Hong Kong's financial regulators have signaled plans to tighten rules for distressed listed companies. The Accounting and Financial Reporting Council, the Securities and Futures Commission, and Hong Kong Exchanges & Clearing Ltd. jointly warned they may reverse a 2019 rule allowing firms with auditor disclaimers to continue trading. Since the exemption was introduced, the number of listed firms operating under going-concern disclaimers surged to 95 in 2025 from 12 in 2017, according to the joint statement. Among those, 65 firms have maintained the designation for more than a year, with one extreme case lasting 14 consecutive years. The 2019 exemption was originally intended to protect investors from prolonged suspensions, enabling distressed issuers to raise capital or meet debt covenants. However, regulators argue that an audit disclaimer, even one limited to going-concern issues, undermines the basic reliability of financial statements by indicating the auditor cannot express an overall opinion on the accounts. If no significant improvement is observed, the exchange will consider amending listing rules, potentially requiring suspension for issuers with such disclaimers. The potential crackdown highlights a balancing act for Hong Kong officials, who must reconcile capital market revival efforts with growingwariness of deal quality.
The SFC and HKEX have previously restricted individual dealmaker transaction limits, while the audit regulator raised concerns over stretched audit firms handling expanding corporate books. This regulatory move underscores increasing scrutiny on financial reporting standards in Hong Kong's resurging IPO market.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing