Key Regulatory Updates for Hong Kong Listed Companies — May/June 2026

Introduction

This edition summarises key developments for Hong Kong listed companies in May and June 2026, including the publication of the Stock Exchange’s Guide on the Uncertificated Securities Market and the SFC’s Guidance Note for Issuers on Participating in the Uncertificated Securities Market Regime, each addressing issuer preparations for the targeted implementation of the Uncertificated Securities Market (USM) regime on 16 November 2026. The Stock Exchange also updated its Guide for New Listing Applicants to include further guidance on directors’ suitability, complaint assessments, and ultimate beneficial owner information for placees.

Enforcement developments during the period reinforced regulatory expectations for listed issuers and their directors and senior management, including obligations to ensure accurate, complete, and up-to-date submissions to the Stock Exchange, exercise active oversight over delegated functions and listing-related workstreams, and maintain sufficient personal judgement and supervision when discharging compliance responsibilities.

Consultation Papers and Consultation Conclusions

1. Stock Exchange Published Consultation Conclusions on Enhancements to Board Lot Framework (June 2026)

The Hong Kong Exchanges and Clearing Limited (HKEX) has published the conclusions of its consultation on proposed enhancements to the board lot framework for the Hong Kong securities market (the Consultation Conclusions). HKEX will proceed with the proposals as set out in the Consultation Paper with the following key enhancements:

• Reduction of the board lot value floor guidance from HK$2,000 to HK$1,000
• Introduction of board lot value ceiling guidance at HK$50,000 for issuers that adopt board lot units larger than 100 shares
• Standardisation of board lot units to a defined set of eight options: 1; 50; 100; 500; 1,000; 2,000; 5,000; and 10,000 share(s)

HKEX will adopt a two-phased implementation approach:

Phase 1 (Effective 2 July 2026)

• Prospective issuers:
• with IPO application filings (including the refiling of IPO applications lapsed before 2 July 2026) made on or after 2 July 2026 will be required to comply with all components of the new board lot framework; or
• with IPO application filings made before 2 July 2026 will only be required to comply with (i) the updated board lot value floor guidance and (ii) the new board lot value ceiling guidance.
• Existing issuers:
  • will only be required to comply with (i) the updated board lot value floor guidance and (ii) the new board lot value ceiling guidance.
  • who undertake corporate actions involving a change of board lot unit, share consolidation, or share sub-division will be required to comply with all components of the new board lot framework.
• Board Lot Value Floor Guidance:
  • Issuers will be required to follow the board lot value floor guidance upon initial listing, when the board lot unit is being changed, and when conducting share consolidation or sub-division.
• Board Lot Value Ceiling Guidance:
  • The ceiling guidance applies only to Applicable Securities (i.e., issuers of equity securities (except equity warrants, investment companies under Chapter 21, SPAC shares and SPAC warrants under Chapter 18B, and trading-only securities) and REITs) with a board lot unit exceeding 100 shares.
  • Issuers of Applicable Securities using a board lot unit of greater than 100 shares will be required to follow the board lot value ceiling guidance throughout the course of their listing, and issuers are expected to comply with the ceiling guidance (i) upon initial listing; (ii) when the board lot unit is being changed; and (iii) when they conduct a share consolidation or sub-division.
  • HKEX will regularly review board lot values and notify issuers whose average daily closing board lot value during the six-month assessment period exceeds HK$50,000. The first assessment period will commence in July 2026 and will run from January to June and from July to December each year. Issuers will be asked to reduce the board lot value within six months of the end of the relevant assessment period.
  • Issuers that are not Specified Prescribed Securities under the USM regime, which are in general issuers incorporated outside Hong Kong, the Chinese Mainland, Bermuda, or the Cayman Islands, would not be expected to observe the board lot value ceiling guidance until such time as they are able to elect to undertake an earlier USM transition.

Phase 2 (Effective Upon the Launch of USM on 16 November 2026)

• All issuers will be required to adopt one of the standardised board lot units within six months of completing the USM transition process.
• The requirement to conduct parallel trading for a change of board lot unit will be removed for issuers who have completed the USM transition process.

For further details, please refer to the Consultation Conclusion. The Guide on trading arrangements for selected types of corporate actions has been updated to reflect the relevant enhancements set out in the Consultation Conclusions.

Guidance Materials, Listing Decisions, and FAQs by the Stock Exchange

1. Stock Exchange’s Guide on USM and SFC Guidance Note (May 2026)

The Stock Exchange of Hong Kong Limited (the Stock Exchange) has published the Guide on the Uncertificated Securities Market (the Stock Exchange’s USM Guide) and the Securities and Futures Commission (the SFC) has published the Guidance Note for Issuers on Participating in the Uncertificated Securities Market Regime (the SFC Guidance Note). Both will be effective on 16 November 2026, which is the targeted date on which the USM regime will be implemented. The following sets out the key highlights of these publications.

Stock Exchange’s USM Guide

Scope of USM

• Issuers of prescribed securities can participate in Uncertificated Securities Market (USM).
• Prescribed securities that may participate in USM include: (a) shares; (b) depositary receipts; (c) stapled securities; (d) interests in an authorised CIS withdrawable from CCASS; (e) subscription warrants issued for capital fundraising purposes that entitle the holder to subscribe for securities that fall within a class in (a), (b), (c) or (d) (Warrants); and (f) rights under a rights issue to subscribe for the securities described in (a) to (d) above (Rights), that are listed or to be listed on the Stock Exchange.
• Securities outside of scope include: debt securities (including unconverted bonds); interests in an authorised CIS not withdrawable from CCASS; and options, warrants, or similar rights that are not prescribed securities.

Participation Deadline

• Listed issuers of prescribed securities of a class falling within paragraphs (a) to (d) above that are constituted under the laws of Bermuda, the Cayman Islands, Hong Kong, or the Chinese Mainland (each a Specified Jurisdiction) must ensure those securities become participating securities on or before the date specified (the Specified Date) or the expiry of five years after the date of implementation of USM (the USM Implementation Date), whichever is earlier. These securities, together with Warrants and Rights, are referred to as Specified Prescribed Securities.
• After the USM Implementation Date, new applicants of Specified Prescribed Securities (except Warrants or Rights) must ensure that those securities become participating securities on their listing date.

Appointment of Approved Securities Registrar (ASR)

• Deadline for appointment of ASR: All issuers of prescribed securities, both new applicants and listed issuers, must have an ASR from the USM Implementation Date, meaning that an issuer that is incorporated outside the Specified Jurisdictions, or whose securities have yet to become participating securities, must also appoint an ASR by the USM Implementation Date.
• New applicants must appoint an ASR prior to listing: The Stock Exchange will not approve an application for listing of prescribed securities from a new applicant that has not appointed an ASR.
• Listed issuers yet to participate in USM: Listed issuers can retain their existing securities registrar as long as that registrar obtains the SFC’s approval to be an ASR by the USM Implementation Date.
• If there is no ASR acting as the securities registrar for any prescribed securities on or after the USM Implementation Date, the Stock Exchange must suspend dealings no later than the beginning of the first trading session after the vacancy arises or when the Stock Exchange becomes aware of the vacancy, whichever is later.
• To participate in USM, a listed issuer must ensure that its ASR is a Registrar Participant (i.e., an ASR that has systems in place to enable USM operations and has completed all necessary interface testing with HKEX).

