Capital Markets Quarterly - July 2023

Howse Williams' Capital Markets Quarterly aims to provide you an overview of the various regulatory and market updates in the second quarter of 2023, with summaries of some of the key amendments in the rules and guidelines, as well as important decisions made by the regulatory authorities in Hong Kong. We will also highlight some of the major market transactions over the last 3 months.



A) Regulatory Update


The Stock Exchange of Hong Kong Limited (the “Exchange”)


Updates to Guidance Letters

The Exchange updated HKEX-GL55-13 and HKEX-GL57-13 in May 2023 in accordance with the administrative matters and logistical arrangements in relation to the use of the Company Case Number Activation Request Form (CN001). Instead of obtaining a company case number from the Exchange three business days before the listing application, sponsors are required to activate the company case number by CN001 at least one business day before submission of the listing application.


HKEX-GL79-14 was updated in May 2023 to guide listing applicants to comply with the updated documentary requirements and administrative matters for collective investment schemes applications. For example, comments on the listing applications will only be sent by email instead of by email and by post.  Regarding settlement of transaction levy, trading fee and/or brokerage, applicants are no longer required to physically deliver to the Exchange's office a listing agent's letter or email enclosing a cheque. Instead, a notification of submission shall be submitted to the Exchange via Form M402/G402/CIS005.


Consultation Paper on Enhancement of Climate-related Disclosures under the Environmental, Social and Governance Framework

With the initiative to enhance climate-related disclosures under the existing environmental, social and governance ("ESG") reporting framework, the Exchange published a consultation paper introducing a new Part D of Appendix 27 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") to mandate all issuers to make specific climate-related disclosures (elevate from existing "comply or explain") in their ESG reports, which aligns with the International Sustainability Standards Board Climate Standard. The key climate-related disclosure requirements proposed by the Exchange include the following:



  • The issuer’s governance process, controls and procedures used to monitor and manage climate-related risks and opportunities.
  • Management's role in assessing and managing climate-related risks and opportunities.



  • Climate-related risks and opportunities: Description of the risks (including whether they are physical or transition risks, acute or chronic risks, and the time horizon over which each could be expected to have a material effect on the issuer); how the issuer defines the time horizon and the linkage of these definitions to the issuer's strategic planning horizons and capital allocation plans; and the current and anticipated effects of the risks on the issuer.
  • Transition plans: Issuer’s response to climate-related risks and opportunities identified, including any changes to its business model and strategy, adaptation and mitigation efforts, and how these plans will be resourced; and information in respect of any climate-related targets (absolute or intensity).
  • Climate resilience: Information that enables investors to understand the resilience of the issuer’s strategy (including its business model) and operations to climate-related changes, developments or uncertainties; and description of the climate-related scenario analysis adopted that is commensurate with the issuer’s circumstances to assess the effect of climate-related risks.
  • Financial effects of climate-related risks and opportunities: Current (quantitative where material) and anticipated (qualitative) financial effects of climate-related risks, and where applicable, opportunities on the issuer’s financial position, financial performance and cash flows.


Risk Management

  • The issuer’s process to identify, assess and manage climate-related risks and, where applicable, opportunities.


Metrics and Targets

  • Greenhouse gas ("GHG") emissions: Absolute gross GHG emissions generated during the reporting period, classified as scope 1, scope 2 and scope 3 emissions.
  • Other cross-industry metrics: Amount and percentage of assets or business activities (a) vulnerable to transition/physical risks or (b) aligned with climate-related opportunities, and the amount of capital expenditure deployed towards climate-related risks and opportunities.
  • Internal carbon price: For issuers who maintain an internal carbon price, disclose the internal carbon price and explain how the issuer is applying the carbon price in decision-making.
  • Remuneration: Disclose how climate-related considerations are factored into executive remuneration policy.
  • Industry-based metrics: Issuers are encouraged to consider the industry-based disclosure requirements prescribed under other international ESG reporting frameworks and make disclosures as they see fit.


