USM is coming on 16 November 2026. Early planning may help Hong Kong listed issuers identify legal, governance and implementation issues before they affect corporate timetables and shareholder approvals.

 Hong Kong’s Uncertificated Securities Market (“USM”) regime will take effect on 16 November 2026, introducing a framework that facilitates the electronic holding and transfer of listed securities and reduces reliance on physical share certificates.

While much of the market’s attention has focused on operational changes affecting securities registrars and intermediaries, listed issuers should not overlook the potential legal, governance and implementation considerations arising from the transition. For some issuers, USM preparation may extend beyond administrative arrangements and involve corporate approvals, constitutional documentation, disclosure considerations and coordination among multiple stakeholders.

As the implementation date approaches, issuers may wish to assess whether their existing arrangements remain fit for purpose and whether any preparatory work should commence before key corporate milestones, including annual general meetings and other planned corporate actions.

Particular attention may be warranted for issuers with cross-border structures, overseas incorporation jurisdictions, complex capital arrangements or corporate actions anticipated during the implementation period. Early review can help identify potential issues and facilitate smoother implementation planning.

How We Can Help

Stevenson, Wong & Co. advises listed issuers on Hong Kong corporate and regulatory matters. We assist clients in assessing the legal and governance implications of USM implementation, including constitutional review, shareholder approval requirements, transaction planning and cross-jurisdictional coordination.

For further information regarding USM readiness and implementation considerations, or to arrange an initial discussion, please contact Rodney Teoh, our Deputy Head of Corporate Finance.

The full client alert discusses selected legal and implementation considerations arising from the launch of USM and is available on request.

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.

5 October 2026

On 4 September 2026, Korea’s Financial Services Commission (“FSC”) introduced a policy roadmap on the digital transformation of securities issuance and circulation at the third meeting of the private-public joint consultative body on the tokenisation of securities. The roadmap sets out Korea’s proposed approach to progressively integrating distributed ledger technology into its securities issuance, circulation and settlement infrastructure.

The policy direction is particularly significant because it moves beyond the initial focus on fractional investment products and outlines a phased strategy for the tokenisation of traditional financial instruments, including stocks, bonds and funds.

The roadmap is particularly relevant to financial institutions, asset managers, fintech companies and issuers exploring tokenisation initiatives in Asia, as it provides greater regulatory certainty regarding the issuance, distribution and trading of tokenised securities in Korea. Following the publication of the roadmap, on 1 October 2026 the FSC announced proposed amendments to subordinate regulations to implement key aspects of the new framework.

1. Security Tokens Recognised as a New Form of Securities

The FSC reiterated that security tokens are not a separate asset class, but merely a different method of issuing and recording existing securities through distributed ledger technology (“DLT”). With the amendments to the Act on Electronic Registration of Stocks and Bonds scheduled to take effect on 4 February 2027, security tokens, or tokenised securities, will be legally recognised as a digitised form of securities.

Under the proposed framework, traditional securities such as shares, bonds and fund interests may be issued in tokenised form while retaining their existing legal characteristics. The proposed subordinate regulations announced on 1 October 2026 further confirm that the types of securities capable of being tokenised will include not only fractional investment securities, such as non-monetary trust beneficiary certificates and investment contract securities, but also existing standardised securities such as shares, bonds and fund interests. The use of distributed ledger technology is expected to enhance transparency and efficiency in the recording and management of securities ownership and transactions.
 

2. Phased Development of Tokenised Securities Issuance Infrastructure

The FSC has adopted a phased approach to implementation in recognition of the operational and regulatory complexities involved in tokenising traditional financial products.

Phase 1 is scheduled to commence when the amended legislation takes effect in February 2027 and will focus on tokenisation of securities for:

• privately pooled money market funds (“MMFs”) and bonds exclusively reserved for institutional investors;
• unlisted shares through a trust structure; and
• publicly offered fractional investment products.

Implementation of the second and third phases will remain flexible, taking into account the outcome of the first phase, the pace of technological innovation among market participants and the progress of pending stablecoin legislation.

3. Expansion of Fractional Investment Opportunities

The roadmap is accompanied by model standards governing fractional-investment products structured as non-monetary trust beneficiary certificates or investment contract securities.

For non-monetary trust beneficiary certificates, the standards would permit the pooling of underlying assets subject to specified conditions, including that the assets are of the same type, that the standards and purpose of the pooling are clearly identified, that distressed assets are excluded and that information concerning each underlying asset is provided. Future receivables may also be included where sufficient investor-protection measures are in place.

The FSC has proposed that the maximum subscription amount for an individual investor should be the lower of KRW30 million and 5% of the total issuance volume. It has also recommended establishing a specific retail allocation and reserving a minimum portion for equal distribution.

For investment contract securities, the existing investor-protection-focused screening process will remain in place. The authorities will conduct further studies on the circulation of equity-sharing investment contract securities and the issuance of business-project investment contract securities. The policy direction also broadens the scope of assets that may be used in fractional investment structures.

4. Distribution and Trading Framework

There will be no separate authorisation regime exclusively for dealing in tokenised securities. Financial-investment business operators may handle tokenised securities within their existing licensed business areas, although prior consultation with the Financial Supervisory Service (FSS) will be required before undertaking the intermediation of tokenised-securities transactions.

The proposed subordinate regulations will establish an additional over-the-counter (“OTC”) licensing category for debt securities, alongside the categories applicable to unlisted shares and non-monetary trust beneficiary certificates. A corresponding category for investment contract securities may be considered following further study.