Change in ASR

• Notification requirement: An issuer must notify the SFC and Stock Exchange in writing of each of the following changes: (a) a person’s ceasing to act as the ASR; and (b) a person’s beginning to act as the ASR.
• Timing of notification: At least three months before the change takes effect or as soon as reasonably practicable after the issuer becomes aware of the change, whichever is later.
• A listed issuer must publish an announcement as soon as practicable upon notifying the Stock Exchange of any change of its ASR.

Disclosure in Listing Document

• New applicants whose Specified Prescribed Securities will participate in USM upon listing must disclose the information required by Listing Rules (USM LD Disclosure) in their listing documents.
• New applicants submitting a listing application prior to the USM Implementation Date, but whose listing date falls after the USM Implementation Date, must ensure USM LD Disclosure is included in the draft listing document submitted for final approval.
• USM LD Disclosure must be redacted for the purpose of publication of the Application Proof on the Stock Exchange’s website.
• A new applicant that has received the Stock Exchange’s final approval of a listing document without USM LD Disclosure must immediately contact the Stock Exchange if its listing date is delayed beyond the USM Implementation Date.

Permission to List in Certificated Form After the USM Implementation Date

• Within the first year of the USM Implementation Date, the Stock Exchange may allow new listings of Specified Prescribed Securities in certificated form if satisfied that: (a) there are exceptional circumstances justifying the securities becoming participating securities after the listing date; and (b) requiring the securities to become participating securities on the listing date would cause unreasonable delay to the intended listing date.
• A new applicant that has been granted permission by the Stock Exchange to list in certificated form must disclose, in its listing document, the information relating to that permission required by the Listing Rules.
• An issuer that does not accept the Stock Exchange’s decision may apply to the SFC for an exemption from compliance with USM participation requirements under the USM Rules.

Listed Issuer’s USM Participation

• Upon agreement on a proposed Specified Date between an ASR, Hong Kong Securities Clearing Company Limited (HKSCC), and the Stock Exchange, each listed issuer’s authorised representatives will receive a written notice specifying the relevant securities and the applicable Specified Date.
• It is expected that, in practice, the Specified Date and the date on which the prescribed securities are to become participating securities (Participation Date) for any particular prescribed securities will be the same.
• A listed issuer must announce its Specified Date on HKEXnews (and its own website) as soon as reasonably practicable and no later than one business day after being served the written notice.
• A listed issuer must publish an announcement containing the details of its transition to USM (the USM Transition Plan), including the Participation Date and, where required, the steps taken to amend constitutional documents or terms of issue, as soon as reasonably practicable following the finalisation of its plan for its prescribed securities to become participating securities.
• Listed issuers are required to announce a reminder of their USM Transition Plan no later than 21 business days prior to their relevant prescribed securities becoming participating securities.
• The last day for registration of transfer documents that would entitle the transferee to receive physical certificates should be the tenth business day prior to the issuer’s USM Participation Date.
• HKEX will publish on the USM Page of the HKEX website, setting out the Specified Dates and Participation Dates of listed issuers.

Voluntary Participation in USM

• Issuers of prescribed securities that are incorporated in a place other than a Specified Jurisdiction (or whose securities are otherwise constituted under the law of such a jurisdiction) may participate in USM voluntarily.
• These issuers are encouraged to ascertain whether the laws of their home jurisdictions are compatible with the USM regime and, if compatible, to take all reasonable steps for the securities to become participating securities:
• within five years from the date of implementation of the USM regime (where the issuer is already listed); or
• from the date of their first listing (where the issuer is listed after the implementation of the USM regime).

Revision of Specified Date by a Listed Issuer

• A listed issuer that needs to revise its Specified Date should approach its ASR as soon as reasonably practicable, and then submit a formal request in writing to the Listing Division, its ASR, and HKSCC.
• Such a request should be submitted at least 30 business days before its original Specified Date.
• Upon notification by the Stock Exchange of approval of the revision of the Specified Date, the listed issuer must, as soon as reasonably practicable, publish an announcement.
• Listed issuer will have to apply to the SFC for an exemption from compliance with USM requirements, and if such exemption is granted, the issuer must publish an announcement.

Warrants and Rights

• Where the underlying securities of Warrants or Rights are participating securities at the time when those Warrants or Rights are issued, an issuer must ensure that such new issues become participating securities upon listing.
• Title documents, such as provisional allotment letters, will not be issued in respect of Rights that are participating securities.
• There is no requirement for Warrants or Rights to become participating securities by a particular date if they are listed before their underlying securities become participating securities.

Constitutional Documents or Terms of Issue

• Listed issuers that need to amend their constitutional documents to conform with USM requirements should do so within one year of the USM Implementation Date, or on or before their next annual general meeting held after the USM Implementation Date, whichever is later.
• New applicants must ensure that their constitutional documents conform with USM requirements prior to listing.

Corporate Actions

• Issuers should carefully schedule their corporate actions so that no corporate action that involves a reference to, or a change of, their register of holders or the determination of their entitlements should take place within the period starting from 13 business days before and ending 10 business days after their Participation Date inclusive (Moratorium Period).
• The Moratorium Period does not preclude issuers from scheduling payments of cash dividends or holding general meetings within the Moratorium Period.
• Issuers should consider deferring corporate action events until after the Moratorium Period. Where the timing of such events cannot be changed, issuers should consider deferring their Specified Date to avoid the event occurring during such a period.

Issuer Website Disclosure

• An issuer of prescribed securities is required to maintain a webpage on USM matters.
• The USM-specific webpage must contain information relating to the participating securities set out in its listing document and USM-related announcements.
• This webpage must remain operational for at least a year after the relevant prescribed securities become participating securities (i.e., one year after its date of listing if it listed as participating securities after the USM Implementation Date) or its Participation Date.

Non-Compliance With USM Legislation

• The Stock Exchange would apply the Stock Exchange’s USM Guide to a failure to comply with USM legislation, which would include a failure to comply with the USM Rules or other applicable legal obligations with respect to the USM regime.

SFC Guidance Note

Change of ASRs

• Appendix 1 to the SFC Guidance Note sets out the details that should be provided when notifying the SFC of any change in ASR.
• Obligations to notify the SFC and the Stock Exchange of any change in an issuer’s ASR, and to do so within the specified timeframe, are statutory obligations. Failure to comply (without reasonable excuse) is an offence punishable by fines.

Obligation for Prescribed Securities to Become Participating Securities

• The obligation to ensure that prescribed securities become participating securities by the applicable deadline (i.e., their Specified Date or listing date) is a statutory obligation.
• Failure to comply (without reasonable excuse) is an offence punishable by fines.
• This may also call into question the suitability of the securities concerned to be or remain (as applicable) listed.

