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HKSI Paper 4 study materials
HKSI Paper 4 study resources

HKSI Paper 4: Corporate Finance and Capital Raising

HKSI Paper 4 · Work through your exam, one topic at a time.

All guide sections

Corporate Finance and Capital Raising

Corporate finance questions test the Listing Rules, the Takeovers Code and company law as a single system: how an issuer gets listed, how it raises further capital, and how control changes are policed.

Listing gateways

  • Main Board Rule 8.05 offers three tests. The profit test requires a three-year trading record, profit of at least HK$35 million in the most recent year and HK$45 million aggregate in the two preceding years.
  • The market capitalisation/revenue/cash-flow test and the market capitalisation/revenue test serve issuers without that profit profile.
  • Minimum public float is normally 25%, with at least 300 shareholders on the Main Board.
  • Sponsors are regulated twice: under Listing Rules Chapter 3A and the SFC Sponsor Provisions, with due diligence obligations and a declaration at listing.

Post-listing fundraising

  • A general mandate lets an issuer issue up to 20% of its issued share capital, refreshable; placings under mandate need no shareholder meeting but must respect the mandate limit and price norms.
  • Rights issues are offered pro rata and are not counted against the general mandate; open offers and consideration issues have their own rules.
  • Connected transactions under Chapter 14A require announcement, reporting and, above threshold, independent shareholders' approval with an independent financial adviser.

Takeovers and control

  • A mandatory general offer is triggered at 30% of voting rights, or where a 30–50% holder acquires more than 2% in 12 months.
  • The offer must be in cash (or carry a cash alternative) at not less than the highest price paid by the offeror in the preceding six months.
  • Frustrating actions need shareholder or Executive consent; the Executive may grant a whitewash waiver.

Worked example

A fund holds 28% of a Main Board issuer and buys 3% at HK$6.20. It crosses 30%, so a mandatory offer is triggered. Five months earlier it paid HK$6.80 for shares. The offer price is HK$6.80, not HK$6.20, because the six-month look-back captures the higher price. The firm must also arrange cash confirmation and publish an offer document.

Traps

  • Measuring the 30% threshold at completion only, ignoring acquisitions of control.
  • Forgetting the 2% creep rule for holders between 30% and 50%.
  • Placing shares beyond a stale mandate, or at a discount that breaches the price norm.
  • Treating a small connected subscription as automatically exempt.