The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong
Kong Exchanges and Clearing Limited (HKEx), last week published its Growth Enterprise
Market (GEM) Consultation Conclusions. They included details on the proposed
development of GEM as a second board.
The GEM Consultation Conclusions presented the results of a public consultation
held from July 2007 to October 2007.
The Exchange received 11 sets of market
comments. The respondents comprised members of GEM listed companies, corporate
finance and advisory firms, professional organisations, accounting firms and
private individuals.
As a result of the consultation and discussions with the Securities and Futures
Commission, the Exchange considers that the appropriate way forward is to reposition
GEM as a second board, and as a stepping stone towards the Main Board.
Listing Rules amendments will be introduced to reflect the new role of the
market but GEM will largely retain its existing structure. The key changes are:
- Under new quantitative admission requirements, applicants will need to have
achieved positive cash flow of not less than HKD20mn in aggregate for
two preceding financial years;
- The power to approve the admission of new issuers to GEM will be delegated
from the GEM Listing Committee to the Listing Division, and the GEM Listing
Committee will retain monitoring, appeal and policy responsibilities;
- Continuing obligations of GEM listed issuers will be brought closer to
the requirements applicable to the Main Board requirements;
- Existing GEM issuers will be required to comply with the new rules from
their effective date, except that in the case of the public float requirement
they will be given a three-year grace period; and
- The process for transferring listing from GEM to the Main Board will be
streamlined, and there will be a 50% cut in the Main Board initial
listing fee for all transfer applicants from GEM.
"For new applicants, the quantitative admission requirements provide a
clear benchmark for eligibility to the market, thereby removing a degree of
uncertainty and cost in the application process," HKEx's Head of Listing,
Richard Williams, commented.
Williams also explained that: "Delegating the power to approve the admission
of new issuers to the Listing Division should also help address concerns about
the duration and predictability of the listing process, helping to minimise
the applicants' costs, without compromising regulatory standards."
"For existing GEM-listed companies, the more established ones will be
encouraged to treat the platform as a stepping-stone to the Main Board when
the entry requirements for the latter are met."
"Under the streamlined transfer
procedure, a sponsor is no longer necessary and the prospectus will be replaced
by regulatory announcements published electronically. The time and cost of transferring
to the Main Board should thus be significantly reduced" he added.
New listing applications received by the Exchange on or before 2nd May 2008
will be processed according to the GEM Listing Rules in force when the application
was accepted for vetting.
Any new listing application and any refreshed application
received after 2nd May 2008 will be subject to the GEM Listing Rules that are
in force on the date of listing.
These transitional arrangements for new listing applications will not affect
continuing obligations and other aspects of the revised GEM Listing Rules, which
will become effective immediately on the implementation date, save for the grace
period of three years from that date to secure compliance with the revised public
float obligations.
The revised GEM Listing Rules and Main Board Listing Rules will become effective
on 1st July, 2008.
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