Corporate Finance, Listing and Advisory Activities
This domain covers the listing pipeline, post-listing transactions and takeovers - the daily work of Type 6 advisers and sponsors. Questions are rule-application: which test, which threshold, which document.
Getting listed
Main Board eligibility includes the profit test: aggregate profit of at least HK$80m over three years, of which at least HK$35m in the most recent year and HK$45m across the two preceding years, with market capitalisation of at least HK$500m at listing. Alternative market-cap/revenue/cash-flow tests exist. GEM requires a HK$150m market cap and HK$30m of operating cash flow over two years. Chapters 18A (biotech), 18C (specialist technology) and 19C (secondary listing) broaden eligibility.
A sponsor must be formally appointed at least two months before the listing application is filed. The prospectus carries civil and criminal liability under SFO Part XII and the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Post-listing transactions
Classify by the size tests (assets, profits, revenue, consideration ratios): under 5% is out of scope; 5% to 25% is a discloseable transaction (announcement and notification); 100% or more is a major transaction requiring shareholders' approval. Connected transactions need independent shareholders' approval and, above the thresholds, a circular.
Fundraising
Placings, rights issues, open offers, public offers and consideration issues. A general mandate allows issue of up to 20% of issued share capital, and a placing under it is normally capped at a 20% discount to the last closing price.
Takeovers Code
- 30% of voting rights triggers a mandatory general offer for all shares.
- Creep rule: 2% in any 12 months for a holder between 30% and 50%.
- Offer price must be the highest paid by the offeror or concert parties in the preceding six months; if 20% or more of that consideration was cash, the offer must be in cash.
Worked example. A controlling shareholder holds 28% and buys a further 3% from a third party, reaching 31%. Because it crossed 30%, it must make a general offer for all remaining shares at the highest price it paid in the previous six months - the block price, not the current market price.
Traps
- Treating 30% as the creep threshold rather than the trigger point.
- Confusing the 5% announcement test with a shareholders' approval requirement.
- Assuming the look-back period for the highest price is 12 months rather than six.