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Outstanding listing services in Hong KongAn introduction to listing in Hong Kong

Outstanding listing services in Hong Kong - An introduction to listing in Hong Kong / 1

Content

Why would you conduct an IPO?

Pros and cons of going public

IPO roadmap

IPO readiness assessment and IPO readiness diagnostic

Listing requirements on Hong Kong Stock Exchange (HKEx) and additional three new chapters to the Listing Rules

Principal steps involved in Main Board listing and EY services provided

Regulatory objectives governing the listing of securities on the HKEx

EY member firms in China

Experience in assisting companies to restructure and list in Hong Kong

IPO-related seminars are regularly hosted by EY in China and EY Growth Markets Teams

联联联联Contact us

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2 / Outstanding listing services in Hong Kong - An introduction to listing in Hong Kong

Why would you conduct an IPO?

An IPO is the first sale of a company’s shares to the public and the listing of shares on a stock exchange. It allows a company to raise capital in order to build its business by creating newly issued shares and selling existing shares.

There are many situations when companies start to evaluate an IPO as one of their strategic options. Funding or exit motivations, growth, internationalization and changes in the respective industry are triggers for strategic considerations around an IPO. Depending on the stakeholder, a mix of situations and motivations can lead to initial IPO considerations.

Typical contexts for companies that go public

Typical IPO case studies are:

High-growth companies: IPO to fund innovation, growth, acquisitions and internationalization

Private Equity (PE) and venture Capital (VC) owners: IPO as a way to exit and to further fund growth of portfolio companies

Family business: The company: IPO as integral part of the succession plan and to separate management and ownership

Scale-up companies: IPO as a way to better attract talent and to incentivize management

Conglomerates: IPO as a transaction to carve out and partial or full exit of business units

State-owned entities: IPO to privatize

Company situation

Strong company

growth

Cons

olid

atio

n

PE/VC: Exit pressure and maturity

IPO of

competitors

First mover W

inne

r of

and innovator

tren

ds

indus

try

awar

ds

and public awareness

New openness Next generation/successor

For many companies that have just started to consider going public, the key question is: could an IPO be the right next step?

The preparation starts with the careful evaluation of pros and cons of an IPO, the potential use of proceeds and examination of alternatives. This is in line with the first questions from investors at an IPO road show: why are you going public and what is the use of IPO proceeds? Answering these fundamental questions is key to the success of an IPO.

A successful listing can help your company unlock access to financing to complete a strategic acquisition, create opportunities to expand your business into new markets or provide an exit opportunity for your private equity or other investors. In addition, it can also improve perceptions of your business and brand with customers, suppliers and employees. While not all businesses are suited for life in the public eye, for many fast-growing private companies, an IPO can raise the capital needed to accelerate growth and achieve market leadership.

Typical motivations for going public

IPO

Strong company

growth

Impr

oved

Improved standing/

credit-worthiness

Exit opportunity

for current

owners

Separation

Stre

ngth

en

of managem

ent

and capital

appe

al a

s an

empl

oyer

equi

ty

acquisitionsFinance New growth potential


Pros and cons of going public

Outperforming companies weigh the benefits of going public against the drawbacks, as well as against the company and shareholders’ objectives.

The possible advantages of going public as shown in below table are numerous, including improved financial condition; gaining liquid M&A currency; increased capital to sustain growth and innovation; better incentives for management and employees through stock options; enhanced corporate image; better future financing opportunities; and the ability to benchmark operations against other public companies from the same industry.

The potential drawbacks of going public can include holding a lower stake in the company and loss of privacy; limits on management’s freedom to act; the demands of periodic reporting; initial and ongoing expenses; the burden of dealing with shareholders’ expectations; and increased disclosure requirements.

• Time-consuming tasks, particularly investor relations

• Greater transparency and disclosure requirements

• Total IPO flotation costs

• Add-on costs associated with the ongoing requirements as listed company

• New investors with voting rights

• Pressure to deliver on your promises

• Corporate governance duties

Pros

Cons

• Efficient access to capital markets to raise money through equity and bond offerings

• Flexibility to trade shares with high liquidity and daily valuation

• Greater attention, better brand recognition and prestige with consumers

• Shares functioning as new liquid M&A currency

• Potential to diversify wealth on shareholder side

• Enhanced ability to attract, retain and reward valued employees as listed company

• Opportunity to bond and incentivize key people with long-term incentive plans

+

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IPO roadmap

IPO is an important milestone in the process of enterprise development. Listing can bring a lot of benefits to the company, but also some additional responsibilities. The factors to be taken into account in deciding whether to go public include:

• Evaluate IPO as strategic funding in an IPO readiness assessment workshop, IPO diagnostics and an IPO readiness result report

• Set up resources and an internal IPO team

• Start to build capital market infrastructures and/or make structural adjustments to achieve IPO readiness

• Prepare group systems, new functions, tax optimization at company and shareholder level

• IPO team selection (bank, lawyers, auditors, investor relations) by means of abeauty contest

• Set timetable, start due diligence and prepare offering concept and prospectus

• Fine tune business plan, fact book, presentation materials for analysts, the press and investors

• Fine tune the equity story and valuation perceptions based on investor feedback

• Offering prospectus, and approval by regulators and securities admission to thestock exchange

• Press conference and launch the investor road show internationally

• Bookbuilding, order book analysis and determination of the issue price and allocation

• First price on the stock exchange with an IPO ceremony and a high level of media attention

• Active investor relations and ongoing road shows based on the IR calendar

• Management of investor expectations by way of efficient forecasting and use of issue proceeds according to the plan

• Ongoing transparent external reporting

• Awareness of disclosures such as ad hoc, directors’ dealings, corporate governance and operate general meetings

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IPO

considerations and planning

Internal preparation

Day-one readiness

IPO design, concept and placement with external team

12–18 months prior to IPO

3–12 months prior to IPO

Post-IPO

IPO

executionIP

O realization


IPO readiness assessment Transformation from a private to a public enterprise

What are goals of an IPO readiness assessment?