The consultation period will last for three months and end on 14 July 2023.


The Exchange’s Listing Issuer Regulation Newsletter

Key regulatory updates with respect to the following topics are outlined in the newsletter: (a) auditing, financial reporting and related internal control matters; (b) compliance with new rules on share schemes; (c) disclosure of business valuations in transactions; and (d) the application of technology by the Exchange to its regulatory functions and daily operations. 


Among the key regulatory updates, listed issuers are reminded to pay attention in particular to the following:



  • with respect to modified audit opinionsand delays in results publication, the listed issuers' boards should build and maintain strong compliance culture and mentality throughout the organisation and devote sufficient resources (including staffing, systems as well as management attention and priority) to their financial reporting functions to prevent delays in publication of accounts due to internal control deficiencies.


  • the Exchange observed that the circumstances cited by some issuers for a shorter vesting period than the 12-month period required under Rule 17.03F of the Listing Rules were generic and did not meet the Listing Rules requirements. Further, the description of performance targets required under Rule 17.03(7) of the Listing Rules in some scheme documents was generic and did not set out the criteria for assessing if the performance targets would be met.


  • Rule 14.58(5) of the Listing Rules requires issuers to disclose the basis for the consideration and the terms of a notifiable transaction. The Exchange highlighted the below principles for disclosure of valuation regarding (a) selection of valuation methods and (b) valuation assumptions and inputs:


  1. Selection of valuation methods
  • Issuers should describe the selected valuation models and explain why they are selected, in particular why the methods were appropriate for the transactions or the target companies.
  • Where more than one valuation method is used, issuers should disclose the process in analysing the values derived from different valuation methods and how they contributed to the appraised value.


  1. Valuation assumptions and inputs
  • Issuers should explain, with detail and in specific terms, their assumptions and adopted valuation inputs.
  • Where the valuation assumptions and/or inputs are significantly different from the historical information of target company/industry or the parameters of comparable companies, issuers should further substantiate the fairness and reasonableness for using the assumptions and/or inputs.


A copy of the newsletter is available here.


The Exchange’s Disciplinary Actions

In the second quarter of 2023, the Exchange published sanctions in 9 cases which involve (i) inaccurate and incomplete information in listing document, (ii) transactions involving connected parties or failure to disclose and obtain shareholders’ approval, (iii) directors’ failure to safeguard listed issuer’s interests, cooperate in investigations and procure/ provide substantive responses to enquiries from the Exchange, (iv) deficiencies in the listed issuer’s internal controls and risk management systems and (v) inaccurate and incomplete disclosure of financial information or delay in publication of financial results. Listed issuers should exercise caution and put in place proper check and balance, and transaction monitoring mechanisms. 

News release date

Listed issuer/ directors involved – summary of conduct

27 June 2023

Optima Automobile Group Holdings Limited (Stock Code: 8418) and three former and current directors

  • The listing prospectus of the listed issuer contained an untrue confirmation as to no material adverse changes to its financial position
  • There was a significant deterioration in the financial performance of the listed issuer in the two months leading to the listing. No disclosure of the deterioration was made and the listed issuer did not prepare monthly management accounts for the two months
  • The listed issuer's actual listing expenses increased by 80% from those forecasted in the prospectus, primarily attributable to an underwriter’s bonus and a consultancy fee with no calculable basis
  • Censures were made against the listed issuer and a current director
  • Two former and current directors were criticised
  • Three former and current directors were directed to attend training


20 June 2023

A current director of Agile Group Holdings Limited (Stock Code: 3383)

  • Before the listing of the listed issuer, the director undertook not to be interested or involved in any business that would likely compete with the listed issuer and its subsidiaries
  • The director was interested in his son's business which potentially competed with that of the listed issuer by personally providing initial funding to his son to set up the business, providing funding and financial guarantees for the business, and acting as a director of companies within the business group
  • The director did not disclose his interest and his financial support to his son's business to the board
  • The director was criticised and directed to attend training