To protect retail investors, the proposed subordinate regulations set an annual net purchase limit of KRW100 million per retail investor on each OTC exchange, calculated as the total purchase amount less the total sale amount. OTC exchanges will remain subject to operational standards for preventing, monitoring and responding to unfair trading, and contraventions may be sanctioned under the Financial Investment Services and Capital Markets Act. This approach is intended to facilitate market participation by leveraging Korea’s existing financial services regulatory framework, rather than creating a standalone licensing regime for tokenised securities.

5. New Role for Issuer Account Management Entities

Under the new system, qualifying issuers of tokenised securities may be permitted to manage securities accounts for customers in respect of their own issuances. This function was previously reserved for financial companies. The change reflects the FSC’s assessment of the operational stability of distributed ledger systems and the potential efficiency of DLT-based securities-rights management.

The proposed subordinate regulations announced on 1 October 2026 further specify the registration requirements applicable to issuer account management entities. Applicants will be required to have minimum equity capital of KRW4 billion, at least one account-management professional, one internal-control professional and two information-technology professionals, together with the other applicable registration requirements.

6. Distributed Ledger Screening and Operational Standards

The Korea Securities Depository has prepared screening criteria for distributed-ledger systems used in the electronic registration of tokenised securities. When securities companies apply to connect to a distributed ledger, the Korea Securities Depository will conduct screening and operational testing against these criteria.

The proposed subordinate regulations announced on 1 October 2026 further specify requirements applicable to distributed ledgers used for electronic registration. Among other things, the distributed ledger must include, in addition to the electronic registration institution, at least two account management entities (which may include issuer account management entities). The proposals also prohibit the payment of direct consideration for the use of a distributed ledger for electronic registration, having regard to the distributed ledger’s function as a public register and the need to mitigate risks such as delays in the determination of securities rights.

In addition to core functionality relating to the issuance and circulation of tokenised securities, the criteria address information-technology and cybersecurity standards and contingency planning for system errors or malfunctions, including business-continuity arrangements. Securities companies will be expected to maintain existing levels of operational stability when incorporating distributed-ledger technology into their systems.

7. Looking Ahead

The FSC’s roadmap unveiled in September 2026 has already been followed by a further implementation step. On 1 October 2026, the FSC announced proposed amendments to subordinate regulations under the Financial Investment Services and Capital Markets Act and the Electronic Registration Act to facilitate the introduction of tokenised securities from 4 February 2027. The proposed amendments are subject to a legislative notice and public consultation period running from 2 October 2026 to 11 November 2026.

The regulatory proposals provide additional detail on matters including the scope of securities eligible for tokenisation, requirements applicable to distributed-ledger infrastructure, registration requirements for issuer account management entities, and the establishment of an OTC exchange licensing category for debt securities and investment limits applicable to retail investors. Together with the September roadmap, these developments provide greater clarity regarding the practical implementation of Korea’s tokenised-securities regime and demonstrate continued regulatory momentum towards the digitalisation of securities issuance and circulation.

Following the consultation period, the proposed amendments are expected to undergo further regulatory and governmental procedures, including FSC approval and review by the Ministry of Government Legislation, before taking effect alongside the amended legislation on 4 February 2027.

Financial institutions, issuers, asset managers and fintech businesses considering tokenisation projects involving Korea should continue to monitor development during and following the legislative notice and consultation process as well as further developments concerning stablecoins, OTC trading platforms and technical standards for distributed-ledger infrastructure. With the first phase scheduled to commence on 4 February 2027, market participants are expected to begin preparing operational, technology and compliance frameworks well in advance of implementation.

 Please contact our Partner 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.

2 October 2026

Introduction

On 30 September 2026, the Securities and Futures Commission (the “SFC”) and the Securities Commission Malaysia (the “SC”) announced the implementation of simplified regulatory procedures and submission arrangements to facilitate simultaneous listings in Hong Kong and Malaysia (the “Single Submission Arrangement”).

The Single Submission Arrangement brings into operation the simplified dual initial public offering (“IPO”) listing framework contemplated under the Memorandum of Understanding between the SFC and SC concerning mutual recognition of covered funds and the simplified dual IPO listing framework signed on 23 July 2026 (the “MoU”).

Under the Single Submission Arrangement, an applicant seeking a primary listing on either the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or the MAIN Market of Bursa Malaysia Securities Berhad (the “Bursa Malaysia”), together with a simultaneous secondary listing on the other market, may proceed through a streamlined application process via a single listing application submission supported by a single listing document.

The new arrangement is intended to reduce regulatory duplication and compliance costs at the IPO application stage and facilitate greater connectivity between the Hong Kong and Malaysian capital markets.

The arrangement applies to a simultaneous primary and secondary listing involving the Main Board of the Stock Exchange and the MAIN Market of Bursa Malaysia. It does not create a general passporting regime for all forms of cross-listing, nor does it remove the substantive eligibility, disclosure or investor protection requirements applicable in either jurisdiction.

How the Single-Submission Process Works

The submission package should be divided into separately identified Hong Kong and Malaysian parts. Where the same application materials or documents are required in both parts, cross-references may be made to the relevant materials or documents in the other part.