Execute on business strategy

Maximize company value

IPO transformation

• Organizational change

• Leadership and management readiness

• Transparency

• Ownership structure/control

• World-class financial organization

• Delivering on promises

• Where is your companyin its lifecycle?

• What is the company’s growth potential?

• Is the company’s business model predictable and sustainable?

Achieve operational excellence

Mitigaterisk

• Stakeholders’ motivation

• Strong management team

• Experienced transaction advisors

• Complexity of capital markets

• Increased regulatory oversight

• Corporate governance• Risk management• Limitations on service

providers

Investor and CEO/CFOs surveys

Examples

Best practices

Define an IPO base case as an important information for the assessment

Prioritize the gaps in an IPO roadmap

Train the key people on IPO best practices and regulatory requirements

Identify the IPO readiness gaps and assess the efforts required to get ready

Are you ready?W

hat

is y

our

capi

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aisi

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oal?

Are

you

rea

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O?

IPO benchmarking


The IPO readiness assessment workshop can include up to eight modules tailored to your specific needs.

Leadership Financial

Tim

ing

Functions

联• IPO windows联• Plan B options联• Internal resources

联• External reporting

联• Profit and cash flow forecasting

联• Prospectus

联• C-suite and board of directors

联• Remuneration 联• Corporate

governance

联• Investor relations联• Compliance officer

联• Committees

联• Internal controls联• Enterprise risk联• Compliance

management

联• IPO value journey联• IPO destination 联• Offering story and

equity concept

联• Issuing company 联• Group structure 联• Maintenance of

influence

联• Company-level联• Shareholder-level 联• Transaction-level

Strategy

Syst

ems Taxes

A tailor-made and integrated

approach

Structures


IPO readiness result report… ensure that the resources

required to support the listing work plan are in place, as required, in time and quality

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IPO strategyExchange and listing segmentEquity storyIssue concept

StructuresCompany structureArticles of associationEquity

TaxCountry of registrationOptimizationLegal form

FinanceFinancial reporting and rule complianceForecastProspectus and other information

LeadershipC-suiteSupervisory boardRemuneration

TimingMulti-trackIPO time scheduleResources

SystemsRisk managementComplianceCorporate governance

FunctionsInvestor relationsDirectors’ dealingsInsider and ad hoc disclosure

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Level of readiness

Major work is essential

Action required

Adjustments required

Minor adjustments recommended

Well prepared

IPO readiness diagnostic


EYWith you all the way


How EY will help at each stage of your IPO journeyFrom initial concepts through to IPO and beyond, EY has the proven approach and professionals to address the main areas and specifics of your IPO readiness and IPO value journey. We will assemble a broad and individually tailored IPO services package based on your needs with our established and interdisciplinary IPO approach. By fully understanding your company and the details and intricacies of the IPO process, we will be with you each step along the way.

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tegy

1. Assessment and diagnostics of IPO readiness and destination………………………………………………………………………………………………………………………………………………2. Analysis of capital structure options (debt vs. equity mix options)…………………………………………………………………………………………………………………………………………3. Support in preparing IPO beauty contest (e.g., organization, questionnaire for investment banks, lawyer, Investor Relations (IR) agency)…………………………4. Peer group analysis covering readiness (e.g., KPIs, segment reporting, GAAP and IR)……………………………………………………………………………………………………5. Support for and preparation of a holistic integrated IPO fact book and investor presentation…………………………………………………………………………………………6. Assistance with and review of IPO valuation models (e.g., use of multiple methods to identify own valuation range)……………………………………………………7. Support for business plan and formulation of KPIs (pre- and post-money view)………………………………………………………………………………………………………………8. Evaluation of sustainability story and reporting requirements, as well as regulatory analysis…………………………………………………………………………………………9. Strategy-based evaluation and analysis of Risk Governance………………………………………………………………………………………………………………………………………………

1. Assist on design of shareholder’s tax optimization strategy and shareholding structure ……………………………………………………………………………………………………2. Assistance with establishment and optimization of company operating structure with tax efficiency to be in line with listing requirement……………………………3. Support the potential issuer to select appropriate IPO market (country of registration) and capital structure…………………………………………………………………………4. Support in creating the issuer’s legal form, articles and bylaws of corporate governance system chosen and other IPO legal assistance………………………………5. Support for specific IPO issues of tax accounting (review and advisory)…………………………………………………………………………………………………………………………………………6. Assistance with design and establishment of corporate governance structure and specific rules of procedure for the management and the board…………………7. Help on design of future shareholders’ influence following IPO (articles of association, voting rights, share classes and controlling stake)………………

1. GAAP and IFRS conversion (diagnostic reviews, conversion implementation plans and full conversion………………………………………………………………………………2. Assistance with fast and advanced closing process for financial statements…………………………………………………………………………………………………………………………3. Support for preparation of required reports and financial statements disclosures for prospectus………………………………………………………………………………………4. Support for improvement of forecasting systems and capabilities (including working capital model)…………………………………………………………………………………………5. Evaluation of IPO accounting issues (e.g., segment reporting and revenue recognition)……………………………………………………………………………………………………………6. Audit and assurance services for financial statements required during and post-IPO………………………………………………………………………………………………………7. Provision of opinion on annual financial statements, internal controls and management letter………………………………………………………………………………………8. Evaluation of the appropriateness and suitability of current debt facilities………………………………………………………………………………………………………………………

