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Overview of Sponsor’s Role

Every company applying to list on the Hong Kong Stock Exchange (HKEX) must appoint a sponsor to assist with its listing application. The sponsor’s role is to guide and advise applicants through the IPO process, assess applicants’ suitability for listing and ensure sufficient disclosure in the prospectus.

The sponsor will be responsible for overall management of the IPO and will be closely involved in the preparation of the listing documents. The sponsor will assist in addressing all matters raised by regulators in connection with the listing application. The sponsor will also carry out extensive due diligence on the listing applicant in order to assess the applicant’s suitability for listing and to ensure that the prospectus contains sufficient disclosure for investors to form a valid and justifiable opinion of an applicant’s financial condition and profitability. The sponsor will also assess the likely interest of investors in the IPO.

The Hong Kong regulatory regime that governs sponsors and the sponsor’s role in the IPO process is aimed at ensuring that sponsors thoroughly understand the listing applicant’s business prior to filing a listing application. Under these rules, the emphasis is on early, comprehensive due diligence and a properly drafted and substantially complete prospectus to accompany the application. These rules were introduced in part as a response to a number of high profile cases involving difficulties at Hong Kong listed companies, where the Hong Kong Securities and Futures Commission (SFC) found significant deficiencies in the due diligence carried out by sponsors.

The sponsor’s regime includes statutory civil and criminal liability provisions for misleading information in a prospectus which applies to IPO sponsors. Criminal liability will depend on whether a sponsor firm knowingly or recklessly approved a prospectus containing an untrue statement (including an omission) that was materially adverse from an investor’s perspective.

Learn more on the sponsor due diligence here.

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