Key Features of the Single Submission Arrangement

The Single Submission Arrangement introduces a coordinated approach to the application and regulatory review processes for simultaneous listings in Hong Kong and Malaysia. Its key features include:

• Single Listing Document: An applicant may use one listing document for both listings, provided that the document satisfies the applicable statutory, prospectus, disclosure and listing requirements of both Hong Kong and Malaysia.
• Single Point of Submission: An applicant will submit the application materials required by both markets through the authority responsible for its primary listing. Where Hong Kong is the primary-listing market, the full application materials required by the Stock Exchange and the SC materials, including the prescribed additional information, will be submitted to the Stock Exchange. Where Malaysia is the primary-listing market, the full application materials required by SC and the Stock Exchange will be submitted to SC. The submission package must be divided into separately identified Hong Kong and Malaysian parts, although cross-references may be used for documents required in both parts.
• Dedicated Dual-Listing Review Teams: Dedicated teams and communication channels have been established by the regulators to act as direct points of contact for applicants and their professional advisers. This is intended to facilitate active case management, coordination between the relevant authorities and efficient handling of applications throughout the listing process.
• Coordinated Regulatory Review: The SFC, the Stock Exchange and the SC have established coordinated review processes to align regulatory review timelines, minimise duplication and streamline comments and queries raised with applicants.

The streamlined procedures do not dispense with the regulatory requirements applicable in either jurisdiction. Applicants will remain required to satisfy the relevant statutory, listing, disclosure and investor protection requirements applicable to their proposed listing in each market.

Facilitating the Dual Listing Application Process

In connection with the implementation of the Single Submission Arrangement, the SFC has published a “Circular on the Single Submission Arrangement for Dual Listings in Hong Kong and Malaysia”, setting out the arrangements applicable to prospective dual-listing applicants.

Related guidance materials have also been made available by the Malaysian and Hong Kong authorities. In particular, SC has published the Guidance for Listing of Hong Kong Companies on MAIN Market of Bursa Malaysia Securities Berhad. Reference should also be made to the Stock Exchange’s existing explanatory note concerning a Malaysia-incorporated company’s compliance with Hong Kong’s core shareholder-protection standards and applicable Malaysian laws and regulations.

SC also revised its Guidelines on Submission of Corporate and Product Proposals, Prospectus Guidelines and Equity Guidelines on 30 September 2026 to operationalise the simplified dual-listing framework.

These materials are intended to assist prospective applicants and their advisers in navigating the requirements applicable in the two markets. Applicants, sponsors and other professional advisers are encouraged to consult the SFC, the Stock Exchange or the SC, as appropriate, before formally submitting a listing application to discuss the proposed transaction structure and indicative timetable.

By enabling applicants to prepare a single listing document and proceed through a coordinated submission and regulatory review process, the Single Submission Arrangement is expected to reduce repetitive work and enhance efficiency in the execution of simultaneous Hong Kong-Malaysia listings. At the same time, the continued application of the respective regulatory requirements in both jurisdictions is intended to ensure that the efficiencies introduced by the new arrangement do not compromise existing regulatory standards or investor protection.

Strengthening Connectivity between the Hong Kong and Malaysian Capital Markets

The introduction of the Single Submission Arrangement represents a further development in the regulatory cooperation between Hong Kong and Malaysia following the signing of the MoU in July 2026. It also reflects the broader objective of the two regulators to deepen regional capital market connectivity and facilitate cross-border fundraising opportunities.

Prospective applicants should determine the intended primary-listing market at an early stage, as this will determine the submission channel and the principal application process. They should also conduct an early gap analysis of the eligibility, prospectus, financial-information, corporate-governance and shareholder-protection requirements applicable in both jurisdictions. Although common documents may be cross-referenced, the application package must still address jurisdiction-specific requirements. Applicants should also coordinate with both authorities at an early stage regarding the timing of prospectus exposure and registration and keep them informed of subsequent changes to the timetable. An applicant contemplating a dual-primary listing may also consult the relevant authorities at an early stage regarding the potential application of the Single Submission Arrangement.

The Single Submission Arrangement is also expected to benefit sponsors and other professional advisers by reducing duplication in the preparation and submission of listing materials and facilitating greater coordination in responding to regulatory comments. Nevertheless, applicants and their advisers should consider the applicable requirements of both jurisdictions at an early stage and carefully coordinate the proposed transaction structure, disclosure requirements and listing timetable.

More broadly, the initiative reflects continued efforts to strengthen Hong Kong’s connections with other major capital markets in the region and to enhance its role as an international fundraising platform.

Conclusion

The Single Submission Arrangement is a meaningful procedural development for issuers considering simultaneous access to the Hong Kong and Malaysian capital markets. Its principal benefit lies in allowing the materials required by both markets to be submitted through a single channel, supported by one listing document and a coordinated regulatory review process.

The framework does not, however, amount to mutual recognition of listing eligibility or regulatory requirements. Issuers and their advisers will still need to address the requirements of both jurisdictions and coordinate the transaction structure, disclosure package and timetable from an early stage.

From a commercial perspective, the arrangement may be particularly relevant to suitable businesses seeking to broaden their exposure to investors in Mainland China and Southeast Asia and to diversify their fundraising channels.

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.

Trading suspensions can have serious consequences for listed companies, including loss of investor confidence, reduced market liquidity and, ultimately, delisting. Under the Listing Rules, the Stock Exchange of Hong Kong Limited (“HKEX“) may cancel the listing of an issuer whose securities remain suspended for a prescribed period.

