Background
On 21 September 2026, The Stock Exchange of Hong Kong Limited (Exchange) published a Consultation Paper on Phase II of its Listing Framework Competitiveness Review (Consultation Paper), setting out and seeking market feedback on its proposals to refine the post-listing requirements governing notifiable transactions, connected transactions and spin-off transactions. The consultation period will end on 30 November 2026.
This Consultation Paper follows the Exchange’s Consultation Conclusions on Competitiveness Review of Listing Framework published on 24 July 2026, which implemented the first phase of the competitiveness review and introduced reforms relating to weighted voting rights, secondary listings, initial listing requirements and confidential filing.
In pursuit of the Exchange’s broader policy direction of enhancing Hong Kong’s competitiveness as a listing venue, the Phase II proposals form part of the Exchange’s continuing review of the post-listing regulatory framework, with a view to affording listed issuers greater flexibility and efficiency in conducting corporate transactions in pursuit of business growth and expansion, while maintaining investor protection to preserve market confidence through enhanced disclosure requirements and board accountability.
Key proposals
1. Notifiable transactions
Percentage ratios to measure transaction impact to issuer
The Exchange proposes to remove the profits ratio as one of the percentage ratios for measuring the impact of a transaction. The Exchange explains that the profits ratio is the ratio most likely to produce anomalous results, particularly where the target or the listed issuer has recorded losses in its latest accounts or where the issuer’s financial performance is affected by exceptional factors.
The Exchange also proposes to modify the consideration ratio by allowing listed issuers to compare the consideration for the transaction with the higher of their market capitalisation or net asset value. The Exchange notes that, for asset-heavy issuers, comparing transaction consideration against net asset value may better reflect the impact of the transaction on the issuer’s financial position than market capitalisation alone.
If adopted, listed issuers would measure transaction impact using the assets ratio, revenue ratio, modified consideration ratio and, where applicable, equity capital ratio, with the profits ratio removed.
Transaction classifications and materiality thresholds
The Exchange proposes to increase the materiality threshold for major transactions from 25% to 50%, so that transactions where any percentage ratio is 25% or more but less than 50% would be classified as discloseable transactions and subject to enhanced announcement disclosure requirements in lieu of circular and shareholders’ approval requirements.
The increased major transaction threshold would not apply to transactions involving the provision of financial assistance and/or securities or other investment activities, where the existing 25% threshold would remain relevant.
The Exchange proposes to remove the transaction classifications of very substantial acquisition (VSA) and very substantial disposal (VSD), with transactions currently classified as VSAs or VSDs to be classified as major transactions.
Certain existing safeguards would be retained: written shareholders’ approval would not be available where any applicable percentage ratio is 100% or more for acquisitions or 75% or more for disposals and certain other transactions, and an accountants’ report issued by a PIE Auditor would still be required for acquisitions where any percentage ratio is 100% or more.
The Exchange also proposes to align and enhance the circular disclosure requirements currently applicable to major transactions, VSAs and VSDs, including streamlining financial information requirements, introducing risk-factor disclosure for the transaction, removing certain indebtedness and material contract disclosure requirements not relevant to the transaction, allowing certain information about directors and chief executives to be incorporated by reference, and codifying an existing waiver for acquisitions of revenue-generating assets.
Transactions in the ordinary and usual course of business
The Exchange proposes to introduce an exemption for acquisitions or leases of assets in the ordinary and usual course of business of the listed issuer that constitute major transactions, from the circular and shareholders’ approval requirements, provided that the assets are being used, or will be used, for the listed issuer’s existing principal business and the board confirms the fairness and reasonableness of the transactions.
The proposal responds to market feedback that existing requirements applicable to capital transactions conducted by issuers in their ordinary and usual course of business, such as acquisitions of fixed assets, could be less stringent so that issuers can manage capital expenditure more efficiently.
In practice, this could be helpful for listed issuers whose business models involve regular capital expenditure or recurring asset expansion, but the exemption would not be automatic: issuers would need to consider whether the assets are being used, or to be used, for the issuer’s existing principal business and whether the board can support the required fairness and reasonableness confirmation.
Announcement requirements
The Exchange proposes enhanced announcement disclosure requirements for all notifiable transactions, including disclosure of material terms and conditions, the basis of consideration including valuation details where relevant, key financial information of the acquisition or disposal target, and the impact of the transaction on the listed issuer.
The Exchange also proposes to require further announcements for matters including extension of the long stop date, changes in payment schedule, determination of consideration where the consideration is not fixed, and completion of a notifiable transaction.
This is an important balancing feature of the proposals: as more transactions may move out of the circular and shareholders’ approval regime, the quality and timeliness of announcement disclosure would become more important.
2. Connected transactions
Definition of “connected subsidiary”
The Exchange proposes to modify the definition of “connected subsidiary” by increasing the threshold for a connected person’s shareholding in a subsidiary from 10% to 30% or more of the voting power at such subsidiary’s general meeting.
Under the proposal, a non-wholly owned subsidiary of the listed issuer would be a connected subsidiary where connected person(s) at the issuer level can exercise or control 30% or more of the voting power at that subsidiary’s general meeting.
The Exchange explains that, while a connected person at the issuer level may have a direct interest in a subsidiary and therefore a potential conflict, a transaction between a listed issuer and a connected subsidiary does not present the same level of conflict-of-interest risk as a transaction with an external connected person, because the issuer retains control over the subsidiary and continues to consolidate its results.
