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Capital Markets Quarterly - July 2025
2025-07-07

Howse Williams’ Capital Markets Quarterly aims to provide you an overview of the various regulatory and market updates in the second quarter of 2025, 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")

 

Information Paper on Rule Amendments to Implement an Uncertificated Securities Market and “Issuer Platform” announcement

 

In May 2025, the Exchange published an information paper ("Information Paper") to explain the changes to be made to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") as a consequence of the implementation of the Uncertificated Securities Market ("USM") and the Exchange’s "Issuer Platform". The USM aims to streamline securities transactions by introducing the regime of dematerialisation of Prescribed Securities (as defined in the Information Paper), i.e. converting certain number of units of Prescribed Securities from certificated form to uncertificated form, aligning with practices in major global securities markets. Relevant rules and amendments to various existing legislations were approved by the Legislative Council on 16 April 2025. Housekeeping amendments to the Listing Rules will coincide with the Issuer Platform's launch which is tentatively set for mid-2026.

 

Both new applicants and listed issuers must take specific actions to ensure compliance with the USM implementation. New applicants shall appoint an Approved Securities Registrar ("ASR"), amend their constitutional documents to align with the new regulatory requirements and provide information on their USM participation in their listing document. In addition to appointing an ASR and amending constitutional documents, listed issuers shall announce the latest date by which their Prescribed Securities will become Participating Securities (as defined in the Information Paper), announce their plan for their Prescribed Securities to become Participating Securities, announce within the prescribed timeframe a reminder that their securities will shortly become Participating Securities, as well as to participate in USM. These actions must be completed by designated deadlines outlined in the Information Paper. To facilitate this transition, the Listing Division will publish additional guidance to assist issuers to comply with the applicable USM Rule Amendments.  

 

A copy of the Information Paper is available here.

 

Update to Guidance Letter, FAQs and Guide for New Listing Applicants

 

Updated Guides and FAQs

 

The Corporate Governance Guide for Boards and Directors ("CG Guide"), the Guide on Preparation of Annual Report and the FAQs on Directors (FAQ1.1 – No.1-20) and the Corporate Governance Code (FAQ17.1 – No.1-10) have been updated to assist issuers’ and directors’ compliance with the new corporate governance requirements that came into effect on 1 July 2025. The FAQs on Directors provide guidance on requirements regarding directors' training, independent non-executive directors and their tenure of office, procedures for election of directors etc., whilst the FAQs on the Corporate Governance Code provide guidance on board composition and nomination, directors' responsibilities, internal audit function etc.

 

A copy of the CG Guide is available here.

 

Amendments to the Guide

 

The Exchange has updated the Guide for New Listing Applicants to include guidance on the following matters:

 

  1. the confidential filing option for Biotech Companies and Specialist Technology Companies;

 

  1. presuming Biotech Companies and Specialist Technology Companies to have satisfied the Innovative Company Requirements and the external validation requirement for listing with a weighted voting rights structure under Chapter 8A of the Listing Rules; and

 

  1. regarding contractual arrangements, the update of the Regulatory Assurance Requirement and the Regulatory Approval for Other Requirements for applicants that are subject to the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies of the China Securities Regulatory Commission.

 

The above amendments have come into effect on 6 May 2025.

 

The Exchange’s Disciplinary Actions

 

In the second quarter of 2025, the Exchange published sanctions in 7 cases which involve (i) transactions involving connected parties or failure to disclose and comply with procedural requirements, (ii) directors’ failure to safeguard listed issuer’s interests, discharge directors' duties and obligations under the Listing Rules and cooperate in investigations, and (iii) deficiencies in the listed issuer’s internal controls and risk management systems. Listed issuers should exercise caution and put in place proper check and balance, and transaction monitoring mechanisms.

News release date

Issuer/ directors involved – summary of conduct

 

25 June 2025

 

Three Former Directors of Metaverse Yunji Technology Group Company Limited (Delisted, Previous Stock Code: 8287)

  • The Exchange conducted an investigation concerning whether the three former executive directors discharged their directors’ duties.
  • As part of the investigation, the Listing Division sent investigation and reminder letters to each of the three former executive directors. Two of the directors did not respond to the Listing Division’s enquiries. The other director responded to some but not all of the Listing Division’s enquiries.
  • In addition to a public censure, a Director Unsuitability Statement was imposed against each of the three former executive director.

