HKEX green-lights the listing of pre-revenue Biotech companies and companies with weighted voting rights structure

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Dec 2017

To broaden Hong Kong’s capital markets access and enhance its competitiveness, the Hong Kong Exchanges and Clearing Limited ('HKEX') published the New Board Concept Paper in June 2017 with a view to broadening the listing criteria to attract and to better accommodate the needs of high growth companies from innovative sectors, or so called ‘new economy’ companies.

On 15 December 2017, HKEX published the conclusions to the New Board Concept Paper. The key points are:


1.  Two new chapters

HKEX will expand the existing listing regime by introducing two new chapters to the Main Board Listing Rules to allow the listing of:

(a)  Biotech companies which are pre-revenue; and

(b)  companies from emerging and innovative sectors that have weighted voting rights (‘WVR’) structures, subject to additional disclosure and safeguards.


Pre-revenue issuers

Biotech sector was chosen as the initial focus for early stage companies as their activities tend to be strictly regulated (e.g. by the US Food and Drug Administration) under a regime that sets external milestones on development progress. Pre-revenue Biotech companies applying for a listing under this new chapter will be required to have a minimum expected market capitalisation of HK$1.5 billion. Furthermore, HKEX proposed that shares held by cornerstone investors at the time of listing will not be counted towards determining whether the company has met the minimum initial public float requirement.


Issuers with WVR structures

Whereas, companies with WVR structures will be required to have a minimum expected market capitalisation of HK$10 billion and, if the expected market capitalisation is below HK$40 billion, it will also need to have at least HK$1 billion of revenue in the full financial year before listing.

To protect shareholders’ right and to mitigate the additional risks carried by the WVR structures after listing, HKEX will require issuers with WVR structures to put in place appropriate safeguards and to incorporate these safeguards in its constitutional documents. Some of the examples are:

  • Ring-fencing – issuers with WVR structures will be prohibited from increasing the proportion of WVR in issue or issue any further WVR shares.
  • Eligible person only – WVR shares will be restricted to those who are (and remain as) directors of the issuer. The WVR attached to a beneficiary’s shares will lapse permanently if the beneficiary (i) cases to be a director; (ii) dies or is incapacitated; or (iii) if the WVR shares are transferred to another person.
  • Limits on WVR power - there will be a cap on the voting power attached to WVR shares i.e. it should be no more than ten times of the voting power of ordinary shares. Matters relating to material changes to the issuer’s constitutional documents, variation of rights attached to any class of shares, the appointment and removal of independent non-executive directors/ auditors and the winding-up of the issuers shall be decided on a one-share one-vote basis.
  • Enhanced disclosure – issuers with WVR structures will have a unique stock code/marker and appropriate warning to be included in the issuer’s ongoing corporate communications.
  • Enhanced corporate governance – mandatory corporate governance committee will be required to ensure that the issuer is operated and managed for the benefit of all shareholders. A compliance adviser will also be required to be engaged on a permanent basis.


2. A new secondary listing route

HKEX proposes to modify the existing Listing Rules in relation to overseas companies to create a new concessionary secondary listing route to attract companies from emerging and innovative sectors that have a good record of compliance for at least two years on a qualifying exchange (e.g. the New York Stock Exchange, Nasdaq or the “premium listing” segment of the London Stock Exchange’s Main Market) and an expected market capitalisation of at least HK$10 billion.

HKEX is in the progress of finalising the proposals and drafting of the related proposed amendments to the Listing Rules. It expects to begin the discussions with stakeholders soon with a view to proceeding with the formal consultation on the proposed Rule amendments in the first quarter of 2018.

For further details on the consultation conclusions and the respondents’ submissions, along with frequently asked questions about the consultation conclusions, please refer to the links below:

Consultation conclusions on New Board Concept Paper

Respondents’ submissions on New Board Concept Paper

Frequently asked questions

Contact us

Loretta Chan
Partner, PwC Hong Kong
Tel: +[852] 2289 6700

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