HKEX Listing Committee Question Bank: Common Themes and How to Prepare Answers

The Listing Committee of Hong Kong Exchanges and Clearing Limited (HKEX) has materially intensified its scrutiny of listing applicants over the past two listing cycles, a shift driven by the SFC’s and HKEX’s joint 2024–2025 thematic review of listing due diligence. The review, published in November 2024, found that 30% of sponsor due diligence work reviewed fell short of the standards required under the Code of Conduct for Persons Licensed by or Registered with the SFC (the Code of Conduct), specifically regarding verification of core business operations and distribution arrangements. For CFOs, company secretaries, and legal counsel guiding an applicant from business concept (BC) to IPO, the implication is clear: the Listing Committee’s question bank has expanded beyond standard business model queries to include granular operational, regulatory, and financial integrity probes. Preparation must now mirror the rigour of a sponsor’s own due diligence, anticipating lines of inquiry that can delay or derail a listing if left unaddressed. This article dissects the five most common thematic clusters that have appeared in Listing Committee hearings in the 2024–2025 period, and provides a structured methodology for crafting answers that satisfy the Committee’s evidentiary standards.

Thematic Cluster 1: Revenue Verification and Business Model Substantiation

The Listing Committee consistently challenges the quality and independence of revenue evidence, particularly for applicants with significant revenue concentration, high customer turnover, or a heavy reliance on distributors. The 2024 SFC/HKEX thematic review noted that 25% of the files examined had insufficient independent verification of top customers’ identities and transaction volumes, often relying on management representations rather than third-party confirmations. The Committee’s questions in this cluster focus on whether the applicant’s revenue is real, sustainable, and not subject to artificial inflation.

Customer Concentration and Counterparty Diligence

When an applicant derives more than 30% of its revenue from a single customer or the top five customers, the Committee will demand a breakdown of the commercial relationship, including contract terms, payment history, and the customer’s own financial health. The sponsor should be prepared to present a schedule of the top 10 customers, detailing the length of relationship, average order size, and any exclusivity clauses. For example, in the 2024 hearing of a Main Board applicant in the consumer goods sector, the Committee requested direct confirmation letters from the top three customers, which the sponsor had not obtained. The listing was deferred for three months while these confirmations were secured. The standard under HKEX Listing Rule 9.11(23a) requires the sponsor to have conducted “reasonable due diligence” on the material customers, which the Committee interprets as including at least a direct interview with the customer’s procurement officer and a review of the customer’s audited financials if available.

Distribution Channel Integrity

For applicants selling through distributors or agents, the Committee will probe the end-customer base and the distributor’s inventory levels. The key question is whether the applicant has visibility of the ultimate consumer. If the distributor holds significant inventory, the Committee may classify this as a “sell-in” model and require a provision for potential returns. The HKEX’s Guidance Letter GL68-13 (updated in 2024) explicitly states that where an applicant’s revenue recognition depends on sell-through to end customers, the sponsor must verify a statistically significant sample of end-customer sales. A practical preparation step is to compile a distributor mapping: for each distributor, list the number of end customers, the average inventory turnover days, and the distributor’s credit terms. Any distributor with turnover days exceeding 90 should be flagged for further verification, as this pattern has triggered Committee follow-up in multiple 2024 hearings.

Thematic Cluster 2: Related Party Transactions and Connected Party Risks

The Listing Committee treats related party transactions (RPTs) as a red flag for governance weakness, particularly when the transactions are recurring, non-arms-length, or involve a founder’s family members. The SFC’s 2024 enforcement report highlighted that 40% of disciplinary actions against sponsors involved inadequate disclosure or verification of RPTs. The Committee’s focus is on whether the applicant can demonstrate that it operates independently of its connected parties and that all RPTs are conducted on normal commercial terms.

Operational Independence from Connected Parties

The Committee will ask for a detailed organisational chart showing the applicant’s management, board, and key personnel alongside those of the connected parties. Any overlap in directors, shared office premises, or common suppliers will be scrutinised. The sponsor should prepare a “segregation matrix” that lists every shared resource (IT systems, HR, finance, procurement) and the steps taken to separate them. For example, if the applicant shares a warehouse with a connected party, the Committee will expect a lease agreement that reflects market rental rates, supported by a valuation report from an independent surveyor. The standard under HKEX Listing Rule 14A.52 requires that all continuing connected transactions be conducted on normal commercial terms and be governed by a written agreement with a term not exceeding three years. The Committee will test whether the applicant can prove this standard is met for each material RPT.

Financial Guarantees and Intercompany Loans

A frequent Committee question is whether the applicant has provided any guarantees or loans to connected parties, and if so, what the repayment terms are. The Committee will demand a reconciliation of all intercompany balances for the track record period, with an explanation of any amounts that remain outstanding at the date of the listing application. In a 2025 GEM listing hearing, the Committee refused to proceed until the applicant obtained a formal repayment schedule for a HKD 15 million loan to a connected party, which the sponsor had previously described as “informal and repayable on demand.” The HKEX’s position, as stated in Listing Decision LD96-2023, is that any intercompany balance that is not on arm’s length terms must be fully settled before listing, unless a binding repayment agreement is in place.

Thematic Cluster 3: Intellectual Property and Technology Reliance

For technology and biotech applicants, the Committee’s questions centre on the ownership, validity, and enforceability of the applicant’s intellectual property (IP) portfolio. The SFC’s 2024 thematic review noted that 35% of technology applicants had deficiencies in their IP due diligence, including failure to confirm that key patents were registered in the correct jurisdictions or that the applicant had the right to use licensed technology.

