Hong Kong Exchanges and Clearing Raises the Bar Again! Dual-Class Share Valuation Threshold Dramatically Lowered, Confidential Submission Rules Relaxed

South Finance, 21st Century Business Herald Reporter Zhang Weize, Hong Kong Report

On March 13, the Hong Kong Stock Exchange published a consultation document seeking market opinions on a series of proposals aimed at enhancing the competitiveness of the listing mechanism. This is the exchange’s first comprehensive review of listing rules since the 2018 reform of the listing system. The proposals include lowering the listing thresholds for companies with different voting rights (WVR), optimizing standards for “innovative industry” companies, facilitating overseas issuers to list in Hong Kong, and expanding the option for confidential submission of applications to all new applicants.

At a press conference held on the same day, HKEX Listing Division Head Wu Jiexuan stated that the focus of this review is on the requirements for new listing applications. The optimization of listing rules is an ongoing process that must adapt continuously to market conditions. All reforms should be aligned with market needs and draw on international market experiences.

One of the most attention-grabbing aspects of this consultation is the significant reduction in the financial eligibility thresholds for companies with WVR structures. The proposed change suggests lowering the market capitalization threshold from the current HKD 40 billion to HKD 20 billion; another threshold would be adjusted from “market cap of at least HKD 10 billion and audited annual revenue of at least HKD 1 billion” to “market cap of at least HKD 6 billion and revenue of at least HKD 600 million.” For large companies with a market cap exceeding HKD 40 billion, the maximum ratio of different voting rights is proposed to increase from 10:1 to 20:1.

It is understood that the so-called WVR structure, also known as dual-class shares, grants certain shareholders—typically founders—voting rights exceeding their shareholding proportion, allowing them to maintain control over major decisions after listing.

This structure is common among tech and new economy companies. Alibaba, JD.com, and other internet giants use such arrangements. Hong Kong revised its listing rules in 2018 to introduce the WVR mechanism for the first time, attracting a number of new economy companies to list in Hong Kong since then.

Regarding the impact of increasing the voting ratio for WVR structures on small and medium investors, Wu Jiexuan cited data indicating that by the end of 2025, companies with WVR structures in Hong Kong will account for only 1.2% of the entire market. Since the implementation of the system, no company has violated relevant requirements or infringed on minority shareholders’ interests.

In terms of standards for recognizing “innovative industry” companies, HKEX proposes to clearly distinguish between two types: Path A companies relying on technological innovation, and Path B companies relying on business model innovation, with a clear pathway for the latter to list under WVR structures.

Wu Jiexuan explained that in current approval practices, some traditional industry companies that seem unrelated to technology actually meet the criteria for innovative companies. The revision aims to clarify these guidelines without expanding the scope of recognized innovative companies. For Path B companies, HKEX suggests introducing more objective, quantifiable standards—such as requiring a compound annual growth rate of at least 30% and a high industry standing—to reduce subjective judgment risks.

Regarding facilitating overseas issuers, the consultation proposes lowering the market cap requirement for overseas issuers seeking secondary listings with WVR structures from HKD 10 billion to HKD 6 billion, and providing clearer guidance for issuers transitioning from secondary to dual primary listings.

HKEX’s proposals also include expanding the scope of confidential submissions for listing applications to all new applicants. Wu Jiexuan stated that this move is to treat all companies equally and aligns with practices in major exchanges such as the US, UK, and Singapore.

In fact, HKEX first introduced confidential submission as a supporting measure when launching the “Science and Technology Innovation Board” in May 2025, initially limited to companies applying under Main Board Rule 18C (specialized tech companies) and Rule 18A (biotech companies). These materials are only disclosed after passing the listing hearing, reducing risks of trade secrets leakage and market interference.

Wu Jiexuan emphasized that confidential submission is not permanent; applicants must publish post-hearing information as soon as possible after approval, ensuring market transparency is maintained. Meanwhile, HKEX recommends strengthening the rejection mechanism by publicly disclosing not only the sponsor’s name but also all professional institutions involved in preparing the application, including lawyers, accountants, and auditors, to increase deterrence and ensure the quality of listing documents.

Regarding concerns about the quality of listing documents, Wu Jiexuan stressed that regulators focus on the quality of the application files prepared by sponsors, not the listed companies themselves. She said HKEX reviews each application carefully and communicates thoroughly with sponsors. For substandard documents, HKEX and the SFC have the authority to suspend approval or return the application. “We will absolutely not allow applications of poor quality to pass.”

The consultation period for this reform is eight weeks, ending on May 8, 2026.