To promote timely remediation and provide greater certainty to the market, HKEX issued the Guidance on Long Suspension and Delisting (the “Guidance“) in May 2018. The Guidance has recently been updated in September 2026, with heightened emphasis on internal control reviews, independent investigations and the respective responsibilities of audit committees, independent committees and external advisers during the resumption process. This updated Guidance reflects HKEX’s experience in administering the delisting regime and its focus on governance, accountability and the effectiveness of remedial actions undertaken by suspended issuers.

Key Regulatory Amendments

• Comprehensive Framework for Internal Control Review

 The most significant feature of the September 2026 update is the substantial expansion of HKEX’s guidance on internal control reviews.

Although internal control reviews have long been a common resumption condition in cases involving accounting irregularities, corporate misconduct or delayed financial reporting, the previous Guidance provided relatively little detail regarding their scope and execution. The revised Guidance introduces a comprehensive framework governing when an internal control review will be required, what work must be performed by the independent internal control consultant, and how the audit committee should oversee the process.

HKEX’s message is clear – a robust and effective internal control environment is now regarded as a critical indicator of an issuer’s suitability for continued listing.

When will an internal control review be required?

HKEX has identified a number of circumstances that may indicate material deficiencies in an issuer’s internal control systems and warrant an independent review. These include:

• failure to prevent or detect corporate misconduct, such as misappropriation of assets or unauthorised transactions;
• prolonged delays in financial reporting arising from deficiencies in financial reporting processes;
• inability to provide auditors with sufficient and reliable audit evidence;
• material breaches of the Listing Rules; and
• failures to make timely disclosures to shareholders and investors.

Importantly, HKEX emphasises that these examples are not exhaustive. Whether an internal control review is required will depend on the specific facts and circumstances of each case.

The expanded role of the independent internal control consultant

The updated Guidance significantly expands HKEX’s expectations regarding the work to be performed by an independent internal control consultant.

Traditionally, consultants were often engaged to identify deficiencies and recommend remedial measures. HKEX now expects considerably more. The review must be tailored to the nature, scope and seriousness of the issues giving rise to the suspension. In cases involving material irregularities or suspected fraud, the review is expected to encompass not only the specific control failures that led to the suspension but also broader compliance functions, including:

• financial reporting controls;
• disclosure controls;
• controls relating to notifiable and connected transactions; and
• compliance with applicable legal and regulatory requirements.

The independent internal review consultant is also expected to:

• identify material weaknesses in the issuer’s internal control framework;
• recommend appropriate remedial measures;
• conduct follow-up testing to assess whether enhanced controls have been properly implemented and are operating effectively in practice; and
• provide a clear conclusion as to whether the relevant deficiencies have been rectified and whether the issuer’s internal controls are adequate and effective.

Notably, HKEX recognises that newly implemented controls may not always have been tested over a sufficiently long period prior to resumption. In such circumstances, HKEX may require a further review after trading resumes or enhanced monitoring by the audit committee.

These requirements reinforce HKEX’s view that internal control reviews should focus on actual operating effectiveness rather than simply documenting the adoption of new policies and procedures.

The enhanced role of the audit committee

The revised Guidance also substantially elevates the role of the audit committee throughout the internal control review process.

Rather than serving as a passive recipient of professional advice, the audit committee is expected to take ownership of the review and exercise independent judgment when assessing both the work performed and the conclusions reached by external advisers.

Among other things, the audit committee is expected to:

• independently select the internal control consultant;
• assess and be satisfied with the consultant’s independence, qualifications, experience and resources;
• determine and critically assess the scope of the review;
• evaluate the consultant’s findings and require additional work where appropriate;
• ensure that the consultant engages directly with the issuer’s auditors and considers their observations and concerns; and
• assess whether the identified deficiencies have genuinely been rectified and whether the enhanced controls are capable of operating effectively in practice.

Disclosure obligations have also been strengthened. Issuers are now expected to disclose the audit committee’s assessment and explain the basis upon which it concluded that the relevant deficiencies have been addressed and that the issuer’s internal controls are adequate and effective.

Importantly, the audit committee’s responsibilities do not end upon resumption. HKEX expects the audit committee to continue monitoring the effectiveness of the issuer’s internal control framework and to report on its effectiveness in future corporate governance disclosures.

Taken together, these amendments signal HKEX’s expectation that audit committees play an active supervisory role in remediation efforts and assume greater accountability for the quality and effectiveness of governance reforms.

(2) More Prescriptive Requirements for Independent Investigations

HKEX has also expanded its guidance on independent investigations into material accounting irregularities, suspected misconduct and corporate governance failures.

The updated Guidance requires issuers to establish an independent committee promptly where material irregularities are involved. The independent committee is expected to assume primary responsibility for overseeing the investigation, including:

• selecting and engaging the forensic investigator;
• determining the scope of the investigation;
• preserving relevant evidence;
• supervising the progress of the investigation; and
• ensuring management’s full cooperation.

To strengthen independence, issuers are expected to scrutinise the independence of each member of the committee. Directors whose independence may reasonably be called into question should not participate in the independent committee.

The revised Guidance also introduces enhanced disclosure requirements. Issuers are expected to disclose the composition of the independent committee and explain why the appointed forensic investigator possesses the requisite independence, expertise and resources to undertake the engagement.

These amendments indicate that HKEX is increasingly focused not only on the findings of an investigation but also on whether the investigation itself is conducted through a credible, independent and properly governed process.

Practical Implications on Listed Issuers

The September 2026 amendments underscore HKEX’s growing emphasis on governance quality and the effectiveness of remediation efforts.