Preparatory Steps

• Key preparatory steps include:
  • amending the terms of issue (articles/byelaws) to ensure consistency with USM;
  • appointing an ASR approved to provide and operate a UNSRT system;
  • oobtaining the ASR’s written confirmation of readiness; and
  • making appropriate announcements/disclosures.
• Issuers should start the process as soon as possible rather than waiting until after receiving notice of their Specified Date or expected Participation Date.
• Issuers should start the process of reviewing and amending their terms of issue (i.e., documents that govern the terms on which the prescribed securities are issued and on which they may be held, evidenced, and transferred) as soon as possible.
• The terms of issue must allow for:
  • holding, evidencing, and transfer of legal title without paper instruments through a UNSRT system;
  • dematerialisation in accordance with USM Rules;
  • prohibition on issuing certificates or other title instruments;
  • keeping and maintaining the register of holders in accordance with USM Rules;
  • sending written confirmations to holders regarding register changes; and
  • use of authenticated messages for communications between issuer and holders.
• If there are any inconsistencies or conflicts between the terms of issue and any requirements under the USM regime, the terms of issue will have to be amended to remove the inconsistencies or conflicts.
• If the terms of issue are silent in respect of matters provided for under the USM regime, it may be useful to amend the terms of issue to provide for such matters so as to avoid any doubt or ambiguity.
• Issuers will have until the later of: (i) 16 November 2027 (first anniversary of USM Implementation Date); and (ii) the date of their first AGM after the USM Implementation Date, to complete the amendment exercise to their terms of issue.
• Appendix 2 to the SFC Guidance Note expands on the key areas of focus when reviewing the terms of issue, and sets out some sample provisions for consideration and inclusion in the terms as appropriate.

Sequencing Arrangements for Orderly Participation

• An overarching five-year period commencing on the USM Implementation Date has been set within which all of these securities must become participating securities.
• The sequencing arrangement must be agreed among ASRs, HKSCC, and the Stock Exchange.
• While the sequencing agreement will be agreed among the issuer’s ASR, the HKSCC, and the Stock Exchange, the issuer may also express views and concerns via its ASR, although it may not always be possible to accommodate these.
• It is expected that Specified Dates and Participation Dates will be determined as follows:
  • ASRs, the HKSCC, and the Stock Exchange will develop a draft timetable incorporating the Specified Dates and expected Participation Dates of all prescribed securities constituted under the laws of any of the four specified jurisdictions.
  • Each ASR will then approach its issuer-clients and provide an indication of the approximate period (e.g., the quarter or half-year) within which the Specified Date and expected Participation Date for that issuer’s prescribed securities is expected to fall. The issuer will be able to indicate any views or concerns it may have.
  • ASRs, the HKSCC, and the Stock Exchange will endeavour to accommodate issuers’ views and concerns to the extent possible, taking into account several factors.
  • Issuers will be notified in writing of the Specified Date and expected Participation Date for their securities, with at least three months’ advance notice.
• Issuers are urged to reach out to their share registrars/ASRs as soon as possible if they have any particular views or concerns about the timing of their prescribed securities becoming participating securities.

Deferral and Exemption

• The Stock Exchange may allow deferral only in the first 12 months after the USM Implementation Date, in exceptional circumstances, and deferral cannot be to a date later than five years after USM Implementation Date.
• For listed issuers: once a specified date is notified, it will not be changed unless in exceptional circumstances beyond the issuer’s or its ASR’s control.
• The following will not be regarded as sufficient justification for deferral: (a) the issuer’s failure to promptly amend its terms of issue; (b) the ASR’s inability to provide a UNSRT system by the Specified Date; or (c) a change of ASR.
• Deferral may be initiated by the issuer, its ASR, the HKSCC, or the Stock Exchange. However, irrespective of who initiates it, the deferral must be agreed to by the issuer’s ASR, the HKSCC, and the Stock Exchange, and they must also agree on the deferred Specified Date. If they cannot reach agreement, the matter will be decided by the SFC.
• The SFC has power to exempt compliance with Part 7 of the USM Rules, but intends to exercise this power with restraint and only in exceptional circumstances.

Obligations and Limitations After Securities Become Participating Securities

• Any new units of participating securities issued on or after the Participation Date may only be in uncertificated form (breach is an offence punishable by fines).
• No new title instruments may be issued in respect of participating securities.
• Any pre-existing title instruments (i.e., title instruments issued before participation) will, however, remain valid until cancelled.
• Units of prescribed securities held within CCASS must be dematerialised within six months of the prescribed securities becoming participating securities (in practice, expected within a few weeks).
• Issuers are encouraged to exercise their ability to dematerialise existing units to facilitate the market’s early transition.
• Issuers of prescribed securities should note that even if no title instruments were previously issued in respect of those securities (e.g., because the terms of issue do not require title instruments to be issued), steps will still have to be taken to convert the securities into uncertificated form.
• Dematerialisation in such circumstances means (a) recording the securities in the register of holders as being held in uncertificated form; and (b) ensuring that each holder of such securities is a system-member or provisional system-member of the issuer’s ASR’s UNSRT system.

Register of Holders

• If any securities are held in uncertificated form, the register must specifically state that those securities are held in uncertificated form.
• If (i) any holder’s securities are held in uncertificated form and (ii) any entry in the register relating to the particulars of that holder or to the holder’s uncertificated holdings has been changed, a written confirmation must be sent to the holder regarding that change.
• Once any prescribed securities become participating securities, there will be limitations on the period for which the register of holders of those securities may be closed. Specifically, it will no longer be possible for the register to be closed for:
  • more than two consecutive business days at a time; or
  • any longer period during which trading of the securities on the Stock Exchange is suspended.
• There is no limit on the maximum number of days per year that the register may be closed, although such a limit may exist under other legislation (e.g., companies legislation).
• Issuers must permit existing or past registered holders to inspect and make copies of register entries relating to them.

Rematerialisation

• In general, once the participating securities have been dematerialised, they should not be rematerialised unless:
  • the securities are to be delisted from the Stock Exchange; or
  • the SFC has exempted the securities from the restriction on issuing new units in certificated form, and the restriction on issuing new title instruments.

For further details, please refer to the Stock Exchange’s USM Guide and the SFC Guidance Note.