 

 

17 June 2025

 

New Focus Auto Tech Holdings Limited (Stock Code: 360) and Seven Directors

  • Two former independent non-executive directors failed to cooperate in the Exchange’s investigation into breaches of the Listing Rules relating to certain transactions of the listed issuer and its subsidiaries.
  • Based on evidence available to the Exchange, the Exchange founded the following:
  • Between September 2018 and June 2019, a former director of the listed issuer, caused the listed issuer and its subsidiaries to grant loans and enter into equity transactions involving about RMB176 million in total without the approval or knowledge of the listed issuer’s board of directors. One of these transactions constituted a discloseable transaction under Chapter 14 of the Listing Rules. The listed issuer did not disclose the same until October 2022.
  • In December 2022 and January 2023, the current chairman caused a subsidiary to grant two loans of about RMB477 million in total to a borrower. These loans constituted advances to an entity and major transactions under Chapters 13 and 14 of the Listing Rules. The current chairman did not procure the listed issuer to comply with the relevant disclosure and shareholder approval requirements in a timely manner.
  • In September 2024, the current chairman further caused a subsidiary to establish a new company in the PRC with himself and an independent third party. It constituted a discloseable and connected transaction under Chapters 14 and 14A of the Listing Rules. He did not report the matter to and seek approval from the board in a timely manner. He mistakenly believed that such reporting and approval were not required as funding was not needed at the time of the establishment of the company. 
  • The listed issuer’s internal controls were materially deficient at the time of the above transactions.
  • The Exchange found that the listed issuer had breached the Listing Rules. In addition, six of the seven directors had breached the Listing Rules by failing to ensure that the listed issuer had adequate and effective internal controls in place at the material time and to use their best endeavours to procure the listed issuer’s compliance with the Listing Rules.
  • The listed issuer was criticised.
  • Censures were made against the current chairman and six former directors.
  • In addition to public censures, a Director Unsuitability Statement was imposed against two former independent non-executive directors respectively.
  • The Exchange further directed the current chairman to attend 26 hours of training and the other four former directors to attend 21 hours of training.

 

11 June 2025

 

New Century Healthcare Holding Co. Limited (Stock Code: 1518) and Six Directors

  • The Exchange found the listed issuer and the six directors in breach of various requirements under the Listing Rules in relation to a framework agreement which the listed issuer entered into with its connected person ("CP") in 2016.  The connected person was a joint venture owned by, amongst others, the chairman and chief executive officer of the listed issuer.
  • Under the framework agreement, the listed issuer agreed to provide hospital consulting services to CP.  The agreement did not specify the timing for CP’s settlement of service fees payable to the listed issuer.
  • Between 2016 and 2021, a substantial amount of service fees remained unsettled.  The executive directors repeatedly allowed CP to delay the payment without reporting CP’s deteriorating financial condition and business performance, and certain repayment plans agreed between the listed issuer and CP, to the board of directors of listed issuer.  Such information was also not disclosed to the listed issuer’s independent shareholders when the board of directors sought their approval for renewing the framework agreement.
  • The audit committee members were aware of CP’s prolonged delayed or non-payment of service fees, but they did not procure the listed issuer to take adequate steps to safeguard its interests.  Subsequently, CP defaulted on the outstanding fees of RMB140 million, resulting in CP recording an impairment loss of RMB105 million in 2022.
  • Censures were made against the listed issuer and the three executive directors.
  • The two independent non-executive directors and one former non-executive director were criticised.
  • The Exchange further directed the listed issuer to conduct an independent internal control review, and each of the above directors to attend training on regulatory and legal topics and Listing Rule compliance including on each of (a) directors’ duties and (b) the Corporate Governance Code .