From a practical perspective, issuers should expect greater scrutiny of their internal control environment and should allow sufficient time for both remediation and testing before seeking resumption. The Guidance makes clear that implementing policies alone will not be sufficient. Issuers must be able to demonstrate that enhanced controls have been embedded into day-to-day operations and are functioning effectively in practice.

The amendments also place greater responsibility on audit committees and independent committees. Boards should therefore ensure that these committees are actively engaged throughout the resumption process and are supported by appropriately qualified and independent advisers.

Finally, issuers facing investigations into material irregularities should expect HKEX to scrutinise the independence, scope and quality of any investigation, rather than focusing solely on the conclusions reached.

 Looking Ahead

Although the September 2026 amendments do not alter the fundamental mechanics of HKEX’s delisting regime, they significantly raise the regulatory threshold for suspended issuers seeking to resume trading. In particular, the extensive new guidance on internal control reviews demonstrates HKEX’s increasing emphasis on ensuring that underlying governance and compliance deficiencies have been genuinely rectified, rather than merely addressed on paper.

For issuers, a successful resumption will depend on more than simply addressing the causes of suspension. Issuers must now also be able to show that effective governance structures, internal control systems and oversight mechanisms are firmly established to prevent similar issues from arising again.

Now that HKEX has articulated its expectations in considerably greater detail, the resumption process should, in theory, become more transparent for suspended issuers. However, the critical question remains what specific remedial measures, governance enhancements and control procedures must be implemented in order to satisfy HKEX’s new requirements, and the answer will inevitably depend on the particular facts and circumstances of each case. Therefore, distressed issuers are strongly advised to seek professional advice at the earliest practicable stage, thereby minimising the potential disruption, uncertainty and adverse consequences arising from a prolonged trading suspension.

If you have any questions or would like to understand how these regulatory changes may impact your business or compliance obligations, please reach out to our Partner Kenneth Leung.

This article 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.

Introduction

 On 21 September 2026, The Stock Exchange of Hong Kong Limited (the “Exchange”) published a Consultation Paper on Listing Framework Competitiveness Review (Phase 2) (the “Consultation Paper”). It proposes a series of targeted reforms to the requirements that apply to notifiable transactions, connected transactions and spin-offs by listed issuers.

The Consultation Paper notes that the last major reform of the notifiable transaction rules took place in 2004. The market has changed significantly since then. The number of listed issuers had increased to 2,686 as at the end of 2025, and the issuer mix has become increasingly diverse. Other major markets, particularly the UK, have also moved towards a more disclosure-based regulatory approach. The Exchange therefore wants to give listed issuers greater flexibility to conduct corporate transactions while maintaining robust investor protection, thereby enhancing Hong Kong’s competitiveness as a listing venue.

In our view, these reforms are not simply a relaxation of regulation, but a reallocation of regulatory focus. On the one hand, the Exchange proposes to raise the threshold for transactions requiring shareholders’ approval and to streamline transaction classifications and approval processes, leaving more decisions to issuers and their boards of directors. On the other hand, it proposes to enhance announcement disclosure while retaining more stringent safeguards in higher-risk areas such as connected transactions, financial assistance and investment activities. In other words, issuers gain greater flexibility, but in return must disclose earlier and more fully, and their boards bear greater accountability. This article covers three areas in turn: notifiable transactions, connected transactions and spin-offs. For each, it sets out the proposals and the Exchange’s rationale. It ends with practical recommendations.

The consultation period ends on 30 November 2026. Everything discussed in this article is a proposal at the consultation stage. The final position will depend on the consultation conclusions and the amended Rules Governing the Listing of Securities on the Exchange (“MB Rules”) and Rules Governing the Listing of Securities on GEM of the Exchange (together with the MB Rules, the “Listing Rules”).

1. Notifiable Transactions

Notifiable transactions are the most extensive part of the reforms. The Exchange proposes to raise the threshold for shareholders’ approval and to streamline transaction classifications and approval processes. This leaves more decisions to issuers and their boards of directors. At the same time, more stringent safeguards are kept for transactions involving provision of financial assistance and investment activities. The proposals cover four areas: size tests, classification thresholds, disclosure requirements and the scope of exemptions.

• Removal of the profits ratio

The first change concerns the size tests themselves. The Exchange proposes to remove the profits ratio from the five percentage ratios, because it is the ratio most likely to produce anomalous results. Only the assets ratio, revenue ratio, consideration ratio and equity capital ratio would remain.

Rationale: The profits ratio is the ratio most likely to produce anomalous results, particularly where the target company or the issuer has recorded losses. In 2024 and 2025, in all cases submitted by issuers involving anomalous results under the profits ratio, the Exchange consented to the issuer disregarding the ratio or adopting an alternative test. Retaining the revenue ratio and the assets ratio would still allow the impact of a transaction on the issuer to be measured. Moreover, the size tests for connected transactions already exclude the profits ratio, so removing it would make the percentage ratios under the two chapters consistent.

• Net asset value as an alternative denominator for the consideration ratio

The Exchange also proposes to change how the consideration ratio is calculated, so that it better reflects the position of asset-heavy issuers. Listed issuers could compare the consideration for the transaction with the higher of their market capitalisation or their net asset value. Net asset value means the equity attributable to the owners of the issuer, excluding non-controlling interests.