15 June 2023

Five former directors of China Clean Energy Technology Group Limited (Stock Code: 2379)

  • Receivers and managers of over 50% of the shares of the listed issuer sought to replace most of the then board of directors
  • The board refused to convene an EGM and the receivers issued a circular and served a notice on the shareholders of the listed issuer to convene an EGM
  • An EGM was held and it was resolved to remove four former directors from the board
  • The listed issuer refused to accept the EGM poll results on the ground that the EGM did not comply with the lister issuer's articles
  • Upon application of the receivers, the Cayman court held that the EGM was validly held and the removal of directors was valid
  • Despite the Exchange's repeated requests, the listed issuer did not announce the requisition, publish the circular, or provide the Exchange with certain requested information
  • In addition to a censure, a Director Unsuitability Statement was made against two former directors
  • In addition to a censure, a Prejudice to Investors’ Interests Statement was made against a former director, chairman and chief executive officer
  • Censures were made against two former directors and the same directors were directed to attend training


13 June 2023

Jilin Province Huinan Changlong Biopharmacy Company Limited (Stock Code: 8049) and nine former and current directors

  • The listed issuer entered into subscriptions for wealth management products, which were subject to Listing Rule requirements as they were discloseable or major transactions
  • The listed issuer failed to comply with the applicable disclosure or shareholder approval requirements for some of the subscriptions
  • The Listing Division of the Exchange has warned the listed issuer for its non-compliance of the same nature in the past
  • The continuing and repeated breaches of the same nature showed that the remedial measures announced by the listed issuer were ineffective or not adopted
  • A former director did not respond to the enquiries from the Listing Division of the Exchange
  • Censures were made against the listed issuer
  • A Director Unsuitability Statement was made against a former director
  • Eight current directors were criticised and directed to attend training


23 May 2023

CT Vision S.L. (International) Holdings Limited (Stock Code: 994)

  • The auditors of the listed issuer resigned as they were unable to obtain information required for the completion of their audit of the listed issuer's consolidated financial statements
  • As a result, the listed issuer delayed the publication of its audited financial results and the annual report
  • The auditors noticed certain fund transfers to a former director and his related company from the listed issuer's subsidiary, of which the board was not notified
  • The fund transfers constituted discloseable and connected transactions as well as financial assistance
  • There were related inaccurate disclosures in the listed issuer's financial statements
  • Censures were made against the listed issuer


9 May 2023

Keyne Ltd (formerly known as Nine Express Limited) (Stock Code: 9) and sixformer and current directors

  • The listed issuer inaccurately described a lending arrangement in its announcement and annual report
  • There were material omissions in both the announcement and the annual report, including details of the connected nature of the arrangement, which involved the listed issuer’s controlling shareholder
  • Since the listed issuer failed to comply with the procedural requirements for major and connected transactions, the shareholders were deprived of material information related to their investment in the listed issuer and the risks arising from the lending arrangement, and their right to vote on the arrangement
  • The listed issuer discovered that the internal control policies and procedures were deficient but failed to take adequate steps to address them and bring them to the attention of the board
  • Censures were made against the listed issuer and six directors who were also directed to attend training


4 May 2023

Four former directors of Arta TechFin Corporation Limited (formerly known as Freeman FinTech Corporation Limited)(Stock Code: 279)

  • The listed issuer significantly expanded its money lending business and granted unsecured loans to individual borrowers referred by a director with a majority of them located outside of Hong Kong
  • Most of the borrowers requested their loans to be paid to third-party nominees, with some borrowers nominating the same nominee
  • All of the borrowers defaulted on the loans and the listed issuer incurred significant impairment loss
  • Evidence suggested only limited and inadequate due diligence and credit assessments had been conducted on the borrowers, and only limited follow up or monitoring regarding the status of the loans by the directors after the loans were made
  • There was no evidence of anti-money laundering procedures or any other checks conducted on the third-party nominees, even where the same nominee was designated by different borrowers to receive their loan monies
  • In addition to a public censure, a Director Unsuitability Statement was made against a former director
  • Censures were made against three former directors