 

28 May 2025

Two Former Directors of China Health Technology Group Holding Company Limited (formerly known as China Bozza Development Holdings Limited) (Stock Code: 1069)

  • Two former directors had failed to cooperate in the Exchange’s investigation concerning their failure to discharge directors’ duties when (i) operating the listed issuer’s money lending business between 2015 and 2019 and/or (ii) procuring the listed issuer to dispose of certain subsidiaries in 2018.
  • Based on evidence available to the Exchange, the former executive director, in charge of the listed issuer’s money lending business at the material time, had approved the listed issuer granting and/or extending eight loans in a total principal sum of HK$138.3 million without performing sufficient due diligence, risk analysis and credit assessment. Nor had he properly assessed and monitored the sufficiency of the relevant pledged assets. There was no evidence that the former executive director had declared that some of the lenders were his family members. An impairment of about 86% on the loan receivables was recorded in the listed issuer’s 2019 annual results.
  • The two former directors were also found that in 2018, they had procured the listed issuer to allow the purchaser for certain subsidiaries of the listed issuer to delay paying the consideration of RMB93 million until months after completion of the sale on an unsecured and interest-free bases. The purchaser defaulted paying any consideration, resulting in a full impairment of RMB93 million in the listed issuer’s 2019 annual results. There was no evidence of any due diligence or credit assessment conducted by the two former directors on the purchaser prior to the disposal.
  • The two former directors were clearly aware of the Exchange’s investigation but did not respond to the investigation and the Exchange’s reminder letters after they ceased to be directors of the listed issuer.
  • The two former directors were censured.
  • In addition to public censures, a Director Unsuitability Statement was imposed against each of the two former directors.

 

24 April 2025

Former Director of Wisdom Wealth Resources Investment Holding Group Limited (Stock Code: 7)

  • Following disciplinary action in 2024, the former director was publicly censured by the Exchange and was directed to attend 17 hours of training on Listing Rule compliance. Despite repeated reminders, he did not comply with the training direction.
  • The former director’s failure to comply with the training direction constituted a serious breach of the Listing Rules.
  • Censure and a Director Unsuitability Statement was imposed against the former director.

 

22 April 2025

Two Former Directors of Silver Base Group Holdings Limited (In Liquidation) (Delisted, Previous Stock Code: 886)

  • In 2021, while the listed issuer and its subsidiaries ("Group") were facing serious liquidity issues, two former directors, who are related as uncle and nephew, allowed and/or caused the Group to dissipate almost all of its cash and cash equivalents at the material time (about RMB566 million). Substantial prepayments were made by the Group within three months to three purchase agents, one of which was owned by one of the former directors' relatives.
  • Some prepayments were made despite a written warning given by the Group’s finance department that they could impact on the Group’s liquidity. In the end, the purchase agents neither delivered the products nor refunded the prepayments, and the listed issuer was ordered to be wound up by the court.
  • The two former directors failed to act in the interests of the listed issuer and did not exercise reasonable skill, care and diligence in the prepayment transactions. They (1) did not conduct any substantive due diligence and/or risk assessments concerning the purchase agents or the prepayment transactions; (2) did not report to the listed issuer’s board of directors before proceeding with the prepayment transactions; and (3) disregarded the clear conflicts of interest arising from the relationship between one of the former directors and the connected purchase agent and did not make any report to the board of directors.
  • While the other directors of the listed issuer repeatedly expressed concerns and requested regular updates on the prepayment transactions, the two former directors failed to disclose and/or report relevant prepayments to the board of directors in a timely manner.
  • The prepayment transactions constituted connected transactions under Chapter 14A of the Listing Rules, but the two former directors failed to procure the listed issuer’s compliance with the relevant Rule requirements.
  • One of the former directors did not respond to the Listing Division’s investigation and reminder letters. He failed to cooperate in the investigation.
  • A Director Unsuitability Statement and censure were imposed against each of the two former directors.

 

8 April 2025

Leading Holdings Group Limited (Stock Code: 6999) and One Current Director

  • The Exchange found that the director in question had failed to exercise reasonable skill, care and diligence to ensure the accuracy and completeness of the information provided by the listed issuer to the Exchange and stated in the listed issuer’s announcement, which was in breach of the Listing Rules.
  • On 19 May 2022, in response to the Exchange’s enquiries of the listed issuer about whether there was any forced sale of the listed issuer shares held by controlling shareholders, the listed issuer responded in the negative. On the same day, the listed issuer issued an announcement to that effect. In fact, a forced sale of about 1% of the listed issuer shares beneficially owned by the director was executed.  He failed to make any reasonable enquiry before procuring the listed issuer to respond to the Exchange and issue the announcement.
  • Subsequently, after becoming aware of such information being inaccurate, incomplete and/or misleading, he failed to correct the position by informing the Exchange and procuring the listed issuer to publish an announcement.
  • Censures were made against the listed issuer and the director.
  • The Exchange further directed the director to attend 20 hours of training on regulatory and legal topics and Listing Rules compliance, including at least three hours on each of (a) director’s duties; (b) the Corporate Governance Code; and (c) requirements under Rule 2.13 and Chapter 13 of the Listing Rules, within 90 days.