Rationale: In 2004, the denominator of the consideration ratio was changed from net asset value to market capitalisation, which resolved the problems faced by issuers with negative or minimal net asset value. However, for asset-heavy issuers or issuers whose shares are undervalued, some transactions that have little impact on their financial position may still be subject to regulation solely because they trigger the consideration ratio threshold. Net asset value is only an alternative denominator and does not replace market capitalisation; non-controlling interests are excluded to avoid overstating the issuer’s net asset value.

• Increasing the major transaction threshold from 25% to 50%

 The core proposal of this reform is to raise the threshold for major transactions requiring shareholders’ approval from 25% to 50%. Transactions with any percentage ratio of 25% or more but less than 50% would be reclassified as discloseable transactions, which would only require an enhanced announcement, without the need for a circular or shareholders’ approval. Where such transactions involve properties, mineral assets or infrastructure projects, the expert report(s) must still be disclosed. For transactions involving the provision of financial assistance, or securities or other investment activities (including wealth management products and digital assets), the threshold would remain at 25%.

 Rationale: Almost all transactions that required shareholders’ approval in 2024 and 2025 were approved. However, preparing circulars and accountants’ reports and engaging professional advisers add time and cost, and the outcome of shareholders’ votes also creates uncertainty in transaction execution, affecting issuers’ ability to seize opportunities in competitive or time-sensitive transactions. The 50% threshold still captures transactions that would result in a significant change in an issuer’s business or financial position, and shareholders retain the right to vote on such transactions. As financial assistance and investment activities are inherently higher-risk and may be used for shell activities or the improper use of funds, and as the Exchange has also noted an increase in such cases, the 25% threshold would be retained for these transactions.

 Removal of the “Very Substantial Acquisition” and “Very Substantial Disposal” classifications

 With the higher threshold, the Exchange also takes the opportunity to simplify transaction classifications by removing the “Very Substantial Acquisition” (“VSA”) and “Very Substantial Disposal” (“VSD”) classifications, so that such transactions would all be classified as major transactions, with the following arrangements:

• for an acquisition where any percentage ratio is 100% or more, or a disposal or other transaction where any percentage ratio is 75% or more, written shareholders’ approval would not be accepted in lieu of holding a general meeting;
• for an acquisition where any percentage ratio is 100% or more, the accountants’ report must be issued by a PIE Auditor; and
• announcements for these two types of transactions would no longer need to be pre-vetted by the Exchange.

 Rationale: The aim is to simplify the transaction classification system. Retaining the above general meeting requirement ensures that transactions with a material impact on the issuer are still subject to approval at a general meeting. Since 2009, the Exchange has moved towards post-vetting, and these two types of announcements are among the few categories still subject to pre-vetting. Removing pre-vetting is in line with this policy direction, helps promote issuers’ self-compliance with the Listing Rules and facilitates the timely dissemination of information. Announcements relating to reverse takeovers and extreme transactions would still be subject to pre-vetting.

 Enhanced announcement disclosure

With fewer transactions requiring circulars, the information available to investors would decrease accordingly. To fill this gap, the Exchange proposes to significantly enhance the disclosure in the initial announcement for all notifiable transactions. The initial announcement would be required to disclose the following additional information:

• material terms;
• the basis of consideration and details of valuation;
• key financial information of the target company for the previous two financial years;
• a qualitative and quantitative analysis of the impact of the transaction on the issuer; and
• a directors’ responsibility statement.

Where audited financial information is not available, the board would be required to explain the reasons, the basis for still proceeding with the transaction and the associated risks, and to disclose the source of the information and the basis of its preparation. A further announcement would be required upon completion of the transaction, extension of the long stop date, a change in the payment schedule, or determination of the final amount of any variable consideration.

Rationale: Transactions with percentage ratios between 25% and 50% would no longer require circulars. The Exchange wishes investors to obtain, at the announcement stage, the key information already available to the board when it approved the transaction, so that they can assess the significance, merits and risks of the transaction in a timely manner. Introducing the requirements for a directors’ responsibility statement and disclosure of the source of information would strengthen the board’s accountability for the accuracy and completeness of the information disclosed.

 Refinement of circular disclosure

For major transactions that still require a circular, the proposals aim to make the circular focus on information directly relevant to the transaction. The main amendments are as follows:

• aligning the circular requirements for major transactions;
• removing the requirement for the financial information of the disposal target to be reviewed by auditors;
• removing the disclosure requirements for the indebtedness statement of the issuer group, material contracts entered into within the last two years, and management discussion and analysis on the issuer group;
• introducing disclosure of risk factors; and
• allowing directors’ information to be incorporated by reference.

Rationale: Following the removal of the VSA and VSD classifications, the circular requirements for major transactions need to be aligned. The disclosure items being removed relate to information not directly relevant to the transaction.

• Exemption for acquisitions or leasing of assets in the ordinary and usual course of business

Besides adjusting the thresholds, the Exchange proposes a new exemption that would mainly benefit capital-intensive issuers. Where an issuer acquires or leases assets to maintain or expand its existing principal business and the following conditions are met, the transaction would be exempt from the circular and shareholders’ approval requirements even if it constitutes a major transaction, although an announcement would still be required:

• the principal business has been disclosed as a continuing business in the financial statements for the previous two full financial years; and
• the board confirms that the transaction is fair and reasonable.

Examples include acquiring vessels or aircraft, and acquiring land development rights or mining rights. The exemption would not apply to the following transactions:

• acquisitions or disposals of companies, businesses or securities;
• formation of joint ventures;
• provision of financial assistance; or
• securities or other investment activities.