2. Stock Exchange Updated the Guide for New Listing Applicants (May 2026)

The Stock Exchange has updated the Guide for New Listing Applicants to reflect additional listing decisions on directors’ suitability and a new FAQ on ultimate beneficial ownership information of placees, and other housekeeping amendments. Please see below the key updates:

Persons With Significant Influence and Suitability of Directors

• Added new guidance encouraging applicants to consult the Stock Exchange in advance on whether a director’s past incident would constitute an integrity non-compliance and affect the director’s suitability and the applicant’s suitability for listing
• New listing decisions on integrity non-compliances have been added to Annex A.8:

Company J

• Mr. J was the founder, controlling shareholder, executive director, chairman and general manager of Company J.
• Mr. J was involved in a bribery incident more than 12 years ago in connection with a government subsidy application. Mr. J was named as a witness, but was not prosecuted or convicted.
• Company J was listed on a major stock exchange around eight years after the bribery incident.
• The Stock Exchange came to a preliminary view that Mr. J was not unsuitable to act as a director given mitigating factors, including:

• the incident occurred over 10 years ago;
• it was an isolated event and Mr. J had maintained a clean compliance record since the company’s listing on another major stock exchange; and
• the actual/potential benefit derived from the bribe (including the nature of the government subsidy and its impact).

• The Stock Exchange required Company J, when submitting its listing application, to:

• disclose in the listing document:
  • all relevant details of the bribery incident and the conviction of the government official involved according to the court judgment;
  • the directors’ and the sponsor’s view (with basis) on Mr. J’s suitability as a director and Company J’s suitability for listing; and
• provide the sponsor’s robust due diligence on the matter and confirm whether there are any facts or findings which deviated from the submission set out in the pre-IPO enquiry.

Company K

• Mr. K1 and Mr. K2 were the founders and directors of Company K, with Mr. K1 serving as the general manager and Mr. K2 as the chairman and legal representative.
• Company K was listed on a major stock exchange around 10 years ago.
• Since then, Mr. K1 and Mr. K2, each holding slightly over 5% interest in Company K, had acted in concert. They constituted the single largest group of shareholders of Company K since the commencement of the track record period.
• More than 20 years ago, Mr. K1 was convicted of infringement of trade secrets unrelated to Company K and was sentenced by the court to 1.5 years imprisonment and a fine of RMB 100,000 (Mr. K1’s Incident).
• Mr. K2 breached sell-down restrictions on his shareholding and failed to disclose his beneficial interest through a family trust approximately three years ago, resulting in significant monetary penalties.
• The Stock Exchange came to a preliminary view that Mr. K1 was not unsuitable to act as a director, and that Mr. K1’s Incident did not render Company K unsuitable for listing because:

• Mr. K1’s Incident occurred over 20 years ago; and
• Mr. K1 had been a director of Company K before and since its listing on the major stock exchange and had maintained a clean compliance record since the listing.

• Mr. K2 was not suitable to act as a director.
• Remedial Measures: Company K proposed that Mr. K2 resign from all positions, and the acting in concert agreement between Mr. K1 and Mr. K2 be amended so that Mr. K2 exercises his voting rights solely in accordance with Mr. K1’s instructions. Subject to implementation of these remedial measures, the Stock Exchange came to a preliminary view that Company K was not unsuitable for listing.
• The Stock Exchange required Company K, when submitting its listing application, to:

• disclose in the listing document:
  • all relevant details of Mr. K1’s Incident and Mr. K2’s Incident;
  • the remedial measures;
  • the directors’ and the sponsor’s view (with basis) on Mr. K1’s suitability as a director and Company K’s suitability for listing; and
• provide robust due diligence performed by the sponsor, and confirm whether there are any facts or findings which deviated from the submission set out in the pre-IPO enquiry.

Guidance on Complaints Against Applicants

• The Stock Exchange expects applicants and their sponsors to conduct a robust and comprehensive assessment of complaints against an applicant with reference to the nature and substance of the allegations, and their actual or potential impact on the applicant’s business operations, financial condition, compliance track record, shareholders, directors, and eligibility and/or suitability for listing, supported by independent due diligence.
• The Stock Exchange has discretion to require appropriate disclosure to be made in the listing document.
• Complaints that relate solely to commercial disputes arising in the applicant’s ordinary course of business, and do not give rise to concerns affecting the applicant’s eligibility and/or suitability for listing, would not ordinarily require further follow-up by the Stock Exchange or substantive disclosure in the listing document.

New FAQ on Ultimate Beneficial Owners of Placees

• New FAQ 3 in Annex B.8 clarifies the circumstances under which the requirement to provide ultimate beneficial owner (UBO) information will be exempted, including for: (a) institutional funds (sovereign wealth funds, pension funds, endowment funds, and insurance company funds); (b) discretionary asset managers with AUM of at least HK$15 billion and a five-year investment track record; and (c) discretionary funds with AUM of at least HK$8 billion and a one-year investment track record.
• For exempt placees electing not to provide UBO Information, an exemption application to the Stock Exchange and the SFC is no longer required, but the relevant category must be clearly stated in the “Remarks” field in Fast Interface for New Issuance (FINI).

Disciplinary Actions by the Stock Exchange for Failure to Comply With Disclosure Requirements

1. Stock Exchange’s Disciplinary Action Against Lisi Group (Holdings) Limited and Its Former Directors (June 2026)

Key Points

Directors must take an active interest in the issuer’s affairs and safeguard the issuer’s interests. Where anything untoward comes to their attention (including issues raised by professional parties), they must exercise reasonable skill, care, and diligence to consider, follow up, and address them in a timely manner. They must also ensure that the issuer maintains adequate and effective risk management and internal control systems. In this case, the Stock Exchange highlights the seriousness of the directors’ reckless disregard for their duties as they procured or allowed the issuer to commit repeated Listing Rule breaches over a prolonged period despite the Stock Exchange’s warnings and sanctions.

The Stock Exchange also emphasises its expectations towards, and the crucial role of, company secretaries under the Listing Rules to (i) assist the board (and in turn the issuer) to comply with the Listing Rules and (ii) promote good corporate governance.

The Stock Exchange censured Lisi Group (Holdings) Limited (the Company) and Ms Pang Yuen Shan Christina, former company secretary of the Company (Ms Pang). The Stock Exchange imposed a prejudice to investors’ interests statement and censured against Mr Li Lixin, former Chairman and executive director (ED) of the Company (Mr Li); Mr Cheng Jianhe, former ED of the Company (Mr Cheng); Ms Jin Yaxue, former ED of the Company (Ms Jin); Mr Shin Yick Fabian, former independent non-executive director (INED) of the Company (Mr Shin); Mr He Chengying, former INED of the Company (Mr He); and Mr Kwong Kwan Tong, former INED of the Company (Mr Kwong). It was further directed that Ms. Pang must attend 24 hours of training on regulatory and legal topics and Listing Rule compliance.

Facts

• This case concerned breaches of the Listing Rules relating to fund transfers by the Company’s subsidiary to a connected person and prepayments by another subsidiary to raw material suppliers.