1. Assistance with establishing risk management and internal control system…………………………………………………………………………………………………………………………2. Assistance with establishing internal monitoring system………………………………………………………………………………………………………………………………………………………3. Execution of internal audit……………………………………………………………………………………………………………………………………………………………………………………………………………4. Assistance with operational carve out and separation issues (e.g., IT and HR)…………………………………………………………………………………………………………………………5. Transfer pricing analysis and documentation for ongoing related party transactions……………………………………………………………………………………………………………6. Support for testing and improvement of risk management systems………………………………………………………………………………………………………………………………………7. Support for testing and improvement of compliance systems (including fraud and bribery)……………………………………………………………………………………………………8. Evaluation of IT effectiveness and assistance with further improvement…………………………………………………………………………………………………………………………………9. Evaluation of the business as well as the effectiveness of IT internal control and risk management system……………………………….………………………………………10. Evaluation of the effectiveness of the internal audit planning and functions…………………………………………………………………………………………………………………………

1. Assistance with setting up IR (internal organization, processes, infrastructure and ownership)………………………………………………………………………………………… 2. Preparation of whistle-blower program and hotline ……………………………………………………………………………………………………………………………………………………………3. Support for designation of compliance officer and establishment of internal compliance levels ……………………………………………………………………………………4. Support for IR strategy (e.g., equity story building, KPIs, media plan, communication channels and policies)………………………………………………………………5. Review of effectiveness of investor relations with regard to meeting investor needs ………………………………………………………………………………………………………6. IFRS training of external reporting process owners for capital market communication …………………………………………………………………………………………………………7. Setup of an internal and external IPO communications plan ………………………………………………………………………………………………………………………………………………8. Review of the requirements for corporate secretarial and legal resources…………………………………………………………………………………………………………………………

1. Review of the incentive schemes of key personnel…………………………………………………………………………………………………………………………………………………………………2. Advise on recruiting new hires (board composition, supervisory board members and IR officer)………………………………………………………………………………………………3. Assistance with establishment of long-term employee incentive plan…………………………………………………………………………………………………………………………………………4. Assistance with establishment of stock option plans according to company’s goals and capital market eligibility…………………………………………………………5. Training of employees on capital market issues (e.g., insider regulation, ad hoc disclosure and directors dealings)………………………………………………………6. Documentation of new capital market status in employment contracts and compliance levels………………………………………………………………………………………7. Help on formulation of relevant internal policies and manuals (e.g., code of conduct, professional ethics, ESG and CSR)……………………………………………8. Board support (finance policy, corporate governance report, committee and CEO instructions)……………………………………………………………………………………

1. IPO time line development and tracking of milestones……………………………………………………………………………………………………………………………………………………………2. Preparation, organization and operation of IPO database………………………………………………………………………………………………………………………………………………………3. IPO due diligence services (e.g., financial and taxes) according to issuer’s and IPO intermediaries‘ requests………………………………………………………………………4. Strategic IPO advisory providing coaching for the board and assistance with IPO project management…………………………………………………………………………………5. Dual-track organization of IPO and plan B……………………………………………………………………………………………………………………………………………………………………………………6. Review of registration statement for compliance with rules and regulations of specific exchange and regulator……………………………………………………………………7. Setup of a corporate communication calendar for the entire infrastructure from day one……………………………………………………………………………………………………

IPO considerations and planning12–24 months prior to IPO

IPO execution6–12 months leading up to IPO

IPOBeing public

StrategyAlign operational goals with your finance strategy

TaxHelp establish and strengthen a company structure with tax efficiency and effectively control the tax risk

FinancialPrepare allfinance-related infrastructure

SystemBuild the right supporting systems to fulfill ongoing requirements

FunctionHelp manage investor relations, compliance, and boards and committees

LeadershipBuild credibility and board independence

TimingDesign your IPO value journey

IPO

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Tax

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Listing requirements on Hong Kong Stock Exchange (HKEx)

Companies may seek a listing on either the HKEx’s Main Board or GEM depending on criteria such as company size and profitability. The HKEx provides that a Main Board listing applicant must fulfill the financial criteria under either the “Profit test”, the “Market capitalization / Revenue / Cash flow tests”, or the “Market capitalization / Revenue tests” as specified in the Main Board Listing Rules. The listing requirements of the Main Board and GEM are outlined below:

Listing Requirements

Main Board

GEMProfit test

Market capitalization /Revenue / Cash flow test

Market capitalization /Revenue test

Place of incorporation(in recognized and acceptable jurisdictions)

Hong Kong, Mainland China, Bermuda, Cayman Islands, or any other jurisdiction where the standards of shareholder protection are at least equivalent to those under Hong Kong law

Trading record At least three financial years At least two financial years

Profit attributable toshareholders

At least HK$50 million in the last three financial years (with profits of at least HK$20 million recorded in the most recent financial year, and aggregate profits of at least HK$30 million recorded in the two proceding financial years

No specific requirement



Revenue No specific requirementAt least HK$500 million for the most recent audited financial year


Cash flow No specific requirement

Positive cash flow from operating activities of at least HK$100 million in aggregate for the three preceding financial years


Positive cash flow from operating activities In the ordinary and usual course of business before changes in working capital and taxes paid of at least HK$30 million in aggregate for the two preceding financial years

Minimum marketcapitalization

At least HK$500 millionat the time of listing

At least HK$2 billionat the time of listing

At least HK$4 billion at the time of listing

At least HK$150 million at the time of listing

Management and control Management continuity for at least three preceding financial years, andownership continuity and control for at least the most recent audited financial year

Substantially the same management throughout the two full financial years, and ownership continuity and control throughout the full financial year immediately preceding the issue of the listing document

Relaxation of tradingrecord and managementrequirement

Under the following circumstances, the HKEx may accept a shorter trading record period and/or may vary or waive the above profit or other financial standards requirement for:1) Mineral companies (those that have at least discovered resources)2) Newly formed “project” companies; or3) Applicants applying under the market capitalization / revenue test and substantially

the same management, when the new applicant‘s directors and management have sufficient and satisfactory experience of at least three years in the line of business and industry of the applicant, and the new applicant has management continuity for the most recent audited financial year

