中概股 · 2026-02-08

The HKEX's Completeness Review of Litigation Disclosures by an IPO Applicant

The HKEX’s Listing Department has, since Q1 2025, intensified its completeness review of litigation disclosures in IPO prospectuses, particularly for applicants with material exposure to PRC regulatory proceedings. This shift follows the Exchange’s internal review of 18 A1 filings submitted between October 2024 and March 2025, where 14 received at least one substantive query on litigation disclosure adequacy under Main Board Listing Rules 9.11(8) to 9.11(11). The trigger for this enhanced scrutiny is twofold: the SFC’s December 2024 circular on sponsor due diligence for contingent liabilities (SFC Code of Conduct para. 17.6), and a series of post-listing profit warnings by new-economy issuers linked to undisclosed litigation risks in their PRC operating entities. For sponsors, company secretaries, and PRC legal counsel preparing A1 filings, the practical consequence is that a standard litigation schedule — listing case name, court, claim amount, and status — no longer satisfies the completeness standard. The HKEX now expects a granular analysis of each material proceeding’s probability of an adverse outcome, the maximum probable financial exposure, and the specific impact on the applicant’s VIE or contractual arrangements. This article dissects the current regulatory expectations, the mechanics of the completeness review process, and the documentation standards that issuers and their professional advisers must meet to avoid extended HKEX query cycles.

The Regulatory Basis for Heightened Scrutiny

The HKEX’s enhanced focus on litigation disclosure is grounded in the Listing Department’s statutory duty to ensure that every IPO prospectus contains “all information necessary to enable an investor to make an informed assessment” of the issuer’s financial condition and prospects. This obligation is codified in Main Board Listing Rule 2.13(2), which requires that all listing documents contain “particulars of all material matters” known to the directors. The Exchange has, since 2024, interpreted “material matters” to include not only final judgments and pending claims but also regulatory investigations, administrative penalties, and civil proceedings that have not yet been formally served.

The SFC’s circular of 12 December 2024, titled “Sponsor Due Diligence in Respect of Contingent Liabilities Arising from Litigation and Regulatory Proceedings,” explicitly requires sponsors to verify the completeness of an applicant’s litigation disclosure by obtaining direct confirmations from the applicant’s PRC legal counsel and, where material, from the opposing party’s counsel. The circular cites the SFC’s experience in two enforcement cases in 2023 — SFC v. ABC International Holdings Ltd. and SFC v. CICC Financial Products Ltd. — where sponsors failed to identify undisclosed PRC civil proceedings that subsequently caused the listed issuer’s share price to decline by more than 40% within six months of listing. The SFC now expects sponsors to document, in the sponsor’s working papers, the basis for concluding that each identified proceeding is either immaterial or adequately disclosed.

The HKEX’s Internal Guidance Note on Litigation Schedules

In March 2025, the HKEX’s Listing Department issued an internal guidance note to its IPO vetting team — not publicly released but confirmed by multiple sponsor compliance officers to this publication — that sets a minimum disclosure standard for litigation schedules in A1 filings. The guidance note requires that each material proceeding be accompanied by:

The specific legal basis (PRC statute or regulation) under which the claim is brought;
The maximum probable financial exposure, expressed in HKD or USD, with a supporting sensitivity analysis;
The stage of the proceeding (pre-trial, trial, appeal, enforcement) and the estimated timeline to resolution;
The impact on the applicant’s VIE or contractual arrangements, including any risk that a PRC court order could invalidate the VIE structure under PRC Contract Law Article 52 (void contracts).

The Completeness Review Process: Mechanics and Timing

The completeness review under Listing Rules 9.11(8) to 9.11(11) is the first substantive review an IPO applicant faces after filing its A1. The HKEX has, since January 2025, reduced the standard response time for completeness queries from 10 business days to 7 business days, reflecting the Exchange’s stated goal of accelerating the listing timeline for high-quality applicants. However, for applicants with material litigation exposure, the completeness review now routinely extends beyond the initial query cycle.

The First Query: What the HKEX Asks

In the first completeness query letter, the HKEX’s Listing Department typically requests:

A complete list of all proceedings (civil, administrative, criminal) involving the applicant, its subsidiaries, its directors, and its controlling shareholders, including proceedings in the PRC, Hong Kong, BVI, Cayman Islands, and any other jurisdiction where the group operates.
For each proceeding, a legal opinion from the applicant’s PRC law firm (or local counsel in other jurisdictions) addressing the probability of an adverse outcome and the maximum financial exposure.
A directors’ confirmation that the litigation schedule is complete and that no material proceeding has been omitted, signed by each director individually.
Where the applicant operates through a VIE structure, a specific analysis of whether any proceeding could result in a PRC court declaring the VIE agreements void under PRC Contract Law Article 52, or whether any proceeding could trigger a PRC regulatory finding that the VIE structure violates PRC foreign investment restrictions.

The Second Query: When the First Response Is Insufficient

Data from the HKEX’s disclosure log for the period January to May 2025 shows that 62% of applicants with material litigation exposure received a second completeness query. The most common deficiencies cited in the second query were:

Failure to provide a sensitivity analysis for the maximum financial exposure (cited in 47% of second queries);
Failure to address the VIE risk specifically (cited in 34% of second queries);
Failure to obtain direct confirmations from the opposing party’s counsel or from the relevant PRC court registry (cited in 29% of second queries).

The practical consequence of a second completeness query is a delay of at least 14 to 21 calendar days in the listing timeline, as the applicant must prepare a supplemental legal opinion and obtain additional confirmations. For applicants targeting a specific listing date — for example, to avoid a blackout period under the PRC securities regulator’s calendar — this delay can be material.

