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14 October 2026
On 8 October 2026, the Securities and Futures Commission (the “SFC”), the Accounting and Financial Reporting Council (the “AFRC”) and The Stock Exchange of Hong Kong Limited (the “Exchange”) issued a joint statement addressing the growing number of listed issuers whose financial statements carry a disclaimer of opinion solely relating to going concern (the “Joint Statement”). The Joint Statement sets out clear expectations for listed issuers, their management (including their boards), audit committees and auditors. For affected companies, inadequately supported action plans and updates that do not demonstrate meaningful progress are unlikely to satisfy the regulators’ expectations.
The Joint Statement is especially important for listed issuers experiencing, or at risk of experiencing, going concern difficulties. Under Rule 13.50A of the Main Board Listing Rules and Rule 17.49B of the GEM Listing Rules, trading would normally be suspended where an issuer publishes financial statements with a disclaimer of opinion or an adverse opinion. The current exception applies where the disclaimer of opinion or adverse opinion relates solely to going concern. However, the Joint Statement focuses specifically on cases involving a disclaimer of opinion solely relating to going concern. The regulators are concerned by both the sharp rise and the prolonged use of such disclaimers. The number of affected listed issuers increased from 12 in 2017 to 95 in 2025. Of those 95 issuers, 65 had received such a disclaimer for more than one year, and the longest-running case had continued for 14 years.
Why the Regulators Are Concerned
The carve-out was introduced in 2019 because an opinion relating solely to going concern concerns management’s use of the going concern basis of accounting rather than gross errors or inaccuracies in the financial statements, and to avoid prolonged suspensions that could limit investors’ ability to exit and restrict an issuer’s ability to raise funds or comply with debt covenants. The regulators nevertheless expected such disclaimers to be resolved within a reasonable period. They have identified recurring weaknesses, including boilerplate disclosure, insufficient detail about assumptions and action plans, limited issuer-specific explanation and inadequate support for audit committee conclusions. Since early 2025, the Exchange has intensified scrutiny by requesting quarterly updates on implementation and outcomes. Issuers should expect close review of their disclosures, evidence and progress against stated milestones. Perhaps the most significant regulatory message is that management must be able to substantiate the feasibility and achievability of its proposed remedial measures with issuer-specific evidence, rather than relying on generic statements regarding market conditions, financing opportunities or future business prospects.
What Listed Issuers and Management Should Do
Listed issuers should prepare rigorous going concern assessments supported by reasonable assumptions, reliable data and concrete evidence. Action plans should identify specific measures, implementation timelines, expected cash-flow contributions or savings, and key assumptions as to timing and amount. Measures may include revenue growth, cost reductions, recovery of receivables, asset disposals, debt restructuring or loan extensions, fundraising and financial support from controlling shareholders. The assessment should explain the underlying issues, remediation strategy, audit committee’s views and measurable progress, and should be capable of withstanding challenge from auditors and regulators rather than merely satisfying a reporting formality. Management should also be able to substantiate the feasibility and achievability of its proposed remedial measures with issuer-specific evidence and reasonable assumptions.
Where the Exchange requests quarterly updates, issuers should report material events, changes and developments affecting previously disclosed plans and cash-flow forecasts. Any departure from the original plan should be explained, together with resulting adjustments to forecasts and assumptions and the reasons the revised plan remains achievable. Contemporaneous evidence will be important when responding to regulatory enquiries.
Audit Committees Must Demonstrate Effective Challenge
Audit committees must do more than endorse management’s conclusions. They should engage early with management and auditors, critically test whether all relevant events and conditions have been identified, and assess whether proposed plans, assumptions and data are feasible and adequately supported. Their challenge, deliberations and conclusions should be actively documented and evident from the issuer’s disclosures. Where a committee agrees with management despite an auditor issuing or proposing a disclaimer, the annual report should clearly describe the auditor’s concerns, the committee’s assessment and the basis for its agreement. The committee should then monitor implementation and ensure that material deviations, delays and revised assumptions are promptly reviewed and disclosed.
Auditors Are Expected to Apply Greater Rigour
Auditors are expected to adopt a proactive and rigorous approach to management’s going concern assessment and disclosures. They should critically assess significant assumptions, underlying data and action plans, consider all relevant audit information, communicate deficiencies promptly, and consider alternative procedures before concluding that a scope limitation exists.
If a disclaimer is issued, the auditor should identify the aspects for which sufficient appropriate evidence could not be obtained and explain the work performed and why the evidence was insufficient. A going concern disclaimer does not relieve the auditor of responsibility for the remaining areas of the financial statements, and any other matter that would independently result in a modified opinion should be clearly described under the applicable auditing standards.
Enforcement and Trading Suspension Risks
The SFC, the AFRC and the Exchange will continue to monitor listed issuers and the conduct of their management, audit committees and auditors. If misconduct or non-compliance is identified, including false or misleading disclosures or a material misstatement by way of omission, the regulators may pursue regulatory, disciplinary or enforcement action under the Securities and Futures Ordinance, the Accounting and Financial Reporting Council Ordinance and the Listing Rules, as applicable.
Separately, where a going concern disclaimer persists for a prolonged period, the Exchange may also consider whether the issuer continues to maintain a sufficient level of operations and assets under Rule 13.24 of the Main Board Listing Rules or Rule 17.26 of the GEM Listing Rules. Non-compliance with those requirements may itself result in a trading suspension.
The direction of travel is particularly significant. If the Joint Statement does not lead to significant improvement, the Exchange will consider amending the Listing Rules as necessary. This could include requiring the suspension of issuers whose financial statements contain a disclaimer of opinion solely relating to going concern. Any such change could narrow or remove the current carve-out and expose affected issuers to suspension where a going concern disclaimer is issued.
How We Can Assist
Issuers should act early to stress-test going concern assessments, substantiate assumptions, convert remedial measures into measurable plans, document audit committee challenge, prepare quarterly updates and coordinate management, the audit committee and auditors before the reporting deadline. Early legal advice should be considered where a going concern disclaimer has been issued or is anticipated, previously announced plans are delayed or revised, or the issuer is responding to Exchange enquiries. We can assist with coordinating legal, financial and audit workstreams, reviewing annual and quarterly disclosures, and identifying potential Listing Rule, enforcement and trading risks.
Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.
This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.