Fund Transfers

• Between April 2021 and June 2024, Ningbo New JoySun Corporation (New JoySun), a subsidiary of the Company, made 333 fund transfers to Ningbo Lisi Holding Limited Company (Ningbo Lisi), a private company owned by Mr Li and therefore a connected person of the Company. Mr Li was also the Company’s controlling shareholder at the relevant time.
• The Company claimed that the fund transfers were intended to demonstrate ongoing financial relationships between the Company and its subsidiaries (the Group) and Ningbo Lisi in order to secure more favourable commercial terms from banks in the future, but the Company confirmed that the Group had not received any actual benefits.
• The Group did not enter into any written agreement in respect of the fund transfers, which were interest-free, unsecured, and without a fixed repayment schedule.
• Although the outstanding balance was settled monthly, the highest daily outstanding balance during the period was approximately RMB 329 million.
• The fund transfers constituted 31 discloseable and connected transactions and 191 major and connected transactions, including two advances to an entity.
• The auditor flagged the fund transfers in the board and audit committee meetings for each of FY 2022, FY 2023, and FY 2024 and recommended that the Group regulate and strengthen its management of the fund transfers, eliminate any non-commercial fund transfers with Ningbo Lisi, and consider the approval and disclosure requirements under the Listing Rules.
• Despite the auditor’s repeated recommendations, the fund transfers continued to be approved until June 2024, and the Company only made an announcement disclosing the fund transfers on 12 July 2024, more than three years after the first Fund Transfers were made.

Prepayments

• In March 2024, Ningbo Lisi Household Products Company Limited (Ningbo Lisi Household), another subsidiary of the Company, entered into procurement contracts with three independent raw material suppliers (the Suppliers) with a view to securing supplies of raw materials for a potential purchase order, which was the subject of a tender bid submitted by the Group.
• Between 27 and 29 March 2024, Ningbo Lisi Household prepaid the entire consideration of approximately RMB 244 million to the Suppliers (the prepayments).
• The procurement contracts were terminated between 15 April and 4 June 2024 after the Group failed in the tender bid, and all prepayments were fully repaid to Ningbo Lisi Household by 6 June 2024.
• The prepayments constituted two discloseable transactions and one major transaction of the Group.

Internal Controls

• The Company had a long history of breaches of Chapters 13, 14, and 14A of the Listing Rules, including three warning letters between 2014 and 2016 and a public censure on 19 July 2023 for failures relating to notifiable and/or connected transactions.
• Although the Company had appointed an internal control adviser, implemented the adviser’s recommendations, appointed a compliance adviser, and arranged directors’ training following the 2023 disciplinary action, it did not consult its compliance adviser in respect of the fund transfers or prepayments before they were executed.

Findings of Breach

• The Company breached Rules 13.13, 14.34, 14.38A, 14.40, 14A.34, 14A.35, 14A.36, 14A.39, and 14A.46 of the Listing Rules by failing to comply with the announcement, written agreement, circular, shareholders’ approval, and other applicable requirements for the fund transfers and prepayments.
• The Relevant Directors breached Rules 3.08 and 3.09B(2) by failing to apply reasonable skill, care, and diligence, safeguard the Company’s assets and interests, avoid conflict of interest and duty in respect of Mr Li, procure the Company’s compliance with the Listing Rules, and procure the Company to have adequate and effective internal controls and procedures.
• The Listing Committee considered that the Relevant Directors’ conduct demonstrated a blatant or reckless disregard for their directors’ duties and responsibilities under the Listing Rules:
• The Listing Committee found that Ms Pang, as company secretary, failed to take adequate action to consider and advise the board on the fund transfers, caused by action or omission of the Company’s contravention of the Listing Rules, and was liable under Rule 2A.10B(3).
• This matter highlights a deeply concerning weakness in the Company’s Rule compliance culture, particularly at the highest levels of governance. The board and senior management demonstrated a lack of diligence and accountability in discharging the Company’s obligations under the Listing Rules.

Conclusion

• The Listing Committee decided to impose the sanctions and directions set out in the above.

For further details, please refer to the statement of disciplinary action.

2. Stock Exchange’s Disciplinary Action Against Zhejiang Yongan Rongtong Holdings Co., Ltd. and Directors (June 2026)

Key Points

Directors owe fiduciary duties to act in the best interests of the issuer and its shareholders as a whole, and to safeguard its assets. They must prioritise the issuer’s interests over those of the controlling shareholder or any other third party. A breach of fiduciary duties is serious and may give rise to suitability concerns regarding the relevant directors. Issuers and their boards must ensure that any transaction involving a controlling shareholder strictly complies with the applicable Listing Rules, particularly those governing connected transactions. To ensure timely identification of connected transactions and compliance with regulatory requirements, issuers must maintain adequate and effective internal controls.

The Stock Exchange censured Zhejiang Yongan Rongtong Holdings Co., Ltd. (delisted, Previous Stock Code: 8211) (the Company); imposed a director unsuitability statement and censure against Mr Zhan Fahui, former chairman, executive director, and chief executive officer of the Company (Mr Zhan); imposed a prejudice to investors’ interests statement and censure against Mr Jin Lei, chairman and executive director of the Company at the time of the Company’s delisting (Mr Jin), and Ms Zhou Youqin, former executive director and chief executive officer of the Company (Ms Zhou); and censured Mr Xia Zhenbo, non-executive director of the Company at the time of the Company’s delisting (Mr Xia), Mr Yuan Lingfeng, independent non-executive director of the Company at the time of the Company’s delisting (Mr Yuan), and Mr Zhang Jianyong, independent non-executive director of the Company at the time of the Company’s delisting (Mr Zhang).

Facts

• In late 2024, the Company’s controlling shareholder, Zhejiang Yongli Industrial Group Co., Ltd. (Zhejiang Yongli), encountered a severe liquidity shortfall after its bank advised on 31 December 2024 that an RMB 186.5 million credit facility would not be renewed.
• On 31 December 2024, Zhejiang Yongli delivered a payment request to the Company.
• Mr Zhan approved the transfer himself without making any inquiries and overrode the Company’s internal controls, which required approval by two executive directors (the unauthorised advances).
• The unauthorised advances were made in two tranches on 31 December 2024 and 2 January 2025, totaling approximately RMB 166.7 million and representing approximately 99.6% of the Company’s cash balance as at 30 June 2024.
• No due diligence was undertaken prior to the transfers, and at the time of the transfers there were no written agreements between the Company and Zhejiang Yongli, no security provided, and no agreement as to interest.
• The unauthorised advances constituted notifiable transactions, connected transactions, advances to entities, and/or continuing connected transactions, and were subject to the reporting, announcement, circular, independent financial advice, and independent shareholders’ approval requirements under Chapters 19 and 20 of the GEM Listing Rules (GLR).
• After the unauthorised advances were made, neither Mr Zhan nor the finance personnel who executed the transfers informed the other directors or took steps to ensure the Company’s compliance with the applicable GEM Listing Rules.
• The unauthorised advances were discovered by the company secretary on 17 January 2025, but the board was only informed on 28 January 2025 and the Company only published an announcement on 19 February 2025.
• The Board failed to take timely remedial steps.
• A forensic investigator found that Mr Zhan had overridden the Company’s internal controls, and also identified significant control deficiencies, including weaknesses in approval processes, connected transaction monitoring, and record-keeping.
• Zhejiang Yongli subsequently fully settled all amounts due under the loan agreement and paid accrued interest of RMB 829,362.75.

