On 6 July 2016, The Stock Exchange of Hong Kong Limited (the Exchange) updated its Guidance Letter GL25-11 (the Guidance Letter), which sets out the conditions for waiving a listing applicant’s strict compliance with Main Board Rule 4.04(1) and GEM Rules 7.03(1) and 11.10 (the Relevant Rule Waiver) (Note).
The update made was to paragraph 4.3 of the Guidance Letter, whereby the Exchange has clarified that it will NOT ordinarily grant the Relevant Rule Waiver to a listing applicant if:
(a) there is a material adverse change in the applicant’s performance during the period from the date of its last audited accounts to the latest practicable date (or up to the end of the profit/loss forecast period); and/or
(b) there is a downward trend in the applicant’s recent business performance to the extent that it may not meet the minimum profit requirement if the Relevant Rule Waiver is not granted.
In cases where a Relevant Rule Waiver has been recommended, the listing applicant may be required to include enhanced disclosures (e.g. a qualitative analysis of the changes in its performance during the prescribed period and detailed reasons for the changes) in its listing document.
The updated GL25-11 and its marked up version can be found on the Exchange’s website.
(Note) Under Main Board Rule 4.04(1) (GEM Rules 7.03(1) and 11.10), a listing applicant is required to include in the accountants’ report its consolidated results for each of the three financial years (two financial years under the GEM Rules) immediately preceding the issue of the prospectus. As listing applicants often experience difficulty in producing audited accounts for the latest financial year if they intend to issue a prospectus shortly after the year-end, it has been the Exchange’s practice to consider the granting of a Relevant Rule Waiver subject to the conditions set out in the Guidance Letter.