Growth Enterprise Market Reforms to Boost SME Listings

Lower costs and faster transfer mechanism to the Main Board for GEM listings

After consultation, revised Growth Enterprise Market (“GEM”) Listing Rules and Main Board Listing Rules to implement the GEM Reforms will come into effect on New Year’s Day 1 January 2024. The GEM reforms proposed by the Stock Exchange of Hong Kong (“SEHK”) received majority support and will be adopted with minor modifications.

The key proposals adopted include:

• Introducing a new streamlined transfer mechanism to enable eligible GEM issuers to transfer to the Main Board without the need to appoint a sponsor to carry out due diligence or produce a “prospectus-standard” listing document;
• Introducing a new alternative “market capitalisation/ revenue/ research & development test” for an initial listing on GEM that targets high-growth enterprises heavily engaged in research and development activities;
• Reducing the post-IPO lock-up period imposed on GEM issuers’ controlling shareholders to 12 months; and
• Removing mandatory quarterly reporting requirements and aligning other continuing obligations of GEM with those of the Main Board.

Regarding this last point and according to the SEHK, aligning continuing obligations of GEM with those of the Main Board include:

1. Removing the requirement to appoint a compliance officer of a GEM issuer;
2. Shortening the engagement period of the compliance adviser of a GEM issuer to a period that is equivalent to the relevant Main Board requirement; and
3. Aligning GEM’s periodic reporting timeframes for annual reports, interim reports, and preliminary announcement of results for the first six months of each financial year with the relevant timeframes under the Main Board. These reforms should significantly enhance GEM’s attractiveness to SMEs seeking a listing, furthermore adjustments to ongoing listing requirements will help reduce compliance costs for current GEM issuers, whilst sustaining market quality and investor protection.

The full consultation conclusion is available here.