Findings of Breach

Company:

• The Company breached GLR 19.34, 19.38, 19.40, 20.32, 20.33, 20.34, 20.37, and 20.44 for failing to comply with the reporting, announcement, circular, independent financial advice, and independent shareholders’ approval requirements in respect of the unauthorised advances.
• The Company also breached GEM Listing Rules 18.03, 18.48A, and 18.49 due to its delay in publishing its FY 2024 financial results and reports.

Mr Zhan:

• Mr Zhan did not conduct any due diligence before transferring nearly all of the Company’s cash reserves or require Zhejiang Yongli to enter into a written agreement or provide security to safeguard those assets.
• Mr Zhan therefore failed in his fiduciary duty to act in the interest of the Company and its shareholders as a whole.
• Mr Zhan breached GLR 5.01 and 5.02B(2) for failing to act in the interests of the Company and its shareholders as a whole, exercise reasonable skill, care, and diligence, ensure that the Company had adequate and effective internal controls in place, and use his best endeavors to procure the Company’s compliance with the GEM Listing Rules.

Ms Zhou and Mr Jin:

• Ms Zhou and Mr Jin were members of the Company’s senior management together with Mr Zhan at the material time. It was their duty to monitor the day-to-day operations, which included supervision of finances and treasury and other members of management, such as Mr Zhan.
• Ms Zhou and Mr Jin did not detect this significant transfer despite their duties of ongoing oversight.
• They were unable to demonstrate they had conducted any review of the Company’s financial positions for audit-closing and budgeting. Had such a review occurred, the unauthorised advances, readily identifiable from ordinary-course financial reports relied upon by the company secretary, should have been detected earlier.
• Ms Zhou and Mr Jin breached GLR 5.01 and 5.02B(2) for failing to exercise independent oversight over the Company’s operations, including treasury and material cash movements, take immediate remedial actions, ensure that the Company had adequate and effective internal controls in place, and use their best endeavours to procure the Company’s compliance with the GEM Listing Rules.

Mr Xia, Mr Yuan, and Mr Zhang:

• Mr Xia, Mr Yuan, and Mr Zhang breached GLR 5.01 and 5.02B(2) for failing to take immediate remedial actions, ensure that the Company had adequate and effective internal controls in place, and use their best endeavours to procure the Company’s compliance with the GEM Listing Rules.

Conclusion

• The GEM Listing Committee decided to impose the sanctions set out in the above.

For further details, please refer to the statement of disciplinary action.

3. Stock Exchange’s Disciplinary Action Against AustAsia Group Ltd. (May 2026)

Key Points

A basic requirement for the Stock Exchange’s effective vetting of any listing application is the submission of accurate, up-to-date, and complete information. The Stock Exchange’s access to such up-to-date information on the applicant provides the basis for maintaining the quality of Hong Kong’s capital market and sustaining investor confidence in new listings.

During a listing application, the board and relevant members of management are ultimately responsible for the information submitted to the Stock Exchange. They must use their best endeavours to procure the issuer’s compliance with the Listing Rules, including ensuring the Stock Exchange is promptly provided with accurate, complete, and up‑to‑date information about the applicant. Failure to discharge these responsibilities is serious and may result in disciplinary action.

The Stock Exchange of Hong Kong Limited (the Stock Exchange):

• censured AustAsia Group Ltd. (the Company);
• imposed a prejudice to investors’ interests statement and censured against Mr Edgar Dowse Collins, former executive director (ED) of the Company (Mr Collins) and Mr Chen Yuan, former chief financial officer and senior management of the Company (Mr Chen); and
• censured five other directors and former directors of the Company, and Mr. Sun Lizhi (Mr Sun), former financial controller and senior management of the Company.

Facts

• Following the Company’s listing in December 2022, the Company announced its audited results for FY 2022 on 1 March 2023. Compared with the last version of the profit and working capital forecast memorandum submitted to the Stock Exchange prior to the listing, net profits fell short by 64.4% (by about US$42.4 million).
• The Division’s investigation found that, during the Stock Exchange’s vetting process of the Company’s listing application, successive versions of the forecast memorandum continued to contain outdated figures, despite the availability of more current information as time passed.
• The Company admitted that during the preparation of the various versions of the forecast memorandum: (i) the FY 2022 forecast was not tested against the most up-to-date financial performance; and (ii) certain underlying assumptions were not reasonably justified.
• The listing application was led by Mr Collins, the Company’s CEO since 2009. The board delegated to him oversight of the Company’s preparation and review of the forecast memorandum.
• Mr Collins was primarily assisted by Mr Chen in relation to the preparation of the forecast memorandum. Mr Chen was appointed to lead the Company’s finance team specifically for the listing application.
• Mr Sun assisted Mr Chen.
• The Division’s investigation identified the following issues:
• Mr Collins did not conduct a proper review of each version of the forecast memorandum.
• Despite being aware of (i) the Stock Exchange’s enquiries regarding rising feed costs; (ii) the Company’s deteriorating performance; (iii) various factors negatively affecting profitability; and (iv) the impact of weaker performance, Mr Collins and Mr Chen did not take sufficient steps to ensure the above factors had been appropriately reassessed and reflected, where necessary, in the forecast memorandum.
• During the preparation of the forecast memorandum, the board failed to exercise collective oversight of a delegated but critical listing task.
• The relevant directors and Mr Collins were ultimately responsible for the accuracy and completeness of the forecast memorandum and were expected to take reasonable steps to monitor the IPO submissions and ensure information provided to the Stock Exchange remained up to date.
• The relevant directors, who knew that the Company faced a deteriorating financial situation prior to the submission of the final version of the forecast memorandum, failed to review the final version and made no enquiries of Mr Collins or Mr Chen prior to its submission to the Stock Exchange. They relied passively on management and the advisers instead of proactively verifying the submission’s information and assumptions.

Findings of Breach

The Company

• The Company breached Rule 9.11A by failing to notify the Stock Exchange and provide it with updated information in the forecast memorandum.

Mr Collins

• Mr Collins breached Rules 3.08 and 3.09B as he failed to exercise the skill, care, and diligence reasonably expected of a person in his role and with his experience.
• Mr Collins should not have relied uncritically on Mr Chen without independent analysis.
• He failed to supervise and monitor Mr Chen, engage actively with the assumptions in the forecast memorandum, review and approve each version of the forecast memorandum, and proactively alert the joint sponsors to the latest development and/or direct a holistic review of the forecast memorandum.
• Given the above, had Mr Collins remained on the Company’s board of directors, the retention of office by him would have been prejudicial to the interests of investors.

Mr Chen

• Mr Chen caused by omission the Company’s contravention of Rule 9.11A and is therefore liable under Rule 2A.10B(3) as he did not take sufficient steps, in light of the information available to him at the relevant times, to procure the Company’s compliance.