 

Securities and Futures Commission (the “SFC”)

Takeovers Bulletin No. 73

Further guidance on treatment of right-of-use assets for the purposes of Rule 11.1(f)

 

Under Rule 11.1(f) of the Takeovers Code, if the book value of the consolidated property assets of the offeree company exceeds 15% of its consolidated total assets, normally a valuation of the property assets held by the offeree company is required. When the relevant percentage is 50% or above, property assets held by the associated companies of the offeree company should also be valued. The requirements apply similarly to the offeror when its shares are included in the offer consideration.

 

The purpose of Rule 11.1(f) of the Takeovers Code is to enable shareholders to make an informed assessment of the offer, taking into account the valuations of significant property interests held by the offeree company and the offeror vis-à-vis their book values (for example, whether there is any material revaluation difference).

 

The valuation requirements are intended to cover both ownership in land and buildings and leasehold interests which give the lessee the substantive risks and rewards of ownership of the leased land or buildings (collectively, “Relevant Property Interests”), such as unilateral right(s) to transfer, sublet, mortgage or otherwise dispose of the interests without the consent of the lessor. One example is the long-term land lease granted by the HKSAR Government.

 

Regarding other leasehold interests relating to land or buildings (e.g. short-term leases), the SFC recognise that typically a property valuer does not ascribe any commercial value to such interests and therefore it may be misleading to use the book value of these interests as a proxy for their significance for the purpose of Rule 11.1(f).

 

For calculating percentages in Rule 11.1(f), the SFC typically allows the exclusion of right-of-use ("ROU") assets, unless the underlying leases resemble property ownership. This approach acts as a waiver of Rule 11.1(f) to maintain the rule's intent following changes in lease accounting standards in 2019. Without this waiver, companies with substantial "operating leases" and insignificant Relevant Property Interests could be required to obtain property valuations, despite many assets likely may be determined to have no value.

 

The SFC has observed that market practitioners have sometimes excluded ROU assets from "consolidated property assets" without adjusting "consolidated total assets". While most ROU assets involved are insignificant, the exclusion is intended to mitigate the impact of IFRS 16 (or HKFRS 16) on Rule 11.1(f). The Executive of the SFC suggests that if ROU assets valued at zero are excluded, their book value should be deducted from both the numerator and denominator in calculations to ensure compliance with Rule 11.1(f). Practice Note 7 has been revised for clarity on this waiver.

 

Reminder to liquidators of offeree companies on disclosure obligations

 

Rule 3.7 of the Takeovers Code provides that after a potential offeror or the offeree company has announced that talks are taking place or an offer is being contemplated, monthly updates must be made to set out the progress of the talks or the consideration of the possible offer, until the potential offeror has announced its firm intention to make an offer in accordance with Rule 3.5 of the Takeovers Code or the offer period is closed (whichever is earlier).

 

Where an offeree company becomes the subject of a winding-up petition after a Rule 3.7 announcement, it remains obliged to comply with the Takeovers Code and keep the market informed of the possible offer by way of an announcement on the Exchange’s website, such as when a formal winding up order was granted and whether talks with the potential offeror are continuing. The responsibility to ensure the offeree company’s compliance with the Takeovers Code shall rest with its liquidator as soon as it is appointed to take control of the offeree company’s affairs and assets in place of directors. Liquidators are reminded to submit draft monthly updates or other offer-related documents to the Executive of the SFC for comment before publication.