Patent Ownership and Chain of Title

The Committee will request a full patent schedule, listing each patent’s registration number, jurisdiction, filing date, expiry date, and the inventor’s name. The sponsor must verify that the applicant is the legal owner of each patent and that there are no outstanding disputes or encumbrances. If any patent was developed by a founder who is not an employee of the applicant, the Committee will require a formal assignment agreement. For example, in a 2024 hearing for a PRC-based biotech applicant, the Committee discovered that two core patents were registered in the founder’s personal name and had not been assigned to the company. The listing was delayed for six months while the assignment was completed and the PRC patent office updated its records. The standard under HKEX Listing Rule 8.04 requires that the applicant must have “good title” to its material assets, including IP.

Licensing and Royalty Obligations

If the applicant relies on licenced technology, the Committee will examine the licence agreement for termination clauses, territorial restrictions, and royalty rates. The key risk is that the licence may be revocable or may not cover the applicant’s intended use. The sponsor should prepare a summary of each material licence, highlighting the termination triggers and the notice period. The Committee will also ask whether the licensor has the right to audit the applicant’s use of the technology, and if so, what the audit history shows. A common Committee follow-up is to request a legal opinion from a PRC law firm confirming that the licence is valid and enforceable under PRC law, particularly for applicants in the software and AI sectors.

Thematic Cluster 4: Regulatory Compliance and Industry-Specific Licences

The Listing Committee expects applicants to demonstrate a clean regulatory record and to have obtained all material licences and permits required for their operations. This cluster has become more prominent since the HKEX’s 2024 update to its guidance on regulatory compliance, which emphasised that any pending regulatory investigation or unresolved compliance issue must be disclosed in the prospectus and addressed in the hearing.

Licence Verification and Renewal Risk

The Committee will request a complete list of all licences held by the applicant, including the issuing authority, licence number, date of issue, and expiry date. For applicants in regulated industries such as financial services, healthcare, or food and beverage, the Committee will ask for confirmation that the licence is current and that the applicant has not received any warning letters or fines in the past three years. The sponsor should obtain a confirmation letter from each relevant regulator, stating that the applicant is in good standing. In a 2025 hearing for a Main Board applicant in the PRC education sector, the Committee requested a letter from the PRC Ministry of Education confirming that the applicant’s online tutoring licence was valid, which the sponsor had not obtained. The listing was adjourned for two months.

Past Compliance Breaches and Remediation

If the applicant has a history of regulatory breaches, the Committee will probe the root cause, the remediation steps taken, and the likelihood of recurrence. The sponsor should prepare a chronology of each breach, including the regulatory body involved, the penalty imposed, and the corrective actions implemented. The Committee will also ask whether the same breach could affect other parts of the applicant’s business. For example, if an applicant in the logistics sector was fined for violating PRC customs regulations at one port, the Committee will ask whether the same procedures are used at other ports and whether a systemic review has been conducted. The standard under HKEX Listing Rule 9.11(23b) requires the sponsor to have “reasonable grounds to believe” that the applicant is in compliance with all applicable laws and regulations.

Thematic Cluster 5: Financial Projections and Valuation Justification

The Listing Committee will test the reasonableness of the applicant’s financial projections, particularly if the applicant is loss-making or has a short track record of profitability. The 2024 amendments to the HKEX Listing Rules for biotech and technology companies (Chapter 18C) have increased the Committee’s focus on the assumptions underlying the projections, as these companies often list without a profit track record.

Revenue Growth Assumptions

The Committee will ask for a breakdown of the revenue growth drivers, including volume growth, price increases, and new product launches. Each assumption should be supported by external evidence, such as industry reports, customer contracts, or market research. The sponsor should prepare a sensitivity analysis showing how the projections change if the key assumptions are varied by 10% and 20%. For example, if the applicant assumes a 15% annual volume growth, the Committee will ask whether this is consistent with the historical growth rate and whether the applicant has the production capacity to support it. In a 2025 hearing for a semiconductor applicant, the Committee rejected the applicant’s projection of 25% revenue growth because the sponsor had not verified that the applicant’s foundry partner had the capacity to meet the increased demand.

Valuation Methodology

If the applicant is loss-making, the Committee will ask how the valuation was determined and whether it is supported by comparable company analysis or a discounted cash flow model. The sponsor should present a valuation summary showing the implied price-to-book ratio, price-to-sales ratio, and enterprise value-to-revenue ratio, compared to a peer group of at least five listed companies in the same sector. The Committee will also ask about the valuation of any convertible instruments or warrants issued in the pre-IPO period, and whether the terms of these instruments are consistent with the listing valuation. The SFC’s 2024 guidance on valuation practices (circular dated 15 March 2024) states that sponsors must ensure that any valuation used in the prospectus is based on “reasonable and supportable assumptions” and that the valuation methodology is disclosed in sufficient detail for investors to understand the basis.

Actionable Takeaways for Preparers

1. Build a due diligence evidence map that cross-references every material claim in the prospectus with a verifiable source document, such as a customer contract, regulator confirmation, or independent expert report, and ensure this map is ready for Committee review at least eight weeks before the hearing.

2. Conduct a mock Listing Committee hearing with external counsel and the sponsor, using a question bank derived from the five thematic clusters above, and record the session to identify weak answers that rely on management representations rather than third-party evidence.

3. Obtain direct confirmations from top customers, regulators, and licensors at least three months before the hearing, and store these in a secure data room that can be accessed by the Committee during the hearing if requested.

4. Prepare a segregation matrix for all related party transactions, showing the arms-length terms and the independent approval process for each transaction, and have this reviewed by the sponsor’s compliance team for consistency with HKEX Listing Rule 14A.

5. Commission a sensitivity analysis on all key financial assumptions in the projections, and be prepared to explain the basis for each assumption with reference to industry data or contractual commitments, as the Committee will test the outer bounds of the applicant’s own forecasts.