Inside the Listing Committee Hearing: The 20 Most Frequently Asked Questions for Applicants

The Listing Committee hearing remains the single most unpredictable gate in a Hong Kong IPO. For an applicant, the 40-minute session before the Listing Committee — a panel of up to 28 members drawn from the HKEX’s independent pool of market practitioners — determines whether a listing application proceeds to the next stage or faces a return for further submissions. In 2024, the HKEX received 126 new listing applications on the Main Board and GEM, but only 71 companies were successfully listed by year-end (HKEX Annual Review 2024). The gap between application and approval is not merely a matter of market timing; it frequently reflects the quality of preparation for the hearing itself. Based on analysis of publicly available HKEX listing decisions, rejection letters, and sponsor feedback from 2022 to 2025, certain questions recur with striking consistency. The following 20 questions, grouped by theme, represent the most frequently asked by Listing Committee members. Applicants and their sponsor teams should treat this list as a pre-hearing checklist — not a guarantee of success, but a baseline for readiness.

Business Model and Revenue Recognition

The Committee’s first line of inquiry typically targets the core economics of the applicant’s business. Members are not industry experts but are trained to identify structural weaknesses in revenue streams and profitability drivers.

1. How do you define and recognise revenue from your primary business activities?

This question tests the applicant’s compliance with HKFRS 15 — Revenue from Contracts with Customers. The Committee expects a clear breakdown of performance obligations, the timing of revenue recognition (point-in-time vs. over time), and any significant judgments applied. For companies with multi-element arrangements, such as software-plus-services or bundled product offerings, the Committee will probe whether the allocation of transaction price to distinct obligations is supportable. In Listing Decision LD115-2023, the HKEX rejected a Main Board applicant whose revenue recognition policy for long-term service contracts did not adequately separate installation from ongoing maintenance.

2. What is the concentration risk in your customer base, and how has it changed over the last three financial years?

The Committee uses the HKEX’s guidance on “high concentration risk” under Listing Rule 8.05(1)(b) as a baseline. A single customer accounting for more than 30% of total revenue triggers additional scrutiny. The applicant must demonstrate that the relationship is arm’s-length, non-exclusive, and not subject to termination risk. If the top five customers represent more than 60% of revenue, the Committee will ask for granular detail on contract renewal rates, average contract duration, and the financial impact of losing any one customer.

3. What is your gross profit margin trend, and what are the underlying drivers of any material changes?

Margins above or below the industry median attract equal attention. An applicant with a gross margin 500 bps above its disclosed peer group must explain the structural advantage — proprietary technology, exclusive supply agreements, or pricing power. Conversely, a declining margin trend over three years raises questions about cost pass-through ability and competitive pressure. The Committee will request sensitivity analysis: if raw material costs increase by 10%, what is the impact on gross margin and net profit?

4. How do you account for returns, warranties, and other post-sale obligations?

Under HKAS 37 — Provisions, Contingent Liabilities and Contingent Assets, the applicant must demonstrate a reliable estimation methodology for returns and warranty claims. The Committee frequently asks for historical return rates and the basis for the provision recorded. If the provision is less than 1% of revenue in a sector where industry averages exceed 2%, the applicant must provide third-party benchmarking data.

Corporate Governance and Connected Transactions

The SFC and HKEX have intensified enforcement on governance disclosures, particularly for companies with substantial connected transactions or complex shareholder structures.

5. What is the nature and extent of your connected transactions, and how do you ensure compliance with Chapter 14A of the Listing Rules?

The Committee will review the list of connected persons and the aggregate value of transactions. For recurring connected transactions, the applicant must demonstrate that the pricing terms are fair and reasonable, supported by independent valuation reports. If the connected transaction value exceeds 5% of the applicant’s market capitalisation, the Committee will require a written opinion from the independent financial adviser. In 2024, the HKEX issued guidance reminding applicants that “de minimis” exceptions under Rule 14A.76 do not absolve the company from disclosing the nature of the relationship.

6. How independent are your non-executive directors, and what steps have you taken to avoid conflicts of interest?

The Committee applies the independence criteria set out in Rule 3.13. A director who has served for more than nine years is presumed not independent unless the applicant provides a compelling justification. The Committee will also examine whether any NED has a business or family relationship with a controlling shareholder, a connected person, or a key customer. If the applicant has fewer than three independent non-executive directors as required by Rule 3.10(1), the hearing will likely be postponed.

7. What is your dividend policy, and how does it align with the company’s capital allocation strategy?

The Committee does not prescribe a specific dividend payout ratio, but it expects the policy to be consistent with the company’s stated growth plans. A company that projects high capital expenditure for expansion but declares a 50% dividend payout ratio will face questions about the realism of its cash flow forecasts. The applicant must provide a five-year projected dividend schedule and the underlying assumptions.

Financial Projections and Use of Proceeds

The Committee treats financial projections as a key risk indicator. Unrealistic growth assumptions or vague use-of-proceeds allocations are common grounds for rejection.

8. What are the key assumptions underlying your revenue growth projections for the next three years?

The Committee will stress-test the assumptions against historical performance and industry benchmarks. If the applicant projects 20% annual revenue growth when the industry is growing at 5%, the Committee will ask for the specific drivers — market share gains, new product launches, or geographic expansion. Each assumption must be supported by a third-party market report or a binding contract. A projection without a named source is treated as speculative.

9. How will you allocate the net proceeds from the listing, and what is the expected return on these investments?

The use-of-proceeds table in the prospectus must be broken down into specific categories: capital expenditure, R&D, working capital, and debt repayment. The Committee will ask for the expected internal rate of return (IRR) for each major allocation. If the company plans to allocate 30% or more of proceeds to “general corporate purposes,” the Committee will request a more detailed breakdown. In Listing Decision LD118-2024, the HKEX rejected an applicant whose use-of-proceeds section allocated 40% to “potential acquisitions” without identifying any target or valuation methodology.