25 April 2023

S&S Intervalue China Limited (Delisted, Previous Stock Code: 8506) and five former and current directors

  • The subsidiary of the listed issuer entered into a series of unauthorised transactions under which it provided financial assistance to third parties
  • The transactions constituted discloseable and major transactions, and the listed issuer failed to make appropriate disclosures to investors and to obtain shareholder approval
  • There was no justifiable commercial reason for the transactions, and they resulted in significant loss
  • Deficiencies identified in the listed issuer's internal controls during a review were left unaddressed, which contributed to the board's inability to prevent and/or timely identify the unauthorised transactions
  • Censures were made against the listed issuer and two former and current directors, who were directed to attend training
  • In addition to a public censure, a Director Unsuitability Statement was made against three former directors 


20 April 2023

Tianjin Real Estate Group Co., Ltd. (Delisted, Previous Debt Stock Code: 5286)

  • The listed issuer issued a bond which was listed on the Exchange
  • Before the maturity of the bond, there was market information that the listed issuer had defaulted in other bonds
  • There was concern over the triggering of an event of default in respect of the bond listed on the Exchange and the Exchange sought clarification from the listed issuer 
  • The listed issuer failed to respond to the Exchange. It also failed to announce relevant necessary information to avoid a false market and did not apply for a trading suspension
  • The listed issuer failed to appoint any replacements for its authorised representatives when they were unable to execute their duties due to an ongoing regulatory investigation
  • Censures were made against the listed issuer



Takeovers Bulletin No.65

Irrevocable Undertakings and Financial Resources Confirmations

An offer made under the Code on Takeovers and Mergers ("Takeovers Code") is made to all shareholders of an offeree company for all outstanding shares other than those held by the offeror (and its concert parties, where applicable), and an offeror may obtain irrevocable undertakings ("IUs") from shareholders, which may include undertakings not to accept the offer ("Non-Accepting IUs"). Pursuant to General Principle 4 and Rule 3.5 of the Takeovers Code, the announcement of an offer must include a confirmation from the offeror’s financial adviser that sufficient resources are available to the offeror to satisfy the full acceptance of the offer. Where a shareholder undertakes in a Non-Accepting IU that it: (i) will not accept an offer; and (ii) will not dispose of or otherwise transfer its shares to any other party (i.e., the shares will not become available for acceptance by any other party), the Executive of the Securities and Futures Commission (the "SFC") will permit an offeror and its financial adviser to take into account the shares that are subject to the Non-Accepting IU ("Subject Shares") for the purposes of the financial resources confirmation. In this scenario, the offeror and its financial adviser may exclude the value of the Subject Shares when ascertaining the total amount of cash that the offeror requires to satisfy the full acceptance of the offer.


In one case, a shareholder who was subject to a Non-Accepting IU tendered shares for acceptance during an offer period and received a total number of acceptances greater than the number of shares subject to the offer less the shares under the Non-Accepting IUs. The shareholder withdrew its acceptances before the due date for settling the offer consideration, and the offeror was able to fulfil its payment obligation under the offer in accordance with the Takeovers Code requirements. Had the shareholder who gave the Non-Accepting IU sold its shares and the purchasers of those shares then accepted the offer, the offeror would have been required to settle the consideration due in accordance with the Takeovers Code.


Under the Takeovers Code, an offer is required to made to all shareholders of an offeree company. The enforceability or legality of a Non-Accepting IU is a civil matter between an offeror and the relevant shareholder of the offeree company. Whether or not a shareholder has breached the terms of a Non-Accepting IU will not negate an offeror’s responsibilities and obligations under the Takeovers Code.


A copy of the newsletter is available here.


