Proposed New Reforms to the GEM board on the HKEX

In September 2023, the Stock Exchange of Hong Kong Limited (the “HKEX”) published a Consultation Paper on GEM Listing Reforms (the “Consultation Paper”), which seeks to invite comments on the proposed reforms to the GEM board on the HKEX, which shall be effective from 31 December 2023. ?

What are the major proposals? ?

Some key changes are listed below:

1. Implementing a new eligibility test targeting high growth enterprises that are heavily engaged in research and development (R&D) activities.
2. Launching a new transfer arrangement enabling qualified GEM issuers to transfer to the Main Board without needing to appoint a sponsor to carry out due diligence, nor to produce a “prospectus-standard” listing document.
3. Aligning continuous obligations with those of the Main Board, such as removing the requirement of providing mandatory quarter report and shortening the lock-up period for controlling shareholders.

The detailed proposed changes are set out below:

Proposed New Eligibility Test

Proposed New Streamlined Transfer Mechanism?

Proposed Reforms on other aspects

Conclusion

In view of rejuvenating the transactions at GEM in an orderly manner, HKEX seeks to provide an easier way for new technology company to go public by proposing the new eligibility test for GEM listing, with a threshold much lower than the Chapters 18A and 18C regime. The route to transfer of listing to Main Board by quality GEM issuers is also made easier under the alternative streamlined transfer mechanism, so to provide incentive for existing GEM issuers to improve their performance.