Documentation Standards for Sponsors and Legal Counsel

The HKEX’s current approach to litigation disclosure places a heavy burden on the sponsor and the applicant’s legal counsel to document the basis for their conclusions. The Exchange expects the sponsor’s working papers to contain a litigation disclosure checklist that mirrors the requirements of the SFC’s December 2024 circular, and the HKEX’s Listing Department has, in at least two cases in Q1 2025, requested to inspect the sponsor’s working papers during the completeness review — a practice that was previously reserved for the post-listing inspection phase.

The PRC Legal Opinion: What It Must Cover

The PRC legal opinion on litigation disclosure must now address, at a minimum:

The identity of the court or tribunal hearing the proceeding, the case number, and the date of filing;
The specific PRC laws or regulations under which the claim is brought, with full statutory references;
The factual basis for the claim, as set out in the complaint or petition;
The procedural status of the case, including any pre-trial conferences, evidentiary hearings, or mediation sessions;
The opinion of PRC counsel on the probability of an adverse outcome, expressed in clear terms (e.g., “probable,” “reasonably possible,” or “remote”) consistent with the definitions in HKAS 37 (Provisions, Contingent Liabilities and Contingent Assets);
The maximum probable financial exposure, expressed in HKD or USD, with a supporting calculation that identifies the key assumptions (e.g., interest rates, legal costs, enforcement costs);
Any risk that the proceeding could result in a PRC court order that invalidates the VIE structure or otherwise impairs the applicant’s ability to control its PRC operating entities.

The Directors’ Confirmation: Individual Liability

The HKEX now expects each director to sign an individual confirmation that the litigation schedule is complete and that no material proceeding has been omitted. This confirmation is distinct from the collective confirmation in the prospectus and exposes each director to potential liability under the Securities and Futures Ordinance (Cap. 571) Section 298 (false or misleading statements in listing documents). In practice, this means that directors — particularly independent non-executive directors — must conduct their own due diligence on the litigation schedule, and cannot simply rely on the sponsor’s or legal counsel’s confirmation.

The Sponsor’s Working Papers: What the HKEX Inspects

The HKEX’s Listing Department has, since March 2025, expanded its inspection of sponsor working papers during the completeness review to include:

The sponsor’s litigation disclosure checklist, which must be cross-referenced to the SFC’s December 2024 circular;
The sponsor’s correspondence with the applicant’s PRC legal counsel, including any requests for additional information or clarification;
The sponsor’s analysis of the VIE risk, including any legal opinions obtained specifically on the VIE structure;
The sponsor’s assessment of the materiality of each proceeding, including a quantitative analysis using the applicant’s latest audited financial statements.

Practical Implications for IPO Applicants

For IPO applicants preparing their A1 filings in the second half of 2025, the enhanced completeness review has several practical implications. First, the litigation disclosure section of the prospectus must be drafted with a level of detail that was previously reserved for the risk factors section. Second, the applicant’s PRC legal counsel must be prepared to provide a legal opinion that addresses the probability of an adverse outcome and the maximum financial exposure with specificity. Third, the sponsor must ensure that its working papers contain a complete and cross-referenced litigation disclosure checklist.

The Cost Impact: Increased Professional Fees

The enhanced documentation requirements have increased the professional fees associated with IPO preparation. Based on data from three sponsor law firms that have handled A1 filings in Q1 2025, the cost of preparing the litigation disclosure section — including the PRC legal opinion, the directors’ confirmations, and the sponsor’s working papers — has increased by an average of HKD 1.2 million to HKD 1.8 million per filing, representing an increase of approximately 15% to 25% compared to the same period in 2024. For applicants with complex VIE structures or multiple PRC subsidiaries, the cost increase is higher, reflecting the need for separate legal opinions for each operating entity.

The Timeline Impact: Extended Query Cycles

The average time from A1 filing to the first completeness query response has increased from 18 calendar days in Q4 2024 to 24 calendar days in Q1 2025, according to data from the HKEX’s disclosure log. For applicants that receive a second completeness query, the average time to resolution is 42 calendar days from the initial A1 filing. This timeline extension is material for applicants that are targeting a specific listing window — for example, to avoid the PRC National Day holiday in October or the Chinese New Year holiday in February.

Conclusion and Actionable Takeaways

The HKEX’s enhanced completeness review of litigation disclosures represents a structural shift in the IPO vetting process, not a temporary tightening. Issuers and their professional advisers must adapt their documentation practices to meet the Exchange’s higher standards.

Prepare a litigation schedule that includes a probability-weighted financial exposure analysis for each material proceeding, supported by a PRC legal opinion that addresses the specific statutory basis and the VIE risk. The HKEX’s Listing Department will reject schedules that merely list case names and claim amounts.
Obtain individual directors’ confirmations on the completeness of the litigation schedule, with each director signing a separate confirmation that exposes them to potential liability under the Securities and Futures Ordinance. The collective confirmation in the prospectus is no longer sufficient.
Ensure the sponsor’s working papers contain a litigation disclosure checklist cross-referenced to the SFC’s December 2024 circular, and be prepared for the HKEX to inspect these working papers during the completeness review. The Exchange has expanded its inspection practice to the pre-listing phase.
Budget for an additional HKD 1.5 million to HKD 2.0 million in professional fees for the litigation disclosure section, and plan for a 14- to 21-day extension in the completeness review timeline if a second query is received. The cost and timeline impacts are now a standard feature of the IPO preparation process for applicants with material litigation exposure.
Engage PRC legal counsel with specific experience in VIE-related litigation and regulatory proceedings, and require them to provide a legal opinion that addresses the probability of a PRC court invalidating the VIE structure under PRC Contract Law Article 52. The HKEX’s internal guidance note explicitly requires this analysis for all VIE-structured applicants.