the Listing of Overseas Companies (Joint Policy Statement) on 7 March 2007 which was updated on 27 September 2013.

    Shareholder Protection Standards

    An overseas listing applicant is required to demonstrate that a combination of its constitutional documents and the laws and regulations of its home jurisdiction provide the key shareholder protection standards specified in the Joint Policy Statement. These are:

    • A super-majority of members’ votes must be required to approve changes to shareholder rights, material changes to the constitutional documents and a voluntary winding-up;
    • Any alteration to the constitutional documents which increase an existing member’s liability to the company must be agreed by such member in writing;
    • Certain requirements in relation to general meetings including the requirement to hold an annual general meeting each year and that there should be no more than 15 months between one AGM and the next; the requirement to give members reasonable written notice of general meetings; the right of all members to speak and vote at annual general meetings and to appoint proxies, and the right of minority members to convene extraordinary general meetings; and
    • The appointment, removal and remuneration of auditors must be approved by a majority of the members or another body that is independent of the board (e.g. the supervisory board in systems that have a two-tier board structure).

    Regulatory Cooperation Arrangements

    Where a listing applicant is not incorporated in one of the four Recognised Jurisdictions (Hong Kong, Bermuda, the Cayman Islands and the PRC), it must be able to show that the statutory securities regulator(s) of its jurisdiction of incorporation and place of central management and control (if different) is/are either a full signatory of the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MOU)1 or have entered into a bi-lateral agreement with the SFC to provide mutual assistance and exchange of information to enforce and secure compliance with applicable laws and regulations.2

    The Exchange will consider three factors in determining the applicant’s place of central management and control:

    • where the senior management directs, controls and coordinates company activities;
    • where the principal books and records are kept; and
    • where the business operations and assets are located.

    Approved Jurisdictions

    The Exchange has approved the following twenty-five Acceptable Jurisdictions of incorporation for listed issuers: Australia, Brazil, the British Virgin Islands, Canada (Alberta), Canada (British Columbia), Canada (Ontario), Cyprus, France, Germany, Guernsey, India, the Isle of Man, Israel, Italy, Japan, Jersey, Luxembourg, the Republic of Korea, Labuan (Malaysia), Russia, Singapore, the United Kingdom, and the states of California, Delaware and Nevada in the United States. The Exchange has published a Country Guide3 for each Acceptable Jurisdiction which sets out guidance as to how companies incorporated in the relevant jurisdiction can meet the requirement for equivalent shareholder protection standards and other guidance for applicants incorporated in that jurisdiction.

    A listing applicant which is incorporated in an Acceptable Jurisdiction will not need to provide a detailed explanation of how it meets the key shareholder protection standards specified in the Joint Policy Statement if it adopts the arrangements set out in the Country Guide for that jurisdiction. The listing applicant will however be required to confirm to the Exchange that the laws, regulations and market practices contained in the country guide still apply, or provide details of any changes to the Exchange and inform it of any other laws, regulations and market practices that are relevant to the listing applicant.

    An overseas company which is incorporated in a jurisdiction which is new to listing (i.e. which has not yet been approved by the Exchange as an Acceptable Jurisdiction) will need to provide the Exchange with a detailed explanation as how the laws and regulations of its home jurisdiction, its constitutional documents and the arrangements it has adopted combine to meet the key shareholder protection standards.

    Dual Primary Listings

    An overseas company which is already listed on another stock exchange can apply for a dual-primary listing on GEM which will require it to comply with the full requirements of the Hong Kong Exchange and those of the overseas exchange. Secondary listings are not possible on GEM, but are allowed on the Main Board of the Exchange.

  2. Mining and Natural Resources Companies

    The particular advantage of qualifying as a Mineral Company for a company seeking a GEM listing is the opportunity to obtain a waiver from the requirement to meet the trading record period of GEM Rule 11.12A. Chapter 18A of the Listing Rules sets out specific requirements for Mineral Companies, which are defined as:

    • existing listed issuers that complete a major transaction (i.e. 25% or more of existing activities) or above involving the acquisition of mineral or petroleum assets; or
    • new listing applicants whose Major Activities (whether directly or through a subsidiary company) include exploration for, and/or extraction of, natural resources such as minerals or petroleum. A Major Activity is one representing 25% or more of the total assets, gross revenue or operating expenses of the applicant and its subsidiaries.

    Portfolio of Indicated Resources or Contingent Resources

    A new applicant Mineral Company is required to have at least a portfolio of Indicated Resources (in the case of minerals) or Contingent Resources (in the case of petroleum) that are identifiable under one of the accepted reporting standards and substantiated in the report of an independent expert (a Competent Person). The definition of Indicated Resources is based on the one in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). The definition of Contingent Resources is based on the one in the Petroleum Resources Management System of September 2007 (PRMS). The portfolio is also required to be meaningful and of sufficient substance to justify a listing.