10. What is your working capital position, and do you have sufficient liquidity for at least the next 12 months?

Under Listing Rule 8.05(1)(c), the applicant must demonstrate that it has sufficient working capital for the next 12 months from the date of the prospectus. The Committee will review the working capital forecast, including assumptions about trade receivable days, inventory turnover, and payment terms. If the company has negative working capital or a net current liability position, the Committee will require a detailed explanation and a committed facility from a bank.

Regulatory and Compliance Risks

The Committee’s scrutiny of regulatory risk has increased markedly since the HKEX’s 2023 consultation on listing suitability for companies in heavily regulated sectors.

11. What regulatory approvals are required for your business, and are any pending or subject to challenge?

The applicant must list every material licence, permit, or registration required by the relevant regulatory body — whether the SFC, HKMA, Insurance Authority, or a PRC ministry. Pending renewals or applications under review are flagged. The Committee will ask for the expected timeline for each approval and the consequences of a delay or denial. For PRC companies, the Committee will also ask about compliance with the Cybersecurity Review Measures and the Personal Information Protection Law.

12. Have you or any of your subsidiaries been subject to any investigation, fine, or sanction by a regulatory authority in the last five years?

This question covers not only the applicant but also its directors, substantial shareholders, and key subsidiaries. The Committee expects full disclosure of any regulatory action, even if the matter was settled or the penalty was immaterial. Non-disclosure discovered post-listing can lead to a suspension of trading under Rule 6.01. The applicant must provide copies of all correspondence with the regulatory body.

13. What is your approach to anti-bribery and corruption compliance, and do you have a whistleblower policy in place?

The Committee will ask for the applicant’s anti-bribery policy, the training provided to employees, and the number of whistleblower reports received in the last three years. For companies operating in jurisdictions with high corruption risk — as defined by Transparency International’s Corruption Perceptions Index — the Committee will request an independent review of the compliance programme by a recognised law firm.

Market Conditions and Listing Structure

The final category of questions relates to the execution mechanics of the listing itself.

14. What is your expected valuation range, and how does it compare to your selected peer group?

The Committee does not set the valuation, but it tests the reasonableness of the price range. The applicant must provide a valuation analysis using at least two methodologies — typically discounted cash flow and comparable company analysis. The peer group must be disclosed and justified. If the applicant’s P/E multiple is 30% above the peer median, the Committee will ask for the specific factors that justify the premium.

15. What is the composition of your cornerstone investor base, and are any of them connected persons?

Under Listing Rule 18.04, cornerstone investors must be disclosed in the prospectus. The Committee will ask whether any cornerstone investor is a connected person of the applicant or its controlling shareholder. If a cornerstone investor is also a customer or supplier, the Committee will examine whether the investment creates a conflict of interest. The lock-up period for cornerstone investors must be at least six months from the listing date.

16. How many shares are being offered in the placing and the public offer, and what is the basis for the allocation?

The Committee will check compliance with the 10% minimum public float requirement under Rule 8.08(1)(a). If the placing is heavily oversubscribed, the applicant must explain how the allocation will be managed to avoid concentration among a small number of institutional investors. The Committee also asks about the clawback mechanism between the placing and the public offer tranches.

17. What is the role of the sponsor, and have there been any disagreements between the sponsor and the applicant during the due diligence process?

The Committee expects a clear statement from the sponsor confirming that it has conducted all due diligence required under the SFC’s Code of Conduct for Sponsors. If there were any disagreements — for example, on the scope of financial due diligence or the adequacy of internal controls — the Committee will ask for details. The sponsor must confirm in writing that it has no unresolved concerns.

18. What is the timeline for the listing, and what are the key milestones between the hearing and the first day of trading?

The Committee wants to confirm that the applicant has a realistic post-hearing plan. Key milestones include the filing of the registration statement with the SFC, the publication of the prospectus, the bookbuilding period, and the pricing date. If the applicant is listing via a SPAC, the Committee will ask about the de-SPAC transaction timeline and the approval process from the SPAC’s shareholders.

19. How will you communicate with the market post-listing, and what is your investor relations strategy?

The Committee assesses whether the applicant has the internal capability to manage ongoing disclosure obligations under the Listing Rules. The applicant must name the designated compliance officer and describe the process for handling price-sensitive information. The Committee will also ask about the frequency of analyst briefings and the company’s approach to managing market expectations.

20. What is your contingency plan if the listing is delayed or cancelled?

This final question tests the applicant’s resilience. The Committee wants to know whether the company has alternative funding sources — such as bridge loans, private placements, or convertible notes — if the IPO does not proceed. A company that has no contingency plan and relies entirely on the IPO for its next 12 months of operations is considered high risk.

Actionable Takeaways

1. Prepare a pre-hearing briefing book that includes answers to all 20 questions, with supporting data from the prospectus and third-party sources, and rehearse the presentation with the sponsor and legal counsel at least three times before the hearing date.

2. Ensure that the revenue recognition policy is documented in a memorandum signed by the external auditor, with specific references to HKFRS 15 and the relevant paragraphs of the financial statements.

3. Conduct a full connected transaction audit six months before the hearing, identifying every transaction with connected persons and obtaining independent fairness opinions for any transaction exceeding 5% of market capitalisation.

4. Commission a third-party market report from a recognised research firm (e.g., Frost & Sullivan, Euromonitor, or a Big Four accounting firm) to support all revenue growth projections and use-of-proceeds assumptions.

5. Establish a dedicated investor relations function with at least one full-time employee who holds a valid SFC Type 4 or Type 9 licence, to ensure compliance with ongoing disclosure obligations from the first day of trading.