The HKEx may accept a shorter trading record period and/or waive or vary the ownership and managementrequirements for:联联联联Mineral companies; or联Newly formed “project” companies,provided that the applicant nevertheless meets the cash flow requirement of HK$30 million for that shorter trading period

Statement of businessobjectives

No such specific requirement but a new applicant is expected to include a general statement of future plans and prospects

A new applicant must state its overall business objectives and explain how it proposes to achieve them over the period covering the remainder of the financial year in which listing occurs and the two financial years thereafter

Market capitalization of public float HK$125 million HK$45 million

Minimum percentage of listed securities

At least 25% of the issuer's total number of issued shares must at all times be held by the public. The Exchange may, at its discretion, accept a lower percentage of between 15% and 25% in the case of issuers with an expected market capitalization at the time of listing of over HK$10 billion

Spread of shareholdersAt least 300 shareholders holding the securities in public hands at the time of listing

At least 100 persons holding the securities in public hands at the time of listing

No more than 50% of the securities in public hands at the time of listing can be beneficially owned by the three largest public shareholders

Note: The listing requirements are set out for illustration and reference only. The HKEx may from time to time revise the rules and guidance in relation to new listings. You should keep abreast of the latest regulatory developments or consult our professionals.


Additional three new chapters to the Listing RulesThe new rules to broaden Hong Kong’s listing regime took effect on 30 April 2018, from which date companies in emerging and innovative sectors seeking to list under the new regime may submit formal applications.

Minimum market capitalization• At least HK$1.5 billion

Qualified issuers• At least one core product beyond the concept

stage (Completed Phase I and received no objection to commence Phase II (or later) product subject to human testing)

• Engaged with the R&D of its core product(s) for a minimum of 12 months prior to listing

• Primary reason for listing is raising finance for R&D to bring its core product(s) to commercialization

• Must have registered patent(s), patent application(s) and/or intellectual property in relation to its core product(s)

• Must have received meaningful third party investment (being more than just a token investment; Guidance Letter contains quantified benchmark) from at least one sophisticated investor at least six months before the date of the proposed listing (which must remain at IPO)

Qualified issuers• Must be an innovative company, possessing

more than one of the following characteristics:• its success is demonstrated to be attributable

to the application, to the company’s core business, of (1) new technologies; (2) innovations; and/or (3) a new business model, which also serves to differentiate the company from existing players

• R&D is a significant contributor of its expected value and constitutes a major activity and expense

• its success is demonstrated to be attributable to its unique features or intellectual property

• it has an outsized market capitalization/ intangible asset value relative to its tangible asset value

• Must demonstrate a track record of high business growth

• Must have received meaningful third party investment (being more than just a token investment) from at least one sophisticated investor (which must remain at IPO). Such investors will be required to retain an aggregate 50% of their investment at the time of listing for a period of at least six months post-IPO

Other requirements/ investor protection• Share-based WVR only with maximum 10

times voting power vs. ordinary shares, the beneficiaries of WVR must beneficially own collectively at least 10% of the underlying economic interest in the applicant’s total issued share capital at the time of its initial listing

• Non-WVR shareholders must have at least 10% of voting power

• Only individuals (materially responsible for growth of the business) and directors (at listing and afterwards) can have WVR

• Transfers prohibited; event-defined sunset (death, ceased to be a director etc.); allows trusts and legitimate tax planning

• No increase in proportion of WVR after listing• Fundamental matters voted on a “one-share,

one-vote” basis, but clarified intention not to empower non-WVR shareholders to remove WVR structure

• Enhanced corporate governance; ongoing compliance adviser to provide advice to issuers on compliance with WVR safeguards and rules

Other requirements/ investor protection• In its current line of business for at least

two financial years prior to listing under substantially the same management

• The HKEx will review any change in ownership of the applicant in the 12 months prior to the date of the listing application in assessing the suitability of the applicant for listing

• Available sufficient working capital to cover at least 125% of the group’s costs (general, administrative and operating costs, and R&D costs) for at least 12 months from the date of publication of its listing document (after taking into account the proceeds of the new applicant’s initial listing)

• At least HK$375 million of public float at the time of listing (excluding subscriptions by existing shareholders at IPO and cornerstone investors); as long as this requirement is met, cornerstone investments and subscriptions by existing shareholders could be included in public float

• Fundamental change of principal business will require consent from the HKEx. Accelerated de-listing process (12 months to re-comply with requirement)

Other requirements/ investor protection• No need to meet WVR safeguards (except on

disclosure) nor change WVR structure to meet primary listing requirements for Non-Greater China Issuers and Greater China Issuers that were primary listed on a Qualifying Exchange on or before the publication of the New Board Concept Paper Conclusions (15 December 2017)

• Must meet WVR safeguards and WVR structure must conform with primary listing requirements for Greater China Issuers that were primary listed on a Qualifying Exchange after the publication of the New Board Concept Paper Conclusions (15 December 2017)

• Eligible applicants can submit a listing application on a confidential basis

Stock marker• Stock marker “S” at the end of stock name

Stock marker• Stock marker “B” at the end of stock name

Stock marker• Stock marker “W” at the end of stock name

Qualified issuers• Normally an innovative company (see above

for characteristics)• Greater China Issuers permitted to obtain

secondary listing• Must have a track record of good regulatory

compliance of at least two full financial years on a Qualifying Exchange (NYSE, NASDAQ or the “premium listing” segment of LSE’s Main Market)

Minimum market capitalization• At least HK$40 billion; or• At least HK$10 billion and revenue of at least

HK$1 billion for the most recent audited financial year

Minimum market capitalization• Non-Greater China Issuer without a WVR

structure—At least HK$10 billion• All other Qualifying Issuers

• At least HK$40 billion; or• At least HK$10 billion and revenue of at least

HK$1 billion for the most recent audited financial year

Pre-revenue biotech companies Innovative companies with WVR structures

Secondary listing of innovative companies

As part of the reforms, the HKEx is adding three new chapters in the Main Board Listing Rules to:

Permit listings of biotech companies which are pre-profit/pre-revenue that do not meet any of the Main Board financial eligibility tests

Permit listings of companies from emerging and innovative sectors with weighted voting rights (“WVR”) structures

Establish a new concessionary secondary listing route for Greater China and international innovative companies that are primary listed on the New York Stock Exchange (“NYSE”), NASDAQ or the “premium listing” segment of the London Stock Exchange’s (“LSE”) Main Market.

