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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.