    Rights of Active Participation

    A new applicant Mineral Company must also be able to demonstrate that it has the right to actively participate in the exploration for and/or extraction of resources either through:

    • control over a majority (by value) of the assets in which it has invested together with adequate rights over the exploration for and/or extraction of resources. This will normally be interpreted as an interest of more than 50%. Companies must also disclose full details of their exploration and/or extraction rights; or
    • adequate rights arising under arrangements acceptable to the Exchange, which give it sufficient influence in decisions over the exploration for and/or extraction of the resources. Arrangements which may be acceptable include joint ventures, production sharing contracts or specific government mandates. The Exchange has stated that it will adopt a purposive approach to determining what is appropriate in specific circumstances and places the onus on applicants to demonstrate the adequacy of their rights and sufficiency of influence.
  3. Suitability for Listing

    Both the issuer and its business must, in the opinion of the Exchange, be suitable for listing (Rule 11.06). The Exchange may, in its discretion, refuse a listing of the securities of an overseas issuer if it believes that it is not in the interest of the Hong Kong public to list them.

  4. Cash Flow Requirement(Rule 11.12A)

    A new GEM applicant or its group (excluding any associated companies, joint ventures and other entities whose results are recorded in the issuer’s financial statements using the equity method of accounting or proportionate consolidation) is required to have a positive cash flow from operating activities in the ordinary and usual course of business before changes in working capital and taxes paid of HK$30 million in aggregate for the 2 financial years immediately preceding the issue of the listing document.

    A statement of cash flow prepared using the indirect method must be included in the prospectus, if it is not included in the accountants’ report.

    The operating cash flow requirement was implemented in July 2008 and means that GEM no longer provides a listing venue for start-up companies.

    Calculation of Positive Operating Cash Flow

    An applicant’s cash flow from operating activities is required to be calculated using the indirect method as described under International Accounting Standard 7 (IAS7) or Hong Kong Accounting Standard 7 (HKAS7) for the 2 immediately preceding financial years.

    Under the indirect method described in HKAS7, positive cash flow from operating activities is determined by adjusting profit or loss for the effects of:

    1. changes during the period in inventories and operating receivables and payables;
    2. non-cash items including depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and undistributed profits of associates; and
    3. all other items for which the cash effects are investing or financing cash flows.

    Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the revenues and expenses disclosed in the statement of comprehensive income and the changes during the period in inventories and operating receivables and payables.

    Mineral Companies

    Note 1: Where the Exchange accepts a trading record of less than two financial years, a new applicant must still meet the cash flow requirement of HK$30 million for that shorter trading record period, in accordance with Rule 11.14.

  5. Operating History and Management (Rule 11.12A(2) and (3))

    The Exchange requires GEM applicants to have a trading record of at least 2 financial years with:

    1. management continuity throughout the 2 preceding financial years; and
    2. ownership continuity and control throughout the preceding full financial

    In both cases, continuity must continue until the date of listing.

    Trading Record Period of Less Than Two Years

    Under Rule 11.14, the Exchange may accept a trading record period of less than 2 financial years (and an accountants’ report covering a shorter period) and waive or vary the ownership and management requirements:

    • for newly-formed “project” companies (for example a company formed for the purposes of a major infrastructure project);
    • for natural resource exploitation companies; and
    • in exceptional circumstances under which the Exchange considers it desirable to accept a shorter period.

    Where the Exchange accepts a trading record of less than 2 financial years, the applicant must nevertheless still meet the cash flow requirement of HK$30 million for that shorter trading record period.

    Mineral Companies

    The Exchange may accept a trading record period of less than two financial years for rule 11.12A (and an accountants’ report covering a shorter period than that specified in rule 11.10) for a new applicant Mineral Company provided that its directors and senior managers, taken together, have sufficient experience relevant to the exploration and/or extraction activity that the Mineral Company is pursuing. Individuals relied on must have a minimum of five years relevant industry experience. Details of the relevant experience must be disclosed in the listing document of the new applicant. (GEM Rules 18A.04)

  6. Statement of Business Objectives (Rule 14.19)

    A new applicant must include in its listing document a statement of business objectives setting out the following information:

    • general information as to (a) the overall business objectives of the new applicant; and (b) the market potential for the new applicant’s business over the period comprising the remainder of the current financial year of the applicant and the 2 financial years thereafter;
    • a detailed description of the new applicant’s objectives for each of the products, services or activities (and any other objectives) analysed over the period comprising the remainder of the current financial year of the applicant and the 2 financial years thereafter;
    • a detailed explanation as to how the applicant proposes to achieve the stated business objectives; and
    • a clear explanation of all bases and assumptions in support of the applicant’s assessment of its market and growth potential, business objectives and/or description of how it proposes to achieve its business objectives.
  7. Minimum Market Capitalisation (Rule 11.23(6))

    New applicants are required to have a minimum market capitalisation at the time of listing of at least HK$150 million.