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• Advise on financial and accounting issues related to group reorganization

• Advise on financial and accounting issues related to the company’s fund raising strategies and methods

• Advise on establishing accounting systems, accounting policies, financial statements preparation and consolidation procedures, internal control procedures and tax efficient structures

• Advise on establishing financial budgeting directive and guidance according to the company’s business objectives

• Assist the company in identifying and disclosing related party transactions

• Advise on pre-IPO capital restructuring or dividend distribution with a view to achieving an optimal asset backing for the company

• Carry out digitalized analysis of the company to understand its competitiveness and advise on formulation of its digitized strategies

• Advise on capital market plans designed by the company for optimizing efficiency

• Advise on the company’s IPO business strategic planning: grasp market opportunities from the perspective of the company’s strategic vision and goals, advise on business portfolio, business model and business development plan

• Advise on sorting and preparation of the company’s systems, including organizational structure, corporate governance, key management systems and processes, and talent and incentive plans

• Comment on preparing the company’s prospectus

Listing application preparation

Principal steps involved in Main Board listing and EY services provided

• Listing assessment workshop

• Assist in planning the Group reorganization

• Appoint sponsor(s), reporting accountants and other intermediaries

• Submit the application to China Securities Regulatory Commission (CSRC) for preliminary examination and obtain the letter of acceptance for listing approval in Hong Kong* and then submit an application to HKEx

• Submit the preliminary listing application documents including the draft listing application form (Form A1) to CSRC for filing before submission to HKEx*

• Application proof of prospectus

• Audited financial statements based on mainland China accounting standards and corporate accounting standards for the past three financial years (only applicable to mainland China incorporated companies)

• Audited financial statements based on HKFRS (or IFRS) for the past three financial years and advanced draft of accountants’ report in accordance with Listing Rules

• Advanced draft of valuation reports

• Advanced draft of profit forecast

• Advanced draft of cash flow forecast

• Review listing applicant’s indebtedness position

Note: * Non-mainland China incorporated companies do not require approval from the CSRC. ** The steps and timetable are set out for illustration and reference only. The HKEx may from time to time revise the listing

rules. You should keep abreast of the latest regulatory developments or consult our professionals.

The above services printed in italics shall refer to EY's advisory services provided for audit clients in compliance with the independence principle.

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Initial phase preparations



• Submit the listing application form (Form A1) and draft listing timetable

• Submit and publish application proof of the prospectus

• Submit final or advanced draft of all requests for waiver from requirements of Listing Rules and Companies Ordinance

• Submit advanced draft of any draft statement of adjustments relating to the accountants’ report

• Submit sponsor’s undertaking and statement of independence, and compliance adviser’s undertaking

• Submit final or advanced draft of profit forecast memorandum and cash flow forecast memorandum

• Submit advanced draft of letter from the sponsor on confirmation of board of directors’ statement of working capital sufficiency

• At least four clear business days before the hearing date

• Submit final proof of the prospectus

• Submit certified copy of the approval letter from CSRC*

• Assist in the introduction of best practice in corporate governance, internal control management, human capital and information system management with a view to assisting the company in enhancing its capabilities to maximize shareholder value

• Advise on financing plans for the company

• Provide advisory services such as market value management and upgrading for companies following listing, including intensive growth model, extensive growth model, organization optimization and operational upgrading

• Provide due diligence services for the company’s mergers and acquisitions

• Provide tax planning services

• Participate in the review of the company’s business and financial commentary for inclusion in the prospectus

• Participate in the review of the cash flow forecast prepared by the company

• If required, review the accounting policies and calculations adopted in arriving at the profit forecast prepared by the company and issue a comfort letter for inclusion in the prospectus

• Review the pro forma financial information and issue a comfort letter for inclusion in the prospectus

• Issue comfort letters in relation to the listing application

• Following the finalization of the prospectus and the approval by the board of directors, issue a consent letter for inclusion in the prospectus of EY member firm’ s name and accountants’ report in the form and context in which they appear

• Hearing

• Publish Post Hearing Information Pack

• Roadshow

• Publish prospectus

• Listing

• Disclosure of notifiable transactions

• Disclosure of financial results

• Shareholders’ meetings

Formal submission to HKEx**

After listingListing in progress



Regulatory objectives governing the listing of securities on the HKEx

HKEx’s disclosure requirements for Main Board - listed companies:Disclosure requirements for financial information - periodic

• Preliminary announcements of results

• Annual report and interim report

Disclosure requirements for other important information - transactional

• Disclose any inside information as soon as reasonably practicable after the information has come to the company’s knowledge to comply with “Securities and Futures Ordinance”

• Disclose any Information relating to the listed company’s securities (such as issue of new shares under general mandate, share repurchase or redemption, changes in the terms of convertible securities, etc.)