 Rationale: Although these transactions may be material to the issuer, they are carried out in the ordinary course of business and do not change the nature of the principal business. The exemption gives management more flexibility in planning capital expenditure. The “two full financial years” requirement is intended to prevent issuers from abusing the exemption through newly established or newly acquired businesses. Transactions that would fundamentally change an issuer’s business, risk profile or investment strategy would still be subject to the circular and shareholders’ approval requirements.

The Exchange also proposes to widen an existing exemption. The revenue exemption for securities transactions carried out by securities houses would be extended to PRC securities houses regulated under the PRC securities law.

2. Connected Transactions

The reforms for connected transactions are more modest than those for notifiable transactions. The Exchange considers that, given that a significant proportion of listed issuers have concentrated shareholdings, which may lead to a higher risk of connected transactions being conducted on terms that are not fair and reasonable to independent shareholders, and that Hong Kong continues to rely on ex ante regulatory safeguards as the primary means of investor protection, the existing framework remains appropriate for the Hong Kong market, and it does not intend to make fundamental changes. The proposals involve only a number of targeted refinements, which provide appropriate flexibility for transactions with a lower risk of abuse while maintaining core investor protection, as set out below:

• Increasing the connected subsidiary threshold from 10% to 30%

The main relaxation for connected transactions is to narrow the scope of “connected subsidiary”: a non-wholly owned subsidiary would only be regarded as a connected subsidiary if connected person(s) at the issuer level can exercise, or control the exercise of, 30% or more of the voting power at its general meeting (currently 10%).

Rationale: The issuer still controls a connected subsidiary and consolidates its results into the group accounts, so the conflict-of-interest risk of such transactions differs from that of transactions with external connected persons. Where the connected person’s interest in the subsidiary is limited, the risk of abuse is relatively lower. The 30% threshold is consistent with the thresholds for “associate” and “controlling shareholder”, and can more accurately identify cases where a person has substantive influence.

• Alignment with notifiable transactions

Some of the proposals for notifiable transactions would also apply to connected transactions: the consideration ratio could likewise use net asset value as the denominator; the enhanced announcement disclosure requirements would apply; and directors’ information in circulars could be incorporated by reference.

Rationale: This keeps the two sets of rules consistent. Connected transactions typically carry higher risks, so enhancing transparency is particularly important.

• Removal of the joint venture partner requirement that applies to PRC issuers only

The Exchange also proposes to remove an additional requirement that applies only to PRC issuers. Under the current rules, if connected person(s) together hold 30% or more of the interests in a cooperative or contractual joint venture, any joint venture partner of that joint venture is regarded as an associate of the connected person(s).

Rationale: A joint venture partner is generally not in a position to control the issuer, or to benefit from transactions with it, merely because of its joint venture arrangements with a connected person. Applying the connected transaction requirements to such parties by default may therefore be disproportionate and unduly burdensome. Removing the requirement would make the rules for PRC issuers consistent with those for other issuers.

• Annual caps for continuing connected transactions expressed as a percentage

For continuing connected transactions, the proposals give more flexibility in how annual caps are set. Where the transactions are of a revenue nature in the ordinary and usual course of business, the annual cap could be expressed as a percentage of the issuer’s revenue or other financial items in its audited accounts, but the issuer would have to disclose the basis for determining the annual cap and the internal control procedures used to monitor it.

Rationale: For some issuers, a fixed monetary cap may set an arbitrary ceiling, or may be hard to set reliably because there is not enough historical transaction data. The Exchange has previously granted similar waivers to individual issuers.

3. Spin-offs

On the one hand, the Exchange maintains the core principle under Practice Note 15 (“PN15”) that “one business cannot support two listings”, so as to address the concern about shell creation; on the other hand, it recognises that listed issuers may need to carry out strategic restructuring from time to time in response to their business environment and operational needs. The proposed reforms therefore aim to streamline the process for assessing whether spin-off proposals comply with PN15, and to relax certain existing requirements that may be overly restrictive, while the core safeguards under PN15 would be retained and the reforms are not expected to reduce the level of shareholder protection. The key proposals are as follows:

• Refining the scope of PN15

First, the Exchange proposes to remove duplicate regulation within a listed group. Where a spin-off is carried out by a subsidiary listed on the Exchange, its listed holding company would no longer need to comply with PN15.

Rationale: The listed subsidiary is already subject to PN15, so imposing the same requirements again at the holding company level would largely be duplicative. If the spin-off constitutes a notifiable transaction, the holding company would still have to comply with the requirements of Chapter 14 and its obligations to disclose inside information.

• Introducing a self-assessment route

 The most important procedural reform for spin-offs is to allow large issuers to proceed without the Exchange’s prior approval. A Main Board parent company (“ParentCo”) could self-assess whether its spin-off proposal complies with PN15 if it meets all of the following conditions:

• its market capitalisation is at least HK$10 billion;
• the revenue of its principal business(es) is at least HK$1 billion; and
• the revenue and total assets attributable to the business(es) of the Remaining Group each account for more than 50% of the issuer group.

In addition, when the spin-off company (“SpinCo”) lodges its new listing application, the ParentCo must submit the Board PN15 Self-assessment Confirmation and the Computation.

Rationale: The market capitalisation and revenue thresholds are at least double the requirements under MB Rule 8.05(3), and issuers of this size generally do not raise the concern of one business supporting two listings. The 50% Remaining Group threshold ensures that the ParentCo retains most of its original businesses, and is also consistent with the major transaction threshold. This route gives ParentCos more certainty over the timetable for their spin-offs, and allows the Exchange to focus its resources on other spin-off cases.