 

Talks announcement in a competitive situation

 

In a competitive situation where an offeror has made a firm intention announcement under Rule 3.5 of the Takeovers Code, a competitor may still be considering whether to make an offer. If a potential competing offer is announced in a Rule 3.7 talks announcement, shareholders will reasonably wish to consider the potential competing offeror's intentions and offer terms when deciding on their shares in the offeree company. Such information is particularly relevant when the first offeror has already issued its offer document and shareholders are being invited to accept the offer before the closing date.

 

Under Rule 3.9 of the Takeovers Code, the offeree company may request the Executive of the SFC to set a time limit for a potential competing offeror to clarify its intention. The Executive of the SFC may also exercise its power to impose such a time limit on the potential competing offeror, if it considers it appropriate to do so, even when a request has not yet been made by the offeree company. In reaching a decision on whether and how long a time limit should be imposed on a potential competing offeror to announce either a firm intention to make an offer in accordance with Rule 3.5 or that it does not intend to make an offer, the Executive of the SFC will take into account all relevant factors including:

 

  1. the current duration of the offer period;
  2. the reason(s) for the potential competing offeror’s delay in issuing a firm intention announcement;
  3. the proposed offer timetable (if any);
  4. any adverse effects that the offer period has had on the offeree company; and
  5. the conduct of the parties to the offer.

 

The SFC reinforced that as long as the parties involved in a possible offer keep the matter confidential, normally there should not be a need to issue a “talks” announcement prior to a Rule 3.5 announcement.

 

A copy of the Takeovers Bulletin is available here.

 

B) Market Update

 

With a sign of recuperation in the Hong Kong IPO market, there were 113 new Main Board, 7 new GEM IPO applications accepted by the Exchange and 27 IPOs launched in the second quarter of 2025 that consists of a diverse range of businesses. Examples of some of the recent Main Board listings are:

 

Issuer

Description

IFBH Limited (Stock Code: 6603)

A ready-to-consume beverage and food company rooted in Thailand. Its retail offering was over-subscribed by 2,681.3 times with estimated net proceeds from the IPO of approximately HK$1,073.93  million. To date, its market capitalisation is approximately HK$10.53 billion.

 

Unisound AI Technology Co., Ltd. - H shares (Stock Code: 9678)

 

An AI company solution provider focusing on the sales of conversational AI products and solutions for daily life and healthcare related application scenarios in China. Its retail offering was over-subscribed by 90.7 times with estimated net proceeds from the IPO of approximately HK$206.4 million. To date, its market capitalisation is approximately HK$12.27 billion.

 

Zhejiang Sanhua Intelligent Controls Co., Ltd. - H Shares (Stock Code: 2050)

 

The world’s largest manufacturer of refrigeration and air-conditioning control components and a global leader in automotive thermal management system components in terms of revenue in 2024, according to Frost & Sullivan. Its retail offering was over-subscribed by 746.9 times with estimated net proceeds from the IPO of approximately HK$9,177 million. To date, its market capitalisation is approximately HK$10.42 billion.

 

Foshan Haitian Flavouring and Food Company Ltd. - H Shares (Stock Code: 3288)

 

A leading condiments company in China with long-standing heritage. Its retail offering was over-subscribed by 917.2 times with estimated net proceeds from the IPO of approximately HK$10,009.6 million. To date, its market capitalisation is approximately HK$9.78 billion.

 

Jiangsu Hengrui Pharmaceuticals Co., Ltd. - H Shares (Stock Code: 1276)

A leading innovative global pharmaceutical company in China. Its retail offering was over-subscribed by 453.9 times with estimated net proceeds from the IPO of approximately HK$9,747.3 million. To date, its market capitalisation is approximately HK$13.89 billion.

 

Auntea Jenny (Shanghai) Industrial Co., Ltd. - H Shares  (Stock Code: 2589)

A fast-growing freshly-made beverage company, operating the fifth and fourth largest network of freshly-made tea shops in China as of 31 December 2022 and 2023, respectively, according to CIC. Its retail offering was over-subscribed by 3,615.8 times with estimated net proceeds from the IPO of approximately HK$195.0 million. To date, its market capitalisation is approximately HK$7.88 billion.

 

 

 

About Us 

 

Howse Williams is a leading, full service, Hong Kong law firm. We combine the in-depth experience of our lawyers with a forward thinking approach. 

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; investment funds; technology, media and telecommunications; virtual assets; 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. 

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