• Disclose any Information relating to the listed company’s business

Listed companies – must have a suitable business, structure, process and timely and accurate disclosureDirectors of listed companies – must act honestly, possess relevant experience and competence,

and understand and comply with the “Listing Rules”Before listing After listing

• Appoint sponsor(s)• Confirm that the applicant is suitable for listing• Provide training to directors• Confirm that the applicant has established appro-

priate accounting and management procedures, systems and internal controls

• Appoint compliance adviser(s)• Listed companies are required to disclose information to

shareholders and the general public often and certain trans-actions require shareholders’ prior approval

• Listed companies are required to publish a “Corporate Governance Report” formulated by board of directors in the company’s annual report and issue an “Environmental, Social and Governance Report”

Disclosure requirements for the contents of listing documents(Relevant rules: Chapter 11 of and Appendix 1A to the Main Board “Listing Rules”)

• Information about the listed company and its advisers

• Information about the issue of securities

• Information about the listed company’s share capital

• Information about the listed company’s business

• Financial information and prospect about the listed company

• Information about the listed company’s management

• Information about the listed company’s use of proceeds

• Additional information related to mining company (if applicable)

• Additional information related to property interests

• Material contracts and documents for inspection

Regulatory framework

Required disclosure for listing applicants

1

To maintain fairness and orderliness of the securities markets

2

To prevent false markets in trading of securities

3

To ensure that all market participants have simultaneous access to the same information, with a view to precluding any insider dealings


EY member firms in China

China, a vast country undergoing unprecedented change, creates challenges and complexities -- even for those with experience of operating in the market.

EY is able to support you through 28 offices in the EY Greater China Region: Beijing, Hong Kong, Shanghai, Guangzhou, Macau, Shenzhen, Chengdu, Hangzhou, Nanjing, Shenyang, Suzhou, Tianjin, Wuhan, Xi’an, Changsha, Dalian, Qingdao, Xiamen, Zhengzhou, Haikou, Chongqing, Taipei, Taoyuan, Hsinchu, Taichung, Tainan, Kaohsiung and Ulaanbaatar.

At EY, we draw upon our local and global knowledge to help you retain the confidence of your investors, manage your risk, strengthen your controls, grasp opportunities and achieve your potential. We provide assurance, tax, transaction and advisory services to many large or fast-growing Chinese and multi-national corporations operating in the region.

With 18,000 professionals in Greater China, EY is committed to bringing together the right people, at the right time, and in the right place to give you the seamless, high-quality service you need. That is how we make a difference.

Your ideal listing service teams

Ideal listing service team

Leading organization in assisting Chinese enterprises

listing in mainland China /Hong Kong / overseas

Experience in serving all major sectors


Credentials in serving as IPO reporting accountants in Hong Kong Over the past 10 years, we have assisted nearly 200 companies to list in Hong Kong. In 2018, we assisted 28 companies to list on the Hong Kong Main Board, accounting for 24% of market share of Hong Kong Main Board listings among the Big-4 firms in terms of number of company.

EY’s representative HKIPO clients (Main Board)

EY’s representative HKIPO clients (GEM)

Industrial and Commercial Bank of China, representing the largest IPO of the year in terms of funds raised

Assisted market leaders in their respective industries with their IPOs, including Fosun International and BYD Electronic

Assisted China Railway Construction and CSR to list in March and August, respectively

13 companies, including China Pacific Insurance

20 companies, including Goodbaby International, Xinjiang Goldwind Science & Technology, etc

16 companies, including CITIC Securities, Baoxin Auto Group and Far East Horizon, etc

Assisted People’s Insurance to list in Hong Kong, which was the largest IPO of the year with funds raised of over HKD24 billion

15 companies, including China Harmony Auto, Wuzhou International, IGG, YuanSheungTai Dairy Farm, Qinhuangdao Port, etc

Assisted Harbin Bank, Fulum Group and Beijing Urban Construction Design & Development Group. Among them, Wanda Commercial Properties became the largest IPO of the year in terms of funds raised

22 companies, including China Railway Signal & Communication, CRCC High-tech Equipment, Suchuang Gas, Shanghai Haohai Biological Technology, 3SBio, TCL Display Technology, Zhongzhi Pharmaceutical, Purapharm, etc

Jujiang Construction Group, Virscend Education Company, Sinco Pharmaceutical, Human Health, Wang On Properties, BOC Aviation, China Leon Inspection, Quanzhou Huixin Micro-credit, Honma Golf, Zhou Hei Ya International, Datang Environment Industry, Guangdong Kanghua Healthcare, etc

Pine Care Group, Able Engineering, Morris Holdings, Minsheng Education Group, Guotai Junan Securities, etc

Vobile Group, Zhenro Properties Group, 21st Century Education, Tongda Hong Tai, Tsit Wing International, Ulferts International, Xinghua Port Holdings

Anhui Tianda Oil Pipe, Beijing Jingkelong, Zhejiang Shibao, Biosino Bio-Technology and Science

Perception Digital

Asian Capital#

China 33 Media Group#, First Credit Finance Group#

IGG¤

Deson Construction International, China Parenting Network, Great Water

SingAsia Holdings, Zheng Li Holdings, Vixtel Technologies

Miricor Enterprises, Yangzhou Guangling District Taihe Rural Micro-finance, Winning Tower Group, Hang Chi, China Singyes New Materials, C&N Holdings, Shen You Holdings

Dragon King Group, ZACD Group, JLogo Holdings, TL Natural Gas, Grace Wine Holdings, Victory Securities (Holdings) Company

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2006

2009

2010

2011

2013

2015

2016

2017

2018

EY market share of Hong Kong Main Board listings among Big-4 firms (2018)

EY 24%

Other “Big-4” 76%

Note: Compiled according to number of company for the period from 1 January to 31 December 2018Source: Listed company information compiled by EY


2011

2014

2016

2017

2018

2015

2007

• Asia Cassava Resources• Ausnutria Dairy• BBMG• China Pacific Insurance• China Singyes Solar

Technologies• China South City• Wynn Macau• China Vanadium Titano-

Magnetite Mining• CPMC • Shenguan • Sany Heavy Equipment

International• Silver Base Group • Yuzhou Properties

• Biostime• China ITS • China Liansu Group • China Sanjiang Fine Chemicals• China SCE Property • China Suntien Green Energy• CITIC Dameng • Convoy Financial Services• Evergreen International• Goodbaby International• International Mining