The Exchange considers the proposed 30% threshold appropriate because it aligns with the threshold used for defining an “associate” of a connected person and for determining whether a person is a “controlling shareholder”.
Annual caps for continuing connected transactions
Under the current rules, a listed issuer must set an annual cap for each continuing connected transaction, and the cap must be expressed in monetary terms with reference to previous transactions and figures in the issuer group’s published information.
The Exchange proposes to allow annual caps for continuing connected transactions to be expressed as a percentage of a listed issuer’s revenue or other financial items in its audited accounts, provided that the transactions are of a revenue nature in the issuer’s ordinary and usual course of business.
The issuer would be required to disclose the basis for determining the annual cap by reference to the financial item and the internal control procedures for monitoring the transaction value as a percentage of the prevailing financial item from time to time.
The Exchange considers that the proposal would provide listed issuers with an alternative means of setting annual caps for revenue-nature continuing connected transactions, thereby increasing flexibility in managing business operations while continuing to require explanation of the basis for determining the annual caps.
3. Spin-offs
Regulatory process for spin-offs
The Exchange proposes to refine the scope of PN15 so that PN15 would not apply to the holding company of a subsidiary proposing a spin-off where both the holding company and the subsidiary are listed on the Exchange.
The Exchange proposes to streamline the regulatory process for spin-offs by introducing a self-assessment route under which the Exchange’s prior approval would not be required, provided that the ParentCo (i.e. listed issuer effecting the spin-off) satisfies the applicable PN15 principles and requirements and, at the time the SpinCo (i.e. entity to be spun off by the listed issuer pursuant to the spin-off) lodges its new listing application, the ParentCo has market capitalisation of at least HK$10 billion together with principal business revenue of at least HK$1 billion.
The self-assessment route would also require the revenue and total assets attributable to the remaining group’s business to account for more than 50% of the issuer group.
The Exchange frames the spin-off proposals as aimed at streamlining the process for ascertaining compliance with PN15 while upholding the core principle that a spin-off should not result in one business supporting two listings.
Announcement requirements
The Exchange proposes to specify disclosure requirements for spin-off announcements.
The Exchange notes that announcement disclosure by ParentCos varies due to the absence of specific rule requirements on content, and the proposal is intended to promote transparency by ensuring shareholders are provided with key information relating to spin-offs to support informed investment decision-making.
Assured entitlement
The Exchange proposes to remove the assured entitlement requirement for all spin-offs.
Under the current PN15 requirement, ParentCos must have due regard to the interests of existing shareholders by providing them with an assured entitlement to shares in the SpinCo, either by way of a preferential offering or a distribution in specie, subject to waiver.
The Exchange notes that it has previously granted waivers from the assured entitlement requirement, including general waivers for spin-offs to PRC exchanges due to PRC legal restrictions and specific waivers where legal restrictions in overseas jurisdictions would make assured entitlement or overseas offering requirements unduly burdensome.
The proposal reflects the Exchange’s view that the assured entitlement requirement should be reviewed given its long history and the practical constraints associated with spin-offs listed outside Hong Kong.
Moratorium period for spin-offs after listing
The Exchange proposes to shorten the moratorium period so that a SpinCo listing application should not be filed within one year after the ParentCo’s initial listing, instead of three years.
The Exchange also proposes exemptions from the moratorium period for secondary listed issuers and for dual-primary listed issuers that have been listed on a PRC stock exchange or a Recognised Stock Exchange for at least two consecutive financial years immediately before their listing in Hong Kong.
The Exchange proposes to clarify that compliance with the moratorium period would be assessed by reference to the time when the SpinCo lodges its new listing application, rather than the time when the ParentCo’s spin-off proposal is considered by the Listing Committee under the current rules.
What does this mean in practice?
If adopted, the proposed increase of the major transaction threshold from 25% to 50% would move a significant category of transactions from the circular and shareholders’ approval regime into an enhanced announcement disclosure regime.
However, the proposals would not amount to a wholesale removal of shareholder protections: transactions involving financial assistance and/or securities or other investment activities would remain subject to the existing 25% major transaction threshold, and the VSA/VSD removal proposal would retain specific safeguards for very large transactions.
The proposed ordinary-course exemption may be particularly relevant to issuers whose operations involve regular acquisitions or leases of assets for their existing principal business, although boards would need to be comfortable giving the required fairness and reasonableness confirmation.
The connected transaction proposals may reduce compliance burden in some group structures, particularly through the proposed increase in the connected subsidiary threshold and the proposed flexibility for revenue-nature continuing connected transaction annual caps.
For issuers considering spin-offs, the proposed self-assessment route, removal of the assured entitlement requirement and shorter moratorium period could make spin-offs and group restructurings more flexible, particularly for eligible large issuers.
Conclusion
The Consultation Paper is another important development in the Exchange’s phased review of Hong Kong’s listing regime, with the Phase II proposals focusing on post-listing transaction flexibility rather than initial listing eligibility. The proposed reforms would, if implemented, materially affect transaction classification, disclosure and approval analysis as well as the way Hong Kong-listed issuers approach acquisitions, disposals, leases, connected transactions, continuing connected transactions and spin-offs.
Listed issuers and other market participants should consider the impact of the proposals and submit their responses to the Exchange by 30 November 2026.
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