    The market capitalisation at the time of listing is calculated by multiplying the number of issued shares by the expected issue price.

  8. Accountants’ Report

    A new applicant must have an accountants’ report prepared in accordance with Chapter 7 of the GEM Listing Rules covering at least the 2 financial years immediately preceding the issue of the listing document. Issuers with an operating history of more than 2 years are encouraged to disclose 3 years of financial results in the accountants’ report.

    The latest financial period reported on by the reporting accountants must not have ended more than 6 months before the date of the listing document (Rule 11.11)

  9. Minimum Public Float

    At least 25% of the issuer’s total issued share capital must be held by the public at all times (Rule 11.23(7)). At the time of listing, the market capitalisation of the publicly held shares must be at least HK$45 million.

    Where an issuer has more than one class of securities apart from the shares for which listing is sought, the total securities of the issuer held by the public (on all regulated market(s) including the Exchange) at the time of listing must be at least 25% of the issuer’s total issued capital. However, the class of securities for which listing is sought must not be less than 15% of the issuer’s total issued share capital, having an expected market capitalisation at the time of listing of at least HK$45 million (Rule 11.23(9)).

    The Exchange has a discretion under Rule 11.23(10) to accept a lower percentage of between 15% and 25%, if the issuer has an expected market capitalisation of over HK$10 billion at the time of listing and the Exchange is satisfied that the number of securities concerned and the extent of their distribution will enable the market to operate properly with a lower percentage, and on condition that the issuer will make appropriate disclosure of the lower prescribed percentage of public float in the initial listing document and confirm sufficiency of public float in successive annual reports after listing (Rule 17.38A). In addition, where securities are to be marketed both in and outside Hong Kong, a sufficient portion, which must be agreed in advance with the Exchange, must normally be offered in Hong Kong.

    The “public” for these purposes means persons who are not: (i) a director, chief executive or substantial shareholder (i.e. a holder of 10%) of the company or its subsidiaries or an associate of any of them; or (ii) a person whose securities have been financed by any person referred to at (i) above or who is accustomed to take instructions from a person referred to at (i) above in relation to his shares.

    In relation to a PRC issuer, the Exchange will not regard a promoter, director, supervisor, chief executive or substantial shareholder of the PRC issuer or its subsidiaries or an associate of any of them as a member of the “public”.

  10. Spread of Shareholders

    Securities new to listing are required to have an adequate spread of shareholders. The number depends on the size and nature of the issue but the general guideline is that there must be at least 100 shareholders (including those whose equity securities are held through CCASS) at the time of listing (Rule 11.23(2)(b)). In addition, not more than 50% of the securities in public hands at the time of listing can be beneficially owned by the 3 largest public shareholders (Rule 11.23(8)).

  11. Business Competition

    A new applicant will not be rendered unsuitable for listing on the grounds that any director or shareholder has an interest in a business which competes or may compete with the new applicant’s business (Rule 11.03).

    However, full disclosure of any competing business or interest of a director, controlling shareholder and substantial shareholder and their respective associates and any other conflicts of interest of any such person with the group must be made at the time of listing. Such disclosure is also required, except in the case of substantial shareholders, in each listing document and circular required under the GEM Listing Rules and in the annual report and accounts, half-year report and quarterly reports of the listed issuer (Rule 11.04). A “controlling shareholder” is any shareholder or persons together entitled to exercise or control the exercise of 30% (or such other amount as may from time to time be specified in the Takeovers Code as the level for triggering a mandatory general offer) or more of the voting power at general meetings of the new applicant or who is or are in a position to control the composition of the majority of the applicant’s board of directors.

    Requirement for Independence from the Controlling Shareholder

    The listing applicant must however be able to demonstrate, and must disclose in its listing document, that it is able to carry on its business independently of its controlling shareholder and its associates (paragraph 27A of Part A of Appendix 1).

  12. Sponsor

    A new applicant seeking a listing of equity securities on GEM must appoint one or more sponsors to assist with its listing application (Rule 6A.02). To be eligible to act as the sponsor of a new applicant, a firm must be licensed by the Hong Kong Securities and Futures Commission to conduct sponsor work.

    If only one sponsor is appointed, that sponsor must be independent from the applicant in accordance with the independence test set out at Rule 6A.07. If there are 2 or more sponsors, at least one sponsor must be independent and the listing document must disclose whether each sponsor is independent in accordance with the Rule 6A.07 test (Rule 6A.10(2)). In addition, one sponsor must be designated as the primary channel for communication with the Exchange. Each sponsor is responsible for ensuring that the sponsor’s obligations under the Listing Rules are discharged (Rule 6A.10(3)).