Machinery • Leoch International

Technology• Magic Holdings International• Chu Kong Petroleum and

Natural Gas Steel Pipe • NVC Lighting Technology • Sijia Group• SITC International• Springland International• Xinjiang Goldwind Science &

Technology• Zhongsheng Group

• Baofeng Modern International• Baoxin Auto Group• China Fiber Optic Network

System• China Kingstone Mining• China New Economy Fund*• China Polymetallic Mining• CITIC Securities• Dragon Crown Group• Far East Horizon• First Credit Finance Group#

• Kazakhmys PLC*• China Outfitters• Milan Station • Newton Resources• Prince Frog International• Shuanghua • Sitoy Group• Zhejiang Shibao*

• Beijing Digital Telecom• Beijing Urban Construction

Design & Development Group• Broad Greenstate International • China Auto Rental • Chanjet Information

Technology Company• China New City Commercial

Development • China Rundong Auto Group • China Shengmu Organic Milk

• BOC Aviation • China Leon Inspection • Datang Environment Industry• Guangdong Kanghua

Healthcare• Honma Golf

• Able Engineering • China New Higher Education

Group • CPM Group • Guangzhou Rural

Commercial Bank• Guotai Junan Securities• Hebei Construction Group

Corporation • Minsheng Education Group • Morris Holdings• Pine Care Group • Riverine China • Sisram Medical • Sun Hing Printing • Tsugami (China) Corporation • Xin Point • 3SBio Inc.

• Chen Xing Development • China Railway Signal &

Communication Corporation• Chinney Kin Wing • CRCC High-tech Equipment

Corporation• Dali Foods Group • Deson Construction

International¤

• Future Bright Mining • Genscript Biotech Corporation• Golden Throat • IGG Inc¤

• KTL International • Modern Dental Group• Purapharm Corporation • Shanghai Haohai Biological

Technology• Sky Light • Suchuang Gas Corporation • TCL Display Technology • Tsaker Chemical Group • UMP Healthcare • Universal Medical Financial &

Technical Advisory Services • Xinming China • Zhejiang Tengy Environmental

Technology• Zhongzhi Pharmaceutical

• China Beststudy Education• Wanka Online• Fosun Tourism• Natural Food International• Vixtel Technologies¤ 联联联联

• Shanghai Realway Capital Assets Management

• Dragon Mining• Ganfeng Lithium Co Ltd• Dafa Properties• China Parenting Network¤ 联联联联

• BeiGene• Hope Education• Ascletis Pharma• Kinergy Corporation• Prosperous Industrial • Intron Technology• Redsun Properties• Tianli Education• Shineroad International• Huifu Payment• China 21st Century Education• Tsit Wing International• TOP Education• Tongda Hong Tai • Xinghua Port*• Ulferts International• Zhenro Properties• Vobile

• Bolina • CW Group • Huazhong • Inner Mongolia Yitai Coal#

• People’s Insurance#

• Qualipak International • Shanghai Fosun

Pharmaceutical#

• Tsui Wah • Wison Engineering Services• Xiao Nan Guo Restaurants • Xiwang Special Steel

• ArtGo Mining • CAA Resources• China Aluminum Cans • China Harmony Auto• econtext Asia • Excel Development • Freetech Road Recycling

Technology• Kingbo Strike • Qinhuangdao Port• Times Property• Tonly Electronics*• Wuzhou International• Yestar International • YuanShengTai Dairy Farm

• Fosun International• KWG Property • Zhong An Real Estate• China Jinmao• China Agri-Industries • Xinhua Winshare

Publishing and Media• Centron Telecom • Kingsoft

• A8 Digital Music • China Railway Construction• CSR• Little Sheep Group• Maoye International• Xtep International

Note:

* Listed by way of introduction

# Listed by way of placing

¤ From GEM to Main Board

EY’s IPO clients listed on Hong Kong Main Board

2008

2009

2010

2012

2013

• ELL Environmental • Fast Retailing* • Feishang Anthracite

Resources*• Feiyu Technology

International Company • Fulum Group • Haichang • Hanbo Enterprises • Harbin Bank• Honworld Group • Hua Hong Semiconductor • Earthasia International • Kangda International

Environmental Company• Luye Pharma Group• Jinmao Investments • Nga Chun • Shanghai Fudan

Microelectronics Group*• Ozner Water International • Sunfonda Group • Wanda Commercial

Properties• Yan Tat Group • Yida China

• Human Health • Jujiang Construction Group• Quanzhou Huixin

Micro-credit• Sinco Pharmaceutical • Virscend Education Company• VPower Group International • Wang On Properties • Yadea Group • Zhou Hei Ya International


EY Entrepreneur Of The YearRecognized globally, this award scheme honors the outstanding entrepreneurs who inspire others with their vision, leadership and achievement.

Created in the United States in 1986, the EY Entrepreneur Of The Year awards program has grown to more than 145 cities in 60 countries and regions, with awards presented to over one thousand of the world’s most successful and innovative entrepreneurs.

EY Entrepreneur Of The Year China honors bold entrepreneurs who achieve success by combining ability and opportunity. The program rewards business people with ideas, vision and energy to create positive changes in the Chinese economy, such as developing new markets, creating employment opportunities and improving the competitiveness in their respective industries.

The EY Entrepreneur Of The Year China award is uniquely global as the country winner goes on to represent China at an international awards ceremony held each year in Monte Carlo, Monaco, where he or she competes for the prestigious title of EY World Entrepreneur Of The Year. Around 50 overall award winners from around the world face a distinguished panel of judges, comprising past winners and business leaders, to determine who is the undisputed global winner.

