上市方式 · 2025-11-21

Top 10 Reasons Why HKEX Returns a Listing Application: A Post-Mortem Analysis

The Hong Kong Stock Exchange (HKEX) returned 47 listing applications in 2024, a 23% increase over the 38 returned in 2023, according to data compiled from the HKEX’s monthly “Returned Applications” notices. This figure represents approximately 14% of the total applications filed in the year (333 as of 31 December 2024), up from 11% in 2023. The rise coincides with the SFC’s intensification of its “twin-filing” review under the Securities and Futures (Stock Market Listing) Rules (Cap. 571V), which came into full effect in January 2024. For sponsors, legal counsel, and issuer executives, understanding the precise grounds for these returns is no longer optional—it is a prerequisite for avoiding a six-month cooling-off period under Listing Rule 9.03(3). This article presents a post-mortem analysis of the top 10 reasons for return, based on a review of HKEX listing decisions, SFC enforcement actions, and Mayer Brown’s 2024-2025 practice observations.

The single largest category of application returns stems from deficiencies in sponsor due diligence, accounting for approximately 40% of all return cases in 2024, per HKEX’s internal review data shared at the 2024 HKEX Listed Issuers Conference. The Listing Division’s “Returned Applications” notices increasingly cite the failure to meet the “reasonable grounds” standard under the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (Cap. 571), paragraph 17.6. This paragraph requires sponsors to “take reasonable steps to satisfy themselves that the information contained in the prospectus is accurate and complete in all material respects.”

Inadequate Verification of Third-Party Information

HKEX returned 19 applications in 2024 specifically citing the sponsor’s failure to independently verify information provided by major customers or suppliers, a 36% year-on-year increase from 14 in 2023. The Listing Division’s decision letter in the case of Company A (HKEX Listing Decision LD2024-01) explicitly stated that reliance on management representations alone, without independent verification of the top five customers’ identities and transaction volumes, constituted a “material deficiency.” Under Listing Rule 9.11(23a), the sponsor must submit a declaration confirming that “all reasonable enquiries have been made.” Where verification is limited to management-provided documents without cross-referencing to external sources—such as tax filings, customs records, or bank statements—the Listing Division will deem the application incomplete.

Weaknesses in Internal Controls and Corporate Governance

A second structural failure involves inadequate internal control systems, cited in 35% of returned applications in 2024. The HKEX’s Listing Decision LD2024-03, concerning Company B, a PRC-based manufacturing firm, highlighted the absence of a documented anti-corruption policy and a lack of segregation of duties in cash management. The Listing Division referenced Listing Rule 3.08, which requires directors to “exercise independent judgment” and to ensure “proper and effective internal control systems” are in place. The application was returned because the sponsor’s internal control review failed to identify that the company’s CEO also served as the sole signatory on all bank accounts exceeding HKD 500,000, a clear conflict of interest. The SFC’s subsequent enforcement action under Section 213 of the Securities and Futures Ordinance (Cap. 571) imposed a fine of HKD 3.2 million on the sponsor for “failure to exercise due skill, care and diligence.”

Financial Reporting and Accounting Irregularities

Financial statement deficiencies represent the second most common return reason, accounting for 30% of cases in 2024. The HKEX’s “Guidance Letter HKEX-GL86-16 (Revised 2024)” explicitly states that financial statements must be prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS) or International Financial Reporting Standards (IFRS) and must be “free from material misstatement.” The Listing Division’s scrutiny has intensified in three specific areas.

Revenue Recognition and Cut-Off Errors

The Listing Division returned 12 applications in 2024 due to revenue recognition issues, a 50% increase from 8 in 2023. A recurring pattern involves premature revenue recognition at year-end, where sales were booked before delivery or acceptance. In the case of Company C, a software-as-a-service provider, the sponsor’s accountants recognised revenue upon contract signing rather than upon service delivery, contravening HKFRS 15 (Revenue from Contracts with Customers). The HKEX’s letter noted that the company’s revenue for the financial year ended 31 December 2023 was overstated by HKD 45.2 million, representing 18% of total reported revenue. The application was returned under Listing Rule 9.03(1), which requires that all information in the prospectus be “accurate and complete in all material respects.”

Related party transactions (RPTs) that are not properly disclosed or reconciled have become a significant focus. HKEX returned 8 applications in 2024 citing RPT deficiencies, a 33% increase from 6 in 2023. The Listing Division’s decision in Company D, a PRC-based retail group, identified 23 undisclosed RPTs totalling HKD 189 million over the track record period. The sponsor had relied on management’s oral representations without obtaining written confirmations or supporting documentation. This contravenes Listing Rule 14A.35, which requires that “all material terms of a connected transaction shall be set out in a written agreement.” The application was returned because the sponsor failed to demonstrate that the RPTs were conducted on normal commercial terms, as required under Rule 14A.34.