Mr Sun

• In his role as senior management supporting Mr Chen, Mr Sun caused by omission the Company’s contravention of Rule 9.11A and is therefore liable under Rule 2A.10B(3) as he did not take sufficient steps, in light of the information available to him at the relevant times, to procure the Company’s compliance.
• Mr Sun, as financial controller in charge of the communication with the Company’s advisers, failed to conduct an adequate review of certain drafts of the forecast memorandum before approving the same for submission.

Other Relevant Directors

• The relevant directors failed to exercise reasonable skill, care, and diligence, and failed to use their best endeavours to procure the Company’s compliance with Rule 9.11A, in breach of Rules 3.08 and 3.09B. Their collective inaction permitted the continued filing of outdated forecasts with the Stock Exchange.
• They were expected to:
  • supervise and/or monitor Mr Collins;
  • review the forecast memorandum in a timely manner — the relevant directors were unable to demonstrate they had clear knowledge about the preparation of the forecast memorandum; and
  • act on available information — despite being in possession of information indicating that key assumptions (such as feed costs and milk prices) had materially changed, the board relied passively on Mr Collins and Mr Chen to identify and escalate issues, instead of taking active steps to satisfy themselves that the forecast memorandum reflected the Company’s actual financial performance.

Conclusion

• The Listing Committee decided to impose the sanctions set out in the above.
• It was further directed that each of the relevant directors has to attend training on regulatory and legal topics and Listing Rule compliance.

For further details, please refer to the statement of disciplinary action.

Disciplinary Actions by the Stock Exchange — Others

1. Stock Exchange’s Disciplinary Action Against Two Former Directors of Fosun Tourism Group (June 2026)

Key Points

Directors of a listed issuer must, at all times, take sufficient proactive steps to safeguard the issuer’s assets and interests. In relation to the issuer’s proposed investment, this duty would include, among others, understanding the nature, the parties’ rights and obligations, and the issuer’s risk associated with the investment. They are expected to bring the proposed investment to the board of directors for consideration and ensure that the proposed investment is fair, reasonable, and in the interest of the Company and its shareholders as a whole. Where appropriate, they should consult professional advisers.

The Stock Exchange censured Mr Wang Wenping, former executive director and chief financial officer of Fosun Tourism Group (the Company) (Mr Wang) and Mr Qian Jiannong, former non-executive director of the Company (Mr Qian). It was further directed that each of Mr Wang and Mr Qian must attend 15 hours of training on regulatory and legal topics and Listing Rule compliance.

Facts

• On 17 December 2018, the Company entered into an investment management agreement (IMA) with AMTD Global Markets Limited (AMTD), who is one of the joint bookrunners, joint lead managers, and underwriters of the Company’s IPO.
• Under the IMA, the Company engaged AMTD as its asset manager for a term of two years to make an investment of US$50 million.
• Unless AMTD agreed otherwise, the IMA would be automatically renewed upon its expiry and the Company was not allowed to terminate the IMA or withdraw the investment sum (Lock-up Clause).
• Subsequently, Mr Wang and Mr Qian approved management fee payments of about US$3 million to AMTD under the IMA. Mr Qian did not review the IMA or make proper and independent enquiries before approving.
• Mr Wang negotiated and executed the agreements purportedly on the Company’s behalf, without reporting to or seeking approval from its board of directors; nor did he procure sufficient due diligence and risk assessments to be conducted on AMTD and the agreements. He also did not properly assess whether the IMA (including the Lock-up Clause) was fair and reasonable and in the Company’s interests.
• Eventually, the Company considered that it was uncertain to recover the carrying amount of the financial products purchased under the IMA and wrote off the US$50 million-investments in 2021.

Findings of Breach

• The Listing Committee found that Mr Wang and Mr Qian breached Rule 3.08 for failing to apply reasonable skill, care, and diligence and safeguard the Company’s assets and interests in respect of the IMA and the management fee payments made thereunder.

Conclusion

• The Listing Committee decided to impose the sanction as set out in the above.

For further details, please refer to the statement of disciplinary action.

2. Stock Exchange’s Disciplinary Action Against Former Directors of Differ Group Auto Limited (in Liquidation) (June 2026)

Key Points

Directors are required to fully cooperate with the Stock Exchange in its investigations. A failure to cooperate includes a failure to provide substantive responses to some or all of the Stock Exchange’s enquiries. Such failure is a serious breach of the Listing Rules and may result in the most serious disciplinary sanction. Directors are reminded that their obligation to cooperate does not lapse after they cease to be directors.

The Stock Exchange imposed a director unsuitability statement and censure against the following former directors of Differ Group Auto Limited (in liquidation) (the Company):

• Mr Kang Fuming, non-executive director (Mr Kang)
• Mr Chen Naike, independent non-executive director (Mr Chen, together with Mr Kang, the Directors)

Facts

• As part of an investigation into, amongst other things, whether the Directors had discharged the duties and obligations under the Listing Rules, the Listing Division (the Division) sent investigation and reminder letters to each Director.
• Both Mr Kang and Mr Chen were aware of the Division’s investigation.
• Mr Kang responded to some, but not all of the Division’s enquiries.
• Mr Chen did not respond to the Division’s enquiries.

Findings of Breach

The Listing Committee found as follows:

• The Directors breached the Listing Rules by failing to cooperate with the Division in the investigation.
• The Directors’ failure to discharge the responsibilities under the Listing Rules was serious.

Conclusion

• The Listing Committee decided to impose the sanctions as set out in the above.

For further details, please refer to the statement of disciplinary action.

Other Publications by the Stock Exchange and SFC

1. HKEX Issuer Access Platform to Launch in Q4 2026 (June 2026)

HKEX announced it plans to launch the HKEX Issuer Access Platform (HKEX IAP) in the fourth quarter of this year. Registration and onboarding for HKEX IAP will be conducted in phases, with issuers’ onboarding starting from October 2026 through to the second quarter of 2027. Issuers will receive at least 12 weeks’ advance notice ahead of their transition to HKEX IAP. More information on HKEX IAP, including onboarding arrangements and related guidance materials, is available on the HKEX IAP webpage.

Takeover Matters

1. Takeovers Bulletin (Issue No. 77) (June 2026)

The SFC Chas published Takeovers Bulletin (Issue no. 77). Please see below the key highlights:

Partners in Limited Partnerships

• The SFC noted that private equity funds are often structured as limited partnerships and that it has received enquiries on whether all or certain specified partners in limited partnerships should be treated as acting in concert for the purposes of The Codes on Takeovers and Mergers and Share Buy-backs (the Codes).
• Under class (7) of the presumption of “acting in concert”, “partners” are presumed to be acting in concert with one another; however, the SFC recognises that limited partners in a limited partnership are more analogous to shareholders of a company than to partners in an unlimited partnership, whereas general partners are akin to directors of a company.
• In practice, the Takeovers Executive (the Executive) will not automatically treat limited partners as acting in concert with one another or with the general partner by virtue of presumption class (7) if their only connection is their common interests in the partnership and the partners in question do not hold 20% or more of the economic interests in the partnership or voting rights over key matters of the partnership.
• General partners will be presumed to be acting in concert with the limited partnership and any bid vehicle established by the partnership.
• A limited partner will be similarly presumed if it holds 20% or more of the voting rights over, or economic interests in, the partnership or is otherwise involved in the making or approval of the partnership’s investment decision.
• The SFC reminded practitioners that assessment of “acting in concert” is a fact-based process and that the Executive should be consulted if there is any doubt as to the application of the concert party rules in a specific scenario.

