On 16 June 2017, the Hong Kong Stock Exchange (HKEX) launched a two-month public consultation on the establishment of a new board and review of the Growth Enterprise Market (GEM).

The proposals were made to enhance the quality of the market as well as to broaden the accessibility of Hong Kong’s capital markets by opening up to a more diverse range of issuers.  Our publication discusses the key changes to the existing regime and how these proposed changes could have an impact on GEM and Main Board (due to corresponding changes to GEM rules) listing applicants.  

The consultation contains two separate papers: 

• The New Board Concept Paper
• The Consultation Paper on the Review of the GEM and changes to the GEM and Main Board Listing Rules

In the New Board Concept Paper, the HKEX proposes to establish a new board with two distinct segments, New Board Pro and New Board Premium, to cater ‘new economy’ companies with one or more of the following characteristics that prohibit them from a listing under the current regime: 

• Pre-profit companies;
• Companies with non-standard governance structures; and
• Mainland Chinese companies that wish to have a secondary listing in Hong Kong. 

On the other hand, the proposed GEM reforms revolved around three areas: GEM’s position as a stepping stone to the Main Board, admission requirements and delisting mechanism, and the open market requirement.