    Each sponsor is required to give an undertaking and statement of independence to the Exchange in the form of Appendix 7K to the GEM Rules at the time of submission of the listing application. As soon as practicable after the Listing Division’s hearing of the listing application but on or before the date of issue of the listing document, sponsors must submit to the Exchange a Sponsor’s Declaration (in the form of Appendix 7G) giving specific confirmations as to the applicant’s compliance with the conditions for listing, the sufficiency and accuracy of information in the prospectus and as to the adequacy of the applicant’s systems and its directors’ experience and understanding of the Listing Rules to ensure the applicant’s compliance with the Listing Rules post-listing (Rule 6A.13). Sponsors are required to conduct reasonable due diligence inquiries in order to put themselves in a position to give the Sponsor’s Declaration (Rule 6A.11(2)). The responsibilities and obligations of sponsors in relation to a new listing application (including as to due diligence) are set out in paragraph 17 of the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC. Certain typical due diligence steps which the Exchange expects of sponsors of initial listing applications are also set out at Practice Note 2 to the GEM Rules. Sponsors are required to document their due diligence planning and significant deviations from their plans and to keep records of their work on listing applications.

    A sponsor’s main responsibilities to a new applicant are:

    • to be closely involved in the preparation of the applicant’s listing documents;.
    • to conduct reasonable due diligence inquiries to put itself in a position to give the Sponsor’s Declaration required by Rule 6A.13;
    • to submit the listing application and all supporting documents on behalf of the applicant;
    • to ensure that there is no unauthorised publication or leakage of publicity material or price sensitive information about a new applicant prior to the hearing of the Listing Division;
    • to use reasonable endeavours to address all matters raised by the Exchange in connection with the listing application;
    • to accompany the applicant to meetings with the Exchange unless otherwise requested by the Exchange; and
    • to comply with the terms of the undertaking and statement of independence given to the Exchange pursuant to Rule 6A.03 (Rule 6A.11).

    Mineral Companies

    The Rules impose an obligation on any sponsor appointed to or by a new applicant Mineral Company to ensure that the Competent Person or Competent Evaluator meets the requirements of GEM Chapter 18A.

  13. Free Transferability

    The securities for which listing is sought must be freely transferable. To facilitate transferability, the securities must be accepted by HKSCC as eligible for deposit, clearance and settlement in CCASS from the date on which dealings are to commence (Rule 11.29).

  14. Authorised representatives

    Every issuer must ensure that, at all times, it has 2 authorised representatives (Rule 5.24). The authorised representatives must be 2 individuals from amongst the issuer’s executive directors and company secretary (unless the Exchange, in exceptional circumstances, agrees otherwise). The responsibilities of an authorised representative are as follows (Rule 5.25):

    • supplying the Exchange with details in writing of how he can be contacted including home, office, mobile and other telephone numbers and, email address and correspondence address (if not based at the registered office), facsimile numbers if available, and any other contact details prescribed by the Exchange from time to time;
    • for so long as the issuer continues to have a Sponsor or Compliance Adviser, assisting the Sponsor or Compliance Adviser in its role as the principal channel of communication with the Exchange concerning the affairs of the issuer.
  15. Directors

    The board of directors of an issuer is collectively responsible for the management and operations of the issuer (Rule 5.01). Every director must satisfy the Exchange that he has the character, experience and integrity and is able to demonstrate a standard of competence commensurate with his position as a director of the issuer (Rules 5.02).

  16. Company Secretary

    A person will be qualified to act as company secretary if by virtue of his/her academic or professional qualifications or relevant experience he/she is, in the opinion of the Exchange, capable of discharging the functions of a company secretary (Rule 5.14). The academic or professional qualifications which the Exchange considers acceptable are membership of The Hong Kong Institute of Chartered Secretaries and being a Hong Kong solicitor, barrister or certified public accountant.

    In assessing a person’s relevant experience, the Exchange will consider the individual’s length of employment with the issuer and other issuers and the roles he has played, the person’s familiarity with the Listing Rules and other relevant Hong Kong laws and regulations, relevant training undertaken and professional qualifications in other jurisdictions.

    A company secretary is not required to be resident in Hong Kong.

  17. Service Agent

    An overseas issuer must appoint, and maintain throughout the period its securities are listed on the GEM the appointment of, a person authorised to accept service of process and notices on its behalf in Hong Kong (Rule 24.05(2)).

  18. Register of Shareholders

    Provision must be made by an overseas issuer for a register of holders to be maintained in Hong Kong, or such other place as the Exchange may agree, and for transfers to be registered locally (Rule 24.05(3)).

1 The current signatories to the IOSCO MOU can be viewed at:

2 Details of the SFC’s cooperative arrangements with overseas regulators can be viewed at:

3 The Country Guides for the Acceptable Jurisdictions are available on the Exchange’s website at


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