Consultation paper on proposed amendments to the Takeovers Code

With the initiative to codify the current practices of the Executive of the SFC and clarify uncertainties in the existing provisions of the Takeovers Code, the SFC published a consultation paper proposing a wide range of amendments to the Takeovers Code, which include proposals to (i) clarify certain matters regarding voting and acceptances by shareholders in a transaction related to Takeovers Code and amend the definition of “close relatives”; (ii) provide guidance on the application of the chain principle; (iii) streamline and improve efficiency during an offer; (iv) clarify the effects of statements made during an offer; (v) clarify certain procedural matters in partial offers and requirements for comparable offers; (vi) introduce a number of green initiatives to enhance efficiency and to reduce the environmental impact associated with documents under the Takeovers Code; and (vii) codify existing practice and effect a number of housekeeping amendments.


The consultation period lasted for five weeks and ended on 23 June 2023.


B) Market Update

With a sign of recuperation in the Hong Kong IPO market, there were 45 new Main Board and 2 new GEM IPO applications accepted by the Exchange and 13 IPOs launched in the second quarter of 2023 that consists of a diverse range of businesses. Examples of some of the recent Main Board listings are:


Listed issuer


Beisen Holding Limited (Stock Code: 9669)


The largest provider of cloud-based human capital management solutions in China in terms of revenues in 2021. The company's platform delivers cloud-based human capital management solutions for enterprises to recruit, evaluate, manage, develop and retain talents efficiently. Its retail offering was over-subscribed by approximately 15.6 times with an estimated net proceeds from the IPO of approximately HK$155.0 million. To date, its market capitalisation reaches approximately HK$6.24 billion.


MedSci Healthcare Holdings Limited (Stock Code: 2415)


The company operates online professional physician platforms in China. Its retail offering was over-subscribed by approximately 8.9 times with an estimated net proceeds from the IPO of approximately HK$538.2 million. To date, its market capitalisation reaches approximately HK$7.87 billion.


ZJLD Group Inc (Stock Code: 6979)


A baijiu company in China devoted to offering premium baijiu products featuring sauce aroma profile. The company ranked 14th among all baijiu companies in China with a market share of 0.8%, in terms of revenue in 2021. Its retail offering was over-subscribed by approximately 0.9 times with an estimated net proceeds from the IPO of approximately HK$4.99 billion. To date, its market capitalisation reaches approximately HK$25.71 billion.


Beijing Luzhu Biotechnology Co., Ltd. - B - H Shares (Stock Code: 2480)


A biotechnology company committed to developing innovative human vaccines and therapeutic biologics to prevent and control infectious diseases and treat cancer and autoimmune diseases. Its retail offering was over-subscribed by approximately 2.3 times with an estimated net proceeds from the IPO of approximately HK$241.6 million. To date, its market capitalisation reaches approximately HK$5.65 billion.


Cutia Therapeutics-B (Stock Code: 2487)


A research & development-driven dermatology-focused biopharmaceutical company focused on the broader dermatology treatment and care therapeutic areas, including localized adipose accumulation management medication, scalp diseases and care, skin diseases and care and topical anesthesia. Its retail offering was over-subscribed by approximately 0.4 times with an estimated net proceeds from the IPO of approximately HK$392.7 million. To date, its market capitalisation reaches approximately HK$7.44 billion.


Laekna, Inc,-B (Stock Code: 2105)


A science-driven, clinical-stage biotechnology company.  Its retail offering was over-subscribed by approximately 4.8 times with an estimated net proceeds from the IPO of approximately HK$708.2 million. To date, its market capitalisation reaches approximately HK$6.57 billion.


Horizon Construction Development Ltd. (Stock Code: 9930)


The largest equipment operation service provider in China in 2022 in terms of revenue. The company provides comprehensive and multi-dimensional services covering the full cycle of projects. The estimated net proceeds from the IPO was approximately HK$1.5176 billion. To date, its market capitalisation reaches approximately HK$9.46 billion.



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Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; trusts and wealth preservation; wills, probate and estate administration; property and building management; banking; fraud; distressed debt; financial services/corporate regulatory and compliance.


As an independent law firm, we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.


Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact [email protected] if you have any questions about the article.