Background
The board of directors of an issuer is responsible for directing and supervising the issuer’s affairs. The Rules (Listing Rules) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Exchange) specifically require directors of listed issuers to have the character, experience and integrity and be able to demonstrate a standard of competence commensurate with their position as directors of a listed issuer.
According to the Guide for New Listing Applicants (Listing Guide) published by the Exchange, the Exchange’s general approach in assessing how an individual’s involvement in non-compliances that entail fraud, deceit or dishonesty (Integrity Non-compliances) (such as false accounting, tax evasion, bribery, conspiracy to defraud, misappropriation of funds, money laundering, and providing false and misleading testimony to regulators) may affect the suitability of an individual to act as a director, which may in turn affect a listing applicant’s suitability for listing is summarised as follows:
- an individual involved in Integrity Non-compliances, whether legally prosecuted or not, may not be suitable to be a director of a listed issuer as Integrity Non-compliances impugn that individual’s character and integrity in contravention of the standards required under the Listing Rules;
- if the culpable individual is also in a position to exert control or significant influence over the applicant’s operation and management (e.g. being the controlling shareholder), the applicant may not be suitable for listing irrespective of whether the individual ceases to be a director; and
- the Exchange will take into account all relevant facts and circumstances in determining whether Integrity Non-compliances would render the applicant unsuitable for listing, including:
→ underlying reasons for the Integrity Non-compliances and relevant mitigating factors;
→ Integrity Non-compliances’ operational and financial impact – an applicant may be requested to demonstrate that it could still meet the relevant eligibility requirements after adjusting its trading record results for the impact of the Integrity Non-compliance and that there would not have been any material adverse impact on its business and financial performance had it complied with the rules and regulations and going forward;
→ culpable person’s influence on the applicant’s operations, internal controls and trading record results; and
→ whether any effective internal control measures have been implemented (and for how long) to avoid re-occurrence of similar Integrity Non-compliances.
In some listing decisions published by the Exchange in earlier years (which are now set out in the Listing Guide), the Exchange determined that individuals who were involved in bribery cases were not suitable to act as directors of the applicants.
Recent development
On 29 May 2026, the Exchange updated the Listing Guide by adding two new listing decisions made this year in connection with the pre-IPO enquiries made by potential listing applicants concerning the suitability of directors who were involved in Integrity Non-compliance incidents (concerning a bribery incident and infringement of trade secrets, respectively) and the applicants’ suitability for listing.
In both cases, having considered the following mitigating factors and additional context, the Exchange came to a preliminary view (see Note below) that the directors involved in the Integrity Non-compliances were not unsuitable to act as directors, and that the incidents concerned did not render the companies unsuitable for listing:
Mitigating factors:
- in both cases, the incidents occurred over 10 years ago;
- the incident in each case was an isolated event – the director concerned had been a director of the company before and since its listing on a major stock exchange and had maintained a clean compliance record since the listing; and
- in the case involving a bribery incident, the actual/potential benefit derived from the bribe, including the nature of the government subsidy and its impact on the company.
Additional context:
- In both cases, the potential listing applicants are listed on a major stock exchange, and hence have been subject to continuous public scrutiny, regulatory supervision, ongoing disclosure obligations, as well as enhanced internal controls and corporate governance requirements following their listing on the major stock exchange, and had complied with all applicable securities laws and regulations since such listing.
For further details of the two listing decisions, please click HERE to see a table summarising the details.
Note: Given that the two cases were considered by the Exchange at the pre-IPO enquiries stage, the views provided by the Exchange were premised on the limited information available, and hence were preliminary in nature. The Exchange required the companies, when submitting their listing applications, to make further detailed disclosures in their listing documents and provide robust due diligence performed by their sponsors regarding the relevant incidents. If there are any facts or red flags identified through the due diligence that may conflict with the companies’ pre-IPO submissions and/or alter the assessment in this regard, the Exchange may alter its preliminary views.
Regulatory reminder
In the updated Listing Guide, the Exchange specifically encourages potential applicants to consult the Exchange in advance on whether a director’s past incident would constitute an Integrity Non-compliance and affect the director’s suitability and the applicant’s suitability for listing.