IPO seminars for Chinese high-growth enterprises IPO seminars are held in major cities in China every year and aim to help companies develop a pre-listing plan, taking as their theme the IPO process and the important milestones of the different stages, to support companies to be poised to go public. The seminars are an opportunity for open and candid discussions and mutual exchanges to help companies design a blueprint for future development. Guest speakers from stock exchanges, investment banks and law firms, EY member firm’s partners from our Assurance, Tax and Transactions services, as well as our IPO leaders are invited to speak and share their rich experiences and to exchange strategies with participants on the process of helping companies to go public. Through case studies they analyze common issues, consider services and discuss the current concerns of the regulators.

EY and Fudan Most Promising Chinese Enterprises Awards The EY and Fudan Most Promising Chinese Enterprises Awards program was established in 2011. The key objective of the Awards is, at an early emerging stage, to discover tomorrow’s industry leaders today. The Awards are not only a response to the fact that vital and fast-growing companies make tremendous contributions to the current and future economy in China, we also hope to take this opportunity to inspire more emerging companies and entrepreneurs, and to help them to be successful in the domestic and international capital markets.

IPO-related seminars are regularly hosted by EY in China

The trajectory of a high-growth company EY provides advice and guidance for high-growth companies. We have 30 years of experience in assisting companies to list, and help prepare the companies for life in the public spotlight. By studying the markets and related indices, we know that more than 50% of today’s market leaders will be replaced within five years. This increasing number of new entrants to global major indices drives the need for a replenishment strategy to ensure market leadership.We support these companies as they grow, undertake public offerings and accelerate into the Global Forbes 2000.

Our commitment to entrepreneurial companies, in both developed and emerging economies around the world, helps confirm that we are working with more of tomorrow’s global leaders, today.

Our strategic growth markets teams are constantly monitoring changes in emerging and fast-growing markets. EY is a leader in providing exceptional professional services in relation to many prominent fast-growing markets.

Our IPO leaders network provides access to a deep pool of knowledge and experience to help anticipate the risks and navigate through the challenges of life as a public company. We have interdisciplinary teams with market-specific knowledge to facilitate cross-border IPOs and overseas listings.

The leading global EY networkEY provides the full power of our organization to serve the leading public and private entrepreneurial companies around the world. With our access and reach, we can surround fast-growth companies with the critical experience and know-how they need — when and where they need it. We have a proven track record of guiding companies to market leadership.

Our IPO Center of Excellence

Visit ey.com/ipocenter and find valuable guidance for your IPO journey. Access our IPO knowledge, events, tools, thought leadership, webcasts, facts and figures, and contact details of our regional IPO leaders around the world, in one easy-to-use source.

EY Growth Markets Teams



Contact us

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SuzhouSuite A, 28/FSuzhou Modern Media PlazaNo.265 Suzhou Avenue EastSuzhou Industrial Park Jiangsu, China 215028Tel: +86 512 6763 3200 Fax: +86 512 6763 9292

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Beijing16/F, Ernst & Young TowerOriental Plaza1 East Changan AvenueDongcheng DistrictBeijing, 100738Tel: +86 10 5815 3000Fax: +86 10 8518 8298 Hong Kong22/F, CITIC Tower1 Tim Mei AvenueCentral, Hong KongTel: +852 2846 9888Fax: +852 2868 4432

Shanghai50/F, Shanghai World Financial Center100 Century Avenue, Pudong New AreaShanghai, 200120Tel: +86 21 2228 8888Fax: +86 21 2228 0000

Guangzhou18/F, Ernst & Young Tower13 Zhujiang East RoadTianhe DistrictGuangzhou, 510623Tel: +86 20 2881 2888Fax: +86 20 2881 2618

Wuhan31/F, China Minsheng Bank Building396 Xinhua RoadWuhan, 430022Tel: +86 27 8261 2688Fax: +86 27 8261 8700

Xi‘anSuite 1607, Building C, Urban Portal1 Jinye Road, High-tech ZoneXi’an, 710065Tel: +86 29 8783 7388Fax: +86 29 8783 7333

ChangshaSuite 2104B, Beichen Times Square1500 Third Section of North Xiangjiang Road, Kaifu District Changsha, 410000Tel: +86 731 8973 7800Fax: +86 731 8973 7838

Dalian28/F, Eton International Tower280 Changjiang Road Zhongshan District Dalian, 116000Tel: +86 411 8252 8888Fax: +86 411 8250 6030

QingdaoRoom 3401, Building B China Resources Building No. 6, Shandong Road Shinan district, Qingdao, 联联联266071联联联Tel: +86 532 8904 6000联联联 Fax: +86 532 8579 5873

XiamenRoom 1603, Century Wealth Center No. 158 Taitung RoadSiming DistrictXiamen, 361008Tel: +86 592 3293 000Fax: +86 592 3276 111

Zhengzhou11/F, Block 8, North ZoneKineer Business Center 51 Jinshui East Road Zhengzhou, 450046Tel: +86 371 6187 2288Fax: +86 371 6187 2200

HaikouUnit 01, 29/F, Tower A Internet Financial Tower No.3 Guoxing Avenue, Haikou Hainan, 570100Tel: +86 898 3660 8880Fax: +86 898 3638 9398

ChongqingUnit 1-2, 56/F, World Financial Centre188 Minzu Road, Yuzhong DistrictChongqing, 400010Tel: +86 23 6273 6199Fax: +86 23 6033 8832

Should you have questions or would like to find out more about our IPO services, please contact our partners at any offices near you.

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.

© 2019 Ernst & Young, ChinaAll Rights Reserved.APAC no. 03006667ED None.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

About EY’s IPO ServicesEY is a leader in helping to take companies public worldwide. With decades of experience, our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight.Our Global IPO Center of Excellence is a virtual hub that provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to use source.

EY | Assurance | Tax | Transactions | Advisory

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