Switches Between Scheme of Arrangement and Contractual Offers

• The SFC noted that, under Rules 5 and 16.2 of the Takeovers Code, an offeror may not withdraw an offer after issuing a “firm intention” statement (except with the Executive’s consent) and may introduce new conditions only to the extent necessary to implement a revised offer and if permitted by the Executive.
• The SFC clarified that a switch from a scheme of arrangement to a contractual offer, or vice versa, during the offer period would be tantamount to a withdrawal of an offer or the introduction of new conditions because the conditionality of the transaction will inevitably change, both of which require the Executive’s consent.
• An example is where a competing offer is announced after an offeror proposes to acquire or privatise the company by way of a scheme of arrangement. Since a contractual offer is commonly perceived as being more flexible than the statutory process of a scheme of arrangement, the first offeror might wish to switch the transaction structure for more flexibility in revising its offer in light of the competing offer.
• In considering whether to give consent to a proposed switch, the Executive will take into account the views of the offeree company’s independent board committee and independent financial adviser as to the effects of the proposed switch on the interests of the offeree company’s shareholders, as well as the particular circumstances of the transaction, including the stage of the offer process, the reasons for the proposed switch, and the likely impact on the deliverability of the offer.
• A request for consent is more likely to be considered favourably if the switch is expected to make the offer more likely to become unconditional and hence deliverable, for example a change from a scheme to a contractual offer with a 50% acceptance condition or a change from a contractual offer with a 90% acceptance condition to a scheme.
• To apply for the Executive’s consent to a switch, an offeror does not need to have reserved the right to switch the transaction structure in its offer announcement or document, but it must announce details of the switch as soon as reasonably practicable after the Executive’s consent is obtained.
• The SFC reminded practitioners that the Executive should be consulted at the earliest possibility.

Compliance With Share Buy-Backs Codes for Buy-Backs of Convertible Securities

• The SFC reminded issuers that, for the purposes of the Share Buy-backs Code, “shares” include securities that carry a right to subscribe for or purchase shares issued directly or indirectly by a company or its subsidiaries.
• If an issuer primarily listed in Hong Kong or any of its subsidiaries buys back convertible securities, warrants, or options issued by it by way of an off-market transaction or a general offer, it must comply with the Share Buy-backs Code unless the transaction constitutes an exempt share buy-back or a waiver is obtained under Rule 8 of the Share Buy-backs Code.
• The SFC clarified that limb (2) of the definition of “exempt share buy-back”, which refers to “a share buy-back made in accordance with the terms and conditions attached to the shares being bought back which either permit or require such share buy-back without the prior agreement of the owners of the shares”, is intended to cover situations where neither the buy-back nor the terms and conditions of the buy-back, require separate negotiation or separate agreement with the holders of the securities being bought back.
• If an issuer initiates a buy-back off the market or by way of a general offer and the relevant holders have discretion to decide whether to sell their holdings at the buy-back price offered by the issuer, the buy-back is not an “exempt share buy-back” under limb (2) of the definition.
• The SFC has revised Practice Note 16 to clarify the meaning of “exempt share buy-back”, and the revised Practice Note 16 will take effect from 1 July 2026.

New Practice Note 28 on Listed Closed-Ended Alternative Assets Funds

• The SFC published new Practice Note 28 on 30 June 2026 to provide guidance on the application of the Codes to listed closed-ended alternative asset funds (LAFs) with a primary listing in Hong Kong.
• The SFC stated that, given the similarities between listed closed-ended alternative asset funds and real estate investment trusts (REITs) in terms of governance structure, its approach to listed closed-ended alternative asset funds largely follows the approach adopted for REITs.
• Unitholders of a non-corporate LAF should be afforded the same level of protection as shareholders of a corporate LAF under the Codes. Therefore, the Executive treats non-corporate LAFs in the same manner as corporate LAFs as far as the Codes are concerned.
• The Executive takes the view that the term “director(s)” in the context of LAFs should be taken to include the management company and/or any one or more of its directors and/or persons with whose instructions the management company, its directors, or a director of such management company is accustomed to act. Therefore, in the context of a corporate LAF:
  • the “directors of a company” in the Codes shall be construed to include the management company and the director(s) of both the corporate LAF and the management company, whereas the “board” shall similarly be construed to include the board of directors of the corporate LAF, the management company, and/or its board of directors; and
  • all references to “trustee” in the REIT Guidance Note shall be modified to refer to “custodian” of the corporate LAF where applicable.
• All takeovers, mergers, and share buy-backs affecting an LAF, whether structured in corporate or non-corporate form, are required to, inter alia, comply with the principles and rules of the Codes unless otherwise permitted by the SFC in advance.
• The SFC also published FAQs on 30 June 2026 elaborating on the requirements concerning takeovers and offers relating to listed closed-ended alternative asset funds. In particular:
• Where an LAF proposes any form of redemption, takeover, merger, amalgamation, or restructuring, the management company and the trustee/custodian shall as soon as practicable consult the SFC on the manner in which such activities could be carried out so that it is fair and equitable to all holders.
• The offering documents of an LAF should clearly disclose that (i) the LAF is required to comply with the principles and rules under the Codes unless otherwise permitted by the SFC in advance; (ii) holders are required to comply with the Codes unless otherwise waived by the SFC in advance; and (iii) holders should seek assistance from professional advisers if in doubt on their obligations under the Codes.

For further details, please refer to the Takeovers Bulletin (Issue no. 77).

Conclusion

In summary, listed issuers should prepare for the USM regime by reviewing the Stock Exchange’s USM Guide and SFC Guidance Note, engaging with their share registrars or ASRs on sequencing and participation timing, reviewing constitutional documents and/or terms of issue, and planning for the required announcements, issuer website disclosures, and corporate action restrictions associated with the transition to USM. The SFC Guidance Note also underscores that obligations to ensure prescribed securities become participating securities by the applicable deadline is a statutory obligation, and failure to comply without reasonable excuse is punishable by fines.

Listed companies considering future capital markets transactions or listings of subsidiaries should also note the Stock Exchange’s updated guidance on directors’ suitability, complaint assessments, and UBO information for placees. Recent disciplinary actions highlight the continuing need for boards and members of management to ensure accurate, complete, and up-to-date submissions to the Stock Exchange, exercise active oversight over delegated responsibilities, and apply independent judgement when reviewing compliance-sensitive information.