• Specifying the contents of spin-off announcements

Alongside the self-assessment route, the Exchange proposes to enhance the disclosure requirements for spin-off announcements. The announcement would have to include the following information:

• the identity and a description of the principal business activities of the SpinCo and the remaining group;
• the revenue and net profits (both before and after taxation) attributable to the SpinCo for the two consecutive financial years immediately preceding the proposed spin-off;
• details of the spin-off, including venue to which the SpinCo will be listed (i.e. the relevant stock exchange) and structure of the spin-off;
• the ParentCo’s expected shareholding in the SpinCo before and after the completion of the spin-off, and whether the SpinCo is expected to continue to be a subsidiary of the ParentCo;
• the total funds expected to be raised by the ParentCo and/or the SpinCo, if any, and the proposed use of proceeds by the ParentCo;
• reasons for, and the benefits which are expected to accrue to the ParentCo as a result of the spin-off, together with a statement that the directors confirm that the terms of the spin-off are fair and reasonable and in the interests of the shareholders as a whole; and
• a statement that the ParentCo has obtained the Exchange’s approval for the spin-off or relies on its self-assessment, in each case together with a confirmation from the board of directors that the spin-off complies with all the applicable principles and requirements under PN15.

Rationale: The current rules do not specify what a spin-off announcement must contain.

• Removal of the assured entitlement requirement

The Exchange proposes to remove the current requirement that every spin-off must give the parent company’s existing shareholders an assured entitlement to shares in the spin-off company. Going forward, no assured entitlement would be needed, regardless of where the spin-off company is listed and whether the parent company has a primary or secondary listing.

Rationale: Assured entitlements have generally been small, with the preferential offering being less than 1.5% of the parent company’s market capitalisation in over half of the cases, and were very often undersubscribed. Cross-jurisdictional legal and regulatory constraints also make it increasingly impracticable to provide assured entitlements. An assured entitlement only gives shareholders priority in the offering and is not additional shareholder protection. Shareholders’ interests would remain protected by the notifiable transaction rules, and shareholders may also keep an indirect interest in the spin-off company through the parent company.

• Shortening the spin-off moratorium period from three years to one year

For newly listed issuers, the proposal would shorten the moratorium period after listing, during which no spin-off may be made, from three years to one year. Secondary listed issuers, and dual-primary listed issuers that had been listed on another exchange for at least two full financial years before listing in Hong Kong, would be exempt.

Rationale: Given issuers’ needs for business expansion, diversification and funding after listing, a three-year moratorium may be unduly onerous. One year is consistent with MB Rule 14.89, which stops an issuer from fundamentally changing its principal business within 12 months of listing. The exempt issuers already have a listing track record in other markets, and investors can refer to the information those issuers have previously made public.

• Other amendments

The other amendments are mainly consequential. They keep the Spin-off requirements consistent with the other proposals:

• the threshold for shareholders’ approval of spin-offs would be raised to 50%, to match the major transaction threshold;
• decision-making power for spin-off cases would be delegated to the Listing Division; and
• it would be clarified that SpinCos may be listed under the listing regime that applies to them (e.g. MB Rules Chapter 18A or Chapter 18C).

4. Concluding Remarks and Practical Observations

Overall, the proposals bear out the view set out at the start of this article: the Exchange is moving towards a regulatory approach that is “more disclosure-based, with greater emphasis on board accountability”. Raising thresholds, simplifying classifications and introducing the self-assessment route should lower compliance costs for issuers carrying out M&As, restructurings and spin-offs, and reduce timing uncertainty. However, the core safeguards for connected transactions stay the same, the 25% threshold still applies to financial assistance and investment activities, and announcement disclosure requirements are significantly higher.

For issuers, the compliance focus will shift from managing the approval process to preparing disclosure and internal records in advance. We recommend that issuers note the following:

1. Starting work earlier: Much more financial information and impact analysis will be needed at the announcement stage, so issuers should arrange due diligence and prepare information early in the transaction.
2. Directors’ responsibility: Where the board relies on unaudited information, it should keep written records showing that it has assessed how reliable that information is.
3. Making use of exemptions: Capital-intensive issuers should review how they have disclosed their principal business in the past, to see whether they meet the conditions for the ordinary and usual course of business exemption; large Main Board issuers may consider using the self-assessment route to plan spin-offs.

Looking ahead, these proposals are still at the consultation stage, and the final rules and implementation arrangements will depend on the consultation conclusions published by the Exchange. The consultation period ends on 30 November 2026, and issuers with views on particular proposals may wish to respond before then. In our view, even if individual thresholds or details change, the direction of travel towards a disclosure-based approach with enhanced board accountability is largely settled. Issuers may wish to review their current transaction approval processes, lists of connected persons and internal control arrangements now, so that they can adapt quickly once the new rules take effect.

For further information on how these proposals may affect specific transactions, please contact our Partner Gordon Tsang, Senior Associate Gary Kwok or Associate Sam Liu.

This article is for general reference only. It does not constitute legal advice or investment advice, and it does not create a solicitor-client relationship. The proposals discussed remain at the consultation stage, and how they apply will depend on the particular facts and the laws and regulations in force at the time. To the maximum extent permitted by applicable law, the firm and its lawyers accept no liability for any loss arising from any person’s reliance on the contents of this article.