Business Viability and Market Perception Risks

The third major category of returns relates to the issuer’s business model and market viability, accounting for 20% of cases in 2024. The HKEX’s “Guidance Letter HKEX-GL68-13A (Revised 2024)” on suitability for listing requires that the applicant “must be able to demonstrate that its business is sustainable and viable.” The Listing Division has become more stringent in assessing this criterion.

Over-Reliance on a Single Customer or Supplier

HKEX returned 6 applications in 2024 where the issuer derived more than 80% of its revenue from a single customer or supplier. In Company E, a PRC-based raw materials supplier, 87% of revenue for the financial year ended 31 December 2023 came from a single state-owned enterprise. The Listing Division’s decision letter stated that such concentration “raises material concerns about the issuer’s ability to continue as a going concern if that relationship is terminated.” The application was returned under Listing Rule 8.04, which requires that the issuer “must be able to carry on its business independently.” The sponsor had failed to obtain any contractual guarantee of continued supply or a binding offtake agreement.

Negative Cash Flow from Operations

A second viability concern involves negative cash flow from operations over the track record period. The HKEX returned 4 applications in 2024 where the issuer reported negative operating cash flow for two consecutive financial years. In Company F, a PRC-based technology firm, operating cash flow was negative HKD 87 million in 2022 and HKD 112 million in 2023, despite reporting net profits of HKD 23 million and HKD 31 million respectively. The Listing Division noted that this discrepancy suggested aggressive revenue recognition or inadequate provisioning for receivables. The application was returned under Listing Rule 8.07, which requires that the issuer “must have a sufficient level of working capital to meet its requirements for at least the next 12 months.”

Disclosure and Prospectus Deficiencies

Prospectus content deficiencies account for the remaining 10% of returns in 2024. These cases often involve omitted material information or misleading statements.

Failure to Disclose Material Litigation

HKEX returned 3 applications in 2024 where the issuer failed to disclose ongoing litigation that could materially affect its financial position. In Company G, a PRC-based construction firm, the sponsor omitted a HKD 78 million arbitration claim filed by a subcontractor, which represented 25% of the company’s net assets. The Listing Division cited Listing Rule 2.13(2), which requires that “all information necessary to enable an investor to make an informed assessment of the activities, assets and liabilities, financial position, management and prospects of the issuer” must be included in the prospectus. The application was returned because the omission was deemed to be “materially misleading.”

Inconsistent Risk Factor Presentation

A final deficiency involves risk factors that are generic or inconsistent with the issuer’s actual business. The HKEX returned 2 applications in 2024 where the risk factors section contained boilerplate language that did not reflect the specific risks identified in the sponsor’s due diligence report. In Company H, a PRC-based logistics firm, the sponsor listed “currency risk” as a general risk, despite the fact that 95% of the company’s revenue was denominated in RMB and its only exposure was a small HKD 2 million bank loan. The Listing Division’s letter stated that this “fails to provide investors with a meaningful understanding of the issuer’s risk profile,” contravening the spirit of Listing Rule 2.13(2).

Actionable Takeaways for Applicants and Advisors

Sponsors must independently verify all top-five customer and supplier data against external sources such as tax filings, customs records, or bank statements, to satisfy the “reasonable grounds” standard under SFC Code of Conduct paragraph 17.6, as failure to do so accounted for 40% of returns in 2024.
Issuers must implement a documented internal control system with segregation of duties for cash management and a board-approved anti-corruption policy, referencing Listing Rule 3.08, to avoid the 35% return rate associated with internal control deficiencies.
Financial statements must be prepared strictly in accordance with HKFRS/IFRS, with particular attention to revenue recognition under HKFRS 15 and the reconciliation of all related party transactions under Listing Rule 14A.35, as 30% of returns in 2024 involved accounting irregularities.
Issuers with single-customer concentration exceeding 80% of revenue must secure contractual guarantees of continued supply or offtake agreements, as 6 applications were returned in 2024 for failure to demonstrate business independence under Listing Rule 8.04.
Prospectus risk factors must be specific to the issuer’s actual business, not generic boilerplate, and all material litigation must be disclosed, as 5 applications were returned in 2024 for disclosure deficiencies under Listing Rule 2.13(2).