HKEX Launches Second Phase of Its Listing Framework Competitiveness Review

Following the first phase of the listing reform focused on attracting high-growth and technology-focused companies, Hong Kong is extending its reforms to provide issuers already listed on the HKEX greater flexibility to pursue business growth while maintaining robust investor protection. The proposals target the post-listing rules governing corporate transactions, specifically those regarding notifiable transactions, connected transactions, and spin-offs. Stakeholders have until 30 November 2026 to provide feedback on the proposed changes.

The Stock Exchange of Hong Kong Limited (HKEX or the Exchange) published a consultation paper on 22 September 2026 outlining the second phase of its Listing Framework Competitiveness Review (the Consultation Paper). HKEX frames the reforms as a move toward greater reliance on high-quality disclosure and director accountability rather than prescriptive shareholder-approval requirements.

The Consultation Paper covers three key areas: notifiable transactions, connected transactions, and spin-offs. HKEX invites feedback by 30 November. The key proposals are summarized below. 

NOTIFIABLE TRANSACTIONS

Percentage Ratios

The Exchange proposes to remove the profits ratio as one of the ratios used to measure a transaction’s impact as it is most likely to produce anomalous results. The Exchange also proposes allowing listed issuers to modify the consideration ratio so that they may compare the consideration of a transaction against the higher of their market capitalization or net asset value (NAV) instead of, as currently, against market capitalization only.

Transaction Classifications and Materiality Thresholds

The Exchange proposes raising the major transaction threshold from 25% to 50%. Transactions where any ratio is 25% or more but under 50% become disclosable transactions, subject to enhanced announcement disclosure instead of requiring a circular and shareholder approval that applies to major transactions.

The higher 50% threshold will not apply to transactions involving the provision of financial assistance and/or securities or other investment activities.

The Exchange further proposes to remove the very substantial acquisition (VSA) and very substantial disposal (VSD) classifications in Chapter 14 of the Listing Rules, with refinements to the associated circular disclosure.

Ordinary-Course Transactions

An exemption from the circular and shareholder approval requirements is proposed to be introduced for the acquisition or leasing of assets in the ordinary and usual course of business (even where it is a major transaction) provided that the assets are used for the issuer’s existing principal business and the issuer’s board of directors confirms the transaction is fair and reasonable.  

Announcement Requirements

Given the increase in the major transaction threshold, issuers should be mindful that enhanced disclosure requirements for all notifiable transactions—which covers material terms, basis of consideration and valuation, key financial information on the target (including the source and basis of preparation), and the transaction’s impact on the issuer—are also being proposed. The breadth and depth of the disclosure of information relevant to the disclosable transactions will be strengthened.

The Exchange proposes to require further announcements for certain specific events such as extensions of the long-stop date, changes to the payment schedule, determinations of non-fixed consideration, and completion.

Circular Requirements for Major Transactions

The proposals seek to align and streamline circular disclosure for major transactions (and formerly VSAs/VSDs), including by removing the accountants’ review requirement for disposals, narrowing financial-information disclosure, adding a new risk-factors requirement, removing certain indebtedness and material-contract disclosures, and codifying the existing waiver for acquisitions of revenue-generating assets. Issuers should be aware that certain existing requirements applicable to VSAs/VSDs will be broadly extended to major transactions.

As a significant change, the Exchange proposes to remove the requirement to include an indebtedness statement of the issuer group in the circular as it is time-consuming to prepare. 

Securities Houses

The Exchange aims to extend the exemption for acquisitions/disposals of securities by securities houses in their ordinary course to include PRC securities houses regulated under the PRC Securities Law.

The existing revenue exemption is applicable to securities houses that are mainly engaged in regulated activities under the Hong Kong Securities and Futures Ordinance, but the Exchange had previously granted a waiver to exempt securities transactions carried out by a listed issuer principally engaged in securities-related activities approved by the China Securities Regulatory Commission (CSRC).

CONNECTED TRANSACTIONS

The Exchange proposes narrowing the application of “connected subsidiary” designations by modifying the definition to raise the connected person’s shareholding threshold in the subsidiary from 10% to 30% or more.

Certain of the aforementioned notifiable-transaction reforms will also apply to connected transactions, including the consideration ratio to be measured against the higher of market cap or NAV and aligned announcement/circular requirements. 

Furthermore, the Exchange proposes removing a connected transaction requirement that currently applies only to PRC issuers. And, significantly, the Exchange will allow annual caps for continuing connected transactions to be expressed as a percentage of the issuer’s revenue or other financial items in its audited accounts (currently caps must be in monetary terms).

SPIN-OFFS

The Consultation Paper also introduces several targeted changes to the rules governing issuers conducting spin-offs:

• Scope of Practice Note 15 (PN15): The Exchange proposes refining the applicability of PN15 such that it does not apply to the holding company of a subsidiary proposing a spin-off when both are already listed on the Exchange.
• Self-Assessment Route: The proposals include streamlining the spin-off process by allowing a self-assessment route without prior Exchange approval where the parent company has satisfied all PN15 principles and, at the time the spin-off lodges its listing application, has a market capitalization of at least HK$10 billion and principal business revenue of at least HK$1 billion, and the remaining group accounts for more than 50% of the issuer group’s revenue and total assets.
• Announcements: The proposals also specify certain disclosure requirements for spin-off announcements.
• Assured Entitlement: The Exchange plans to remove the assured entitlement requirement for all spin-offs. Currently, the practice is that issuers must apply for a specific waiver from the Exchange and provide justifications before the assured entitlement is exempted in the offering structure for the spin-off.
• Moratorium: The Exchange proposes to shorten the moratorium during which a spin-off listing application cannot be filed from three years to one year after the initial listing of the parent company, with exemptions for secondary-listed issuers and certain dual-primary listed issuers.

LOOKING AHEAD

The Consultation Paper brings Hong Kong’s post-listing transaction regime toward a more disclosure-based model and closer to that of its peer markets.

The proposals are expected to have an impact on reducing the cost of compliance; if implemented, there will be fewer transactions requiring shareholder approval, a recalibrated set of size tests and lighter circular content, and materially streamlined spin-off procedures.  

Existing listed issuers are encouraged to remain apprised of these proposals and carefully assess whether they may adjust the timing of their transactions that are currently or will soon be in planning.

HOW WE CAN HELP

We will continue to monitor developments and are available to assist clients in assessing the impact of these proposed reforms on their post-listing compliance.