HKEX: Exchange Publishes Consultation Paper On Phase II Of Listing Framework Competitiveness Review

The Exchange publishes proposals to enhance the competitiveness of its listing framework
Proposals seek to afford listed issuers greater flexibility and efficiency in conducting corporate transactions, whilst maintaining robust investor protection with enhanced disclosure requirements and effective board accountability
Consultation period to last 10 weeks until 30 November 2026

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Monday) published a consultation paper seeking market feedback on a set of proposals to refine requirements relating to corporate transactions by listed issuers to enhance the competitiveness of Hong Kong's listing framework (the Consultation Paper).

The proposals form the second phase of the Exchange's listing framework competitiveness review and focus on the post-listing requirements governing notifiable transactions, connected transactions and spin-off transactions. They seek to provide listed issuers with greater flexibility to undertake corporate transactions, while maintaining appropriate shareholder safeguards through enhanced disclosure requirements and effective board accountability.

HKEX Head of Listing, Katherine Ng, said: "At HKEX, we are committed to enhancing our listing framework so that it meets the evolving needs of Hong Kong's increasingly diverse ecosystem of issuers and investors. This reform seeks to give issuers greater flexibility and certainty in their corporate transactions, increasing efficiency in terms of costs and time while upholding investor protection through timely, meaningful disclosure and strong board accountability. We welcome stakeholders' views as we work together to reinforce Hong Kong's position as a leading international financial centre."

Highlights of the Proposals

(The following highlights are not exhaustive. Please refer to the Consultation Paper for full details.)


Notifiable transactions
1.	Percentage ratios to measure transaction impact to issuer	Profits ratio, assets ratio, revenue ratio and consideration ratio, which respectively compares the profits/total assets/revenue of the subject assets as well as the consideration for the transaction with the profits/total assets/revenue and market capitalisation of the listed issuer1. Transaction is classified where one or more of the percentage ratios exceed the applicable threshold (see 2 below).	To remove profits ratio, which is most likely to produce anomalous results2. To allow listed issuers to calculate consideration ratio by comparing the consideration with the higher of their market capitalisation or their net asset value3.
2.	Transaction classifications and materiality thresholds	Discloseable transaction (where applicable size tests are ≥5% but ˂25%) requires an announcement. Major transaction (where applicable size tests are ≥25% but ˂75% (for disposal) or ˂100% (for acquisition)) requires announcement, circular and shareholders' approval. VSD4 (Very Significant Disposal) and VSA5 (Very Significant Acquisition) require announcement, circular and shareholders’ approval with the difference in requirements as compared to major transactions primarily on the scope of financial information for inclusion in circular6.	Discloseable transaction (where applicable size tests are ≥5% but ˂50%) is subject to enhanced announcement disclosure requirements. Major transaction (where applicable size tests are ≥50%7) requires announcement, circular and shareholders' approval. Remove transaction classifications of VSD and VSA.
3.	Transactions in the ordinary and usual course of business	Notifiable transaction requirements applicable to transaction of a capital nature and in the ordinary and usual course of business of a listed issuer.	To exempt acquisition or leasing of assets in the ordinary and usual course of business of the listed issuer, which constitutes a major transaction, from the circular and shareholders' approval requirements.
4.	Announcement requirements	Prescribed information required for inclusion in transaction announcement, with additional information to be provided in circular where shareholders' approval is required. Further announcement required where a transaction previously announced is terminated or there is any material variation of its terms or material delay in the completion of the agreement.	To ensure investors receive sufficiently meaningful and timely information to assess the transaction. Particularly, to require all notifiable transaction announcements to disclose, among others, the material transaction terms, key financial information of target and explanation of the transaction impact3. To introduce additional prescribed situations where further announcement is required3.
Connected transactions
5.	Definition of "connected subsidiary"	Where any connected person(s) at the issuer level can exercise or control the exercise of ≥10% of the voting power in such subsidiary.	Where any connected person(s) at the issuer level can exercise or control the exercise of ≥30% of the voting power in such subsidiary.
6.	Annual caps for continuing connected transactions	Annual caps must be expressed in monetary terms.	To allow annual caps to be expressed as a percentage of a listed issuer's revenue and other financial items in its audited accounts, if the transactions are of a revenue nature in the ordinary and usual course of business.
Spin-offs
7.	Regulatory process for spin-offs	All Spin-off proposals can only be proceeded with the Exchange's prior approval.	To introduce a self-assessment route without the Exchange's prior approval for eligible listed issuers that: comply with PN15 requirements8; have market capitalisation of ≥HK$10 billion and revenue of ≥HK$1 billion; and have remaining business whose revenue and assets account for >50% of the issuer group's total revenue and assets.
8.	Announcement requirements	No specific content requirement.	To introduce specific disclosure requirements.
9.	Assured entitlement	Requirement to provide existing shareholders with an assured entitlement to shares in the SpinCo.	To remove this requirement.
10.	Moratorium period for spin-offs after listing	A Spin-off proposal would not normally be considered within three years of the initial listing.	To shorten from three years to one year after the initial listing of the ParentCo during which a Spin-off listing application should not be filed.

The Exchange welcomes market feedback on the proposals. The consultation period ends on Monday, 30 November 2026. Interested parties are encouraged to respond by completing and submitting the questionnaire available on the HKEX website.

Notes:

In addition, equity capital ratio which measures materiality by the number of shares to be issued (if any) relative to the listed issuer's issued shares is also one of the percentage ratios under the current regime.
For example, when the transaction target or the listed issuer has recorded losses in its latest accounts, or the issuer's financial is affected by exceptional factors.
Requirements also applicable to connected transactions.
In the case of disposal where applicable size tests are ≥75%.
In the case of acquisition where applicable size tests are ≥100%.
As part of the proposals, we also propose to align the circular disclosure requirements currently applicable to major transactions, VSAs and VSDs.
The increased materiality threshold for classifying a major transaction will not apply to transactions involving provision of financial assistance and/or securities or other investment activities. The threshold for classifying these types of transactions as major transactions will remain to be 25%.
The core principle under PN15 (Practice Note 15 to the Main Board Listing Rules) is that a Spin-off should not result in one business supporting two listings, thereby avoiding shell creation.