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Introduction of New Third Board in Hong Kong
1 September 2017

Hong Kong Exchanges and Clearing Limited (“HKEx”) released the New Board Concept Paper on 16 June 2017, proposing to establish a third new board (“New Board”) separated from the Main Board and the GEM Board. This has created mixed reactions and concerns from IPO investors and other shareholders over the impact of the New Board on the existing regulatory regime.

Why a New Board ?

Hong Kong has always been a top listing venue for companies in the region and globally. However, in recent years, following changes in the market structure with the emergence of small but great potential start-up technology companies, the pool of potential issuers has been more diverse. A New Board is being considered in order to cater the needs of new economy (“New Economy”) industries, e.g. Biotechnology, Health Care Technology and Internet & Direct Marketing Retail etc. who may be unable to meet the profit requirements of the Main Board or the trading criteria of the GEM Board.

To diversify the IPO market is also one of the main purposes of establishing the New Board. As a gateway of China, Hong Kong IPO market has been dominated by Mainland issuers. Mainland IPOs accounted for 60% of the total number of IPOs in the Hong Kong market and 91% of IPO funds raised during the 5 years ending 2016. The New Board is to restructure Hong Kong IPO market to attract more international companies in order to lessen the dependence on Mainland China.

The New Board will also accept companies with dual share structures which currently cannot be listed in Hong Kong. Companies with Weighted Voting Rights (“WVR”) structures are common nowadays as WVR structures allow founders or insiders of the companies to retain control over the companies even after public listing by carrying multiple votes per share.

Overview of the Regulatory Regime of Listing in Hong Kong

1.  Main Board

To list on the Main Board, an issuer must at least have an aggregate profit of HK$50 million in the most recent 3 financial years and a market capitalisation of HK$200 million at the time of listing. Alternation criterion requires at least HK$500 million of revenue in the latest financial year.

2.  GEM Board

The GEM Board has a lower threshold requirement than the Main Board. It requires a trading record of at least 2 years and aggregate cash flow of HK$20 million in the 2 years prior to listing, subject to a minimum market capitalisation of HK$100 million.

Proposed New Board Segments

It is proposed that the New Board will be divided into the New Board PRO segment and the New Board PREMIUM segment. Some general characteristics of each of the segments are highlighted below :-

1.  New Board PRO segment :-

(a)  it aims at early stage companies which do not satisfy the financial or track record requirements for GEM Board listings;

(b)  no track record or minimum financial criteria is required but it is subject to a minimum capitalization at the time of listing of HK$200 million;

(c)  no restriction on secondary listings by Mainland Chinese companies is imposed;

(d)  companies with WVR structures are permitted;

(e)  there is a less stringent approach to initial listing requirements such as the need to engage a sponsor; and

(f)  only professional investors will be able to trade on this segment.

2.  New Board PREMIUM segment :-

(a)  It aims at companies that meet the existing financial and track record requirements of the Main Board, but however are ineligible to list in Hong Kong due to their non-standard governance structures;

(b)  the quantitative requirements equivalent to the Main Board shall apply;

(c)  no restriction on secondary listings by Mainland Chinese companies is imposed;

(d)  companies with WVR structures are permitted;

(e)  there is a more stringent approach to initial listing requirements; and

(f)  both professional and retail investors can trade on this segment.


The proposed New Board by HKEx is believed will help grow the Hong Kong IPO market, and secure Hong Kong as a financial hub to gather not just mainland issuers and investors but also international ones. It is hoped that the New Board will broaden market access and create a way to attract greater diversity of issuers to list in Hong Kong, while being able to calibrate shareholders protection standards based on the level of perceived risk in each segment. The public consultation ended in August 2017 and a report will be published to determine if there is market support for the proposal and listing rules for the New Board are expected to be finalised in early 2018.

To find out more about how we can assist you and / or your company on companies law, compliance and regulatory issues, please do not hesitate to contact us.

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