Peter PARKS

The Securities and Futures Commission (SFC), Accounting and Financial Reporting Council (AFR) and Hong Kong Exchanges and Clearing (HKEX) said in a joint statement on October 8 that the number of listed issuers receiving a disclaimer of opinion from their auditors solely because of going-concern issues had risen from 12 in 2017 to 95 in 2025. For 65 of the companies, the disclaimer had remained in place for more than a year, with the longest-running case lasting 14 years.

HKEX said it would consider amending the Listing Rules as necessary, including requiring such issuers to suspend trading, if the situation did not improve significantly. No timetable has been set for any rule changes.

What is a disclaimer of opinion?

A disclaimer of opinion means an auditor has not expressed an audit opinion on a listed company's financial statements, casting doubt on their reliability.

Exception under rules introduced in 2019

HKEX introduced Listing Rule 13.50A in September 2019. It generally requires a company to suspend trading if its auditor issues a disclaimer of opinion or an adverse opinion on its financial statements. However, HKEX may not apply the suspension requirement when the opinion relates solely to going-concern issues. Reports said the exception was intended to avoid prolonged suspensions restricting investors' ability to trade and further worsening a company's financial difficulties.

On that basis, the 12 companies recorded in 2017 predated the implementation of the new rule.

Disclosures still fall short despite stronger oversight since 2025

HKEX stepped up its scrutiny from early 2025, requiring issuers whose audit reports contained such opinions to publish quarterly update announcements on the progress and effectiveness of their action plans. It issued further guidance in December 2025.

However, regulators said disclosures by some companies remained inadequate. Problems included overly general explanations, insufficient details on the assumptions underpinning management's assessment of the companies' ability to continue as going concerns, and a lack of information on whether action plans were workable. Some companies merely said discussions with creditors or potential investors were "ongoing", without disclosing any substantive progress or reasons for delays.

Responsibilities for all three parties

The joint statement set out specific expectations for the three parties:

  • Management must make a prudent and comprehensive assessment of the company's ability to continue as a going concern, based on reasonable assumptions, reliable data and workable action plans.
  • Audit committees must critically review and challenge management's assessment, and actively oversee the implementation of action plans.
  • Auditors must rigorously assess the relevant evaluation and whether disclosures are adequate, and explain the basis for issuing a disclaimer of opinion.

Carol Hui Fung-yee, executive director of the SFC's Corporate Finance Division, said that "ignoring these issues or failing to scrutinise them adequately is unacceptable".

The three organisations said they would continue to monitor the situation closely and take appropriate regulatory, disciplinary or enforcement action if misconduct or non-compliance was found.

What to watch

  • Whether HKEX will formally amend the Listing Rules and when any changes would be introduced.
  • If the rules are amended, how companies that have received disclaimers of opinion for several consecutive years would be dealt with in terms of trading suspensions and resumptions. According to HKEX's 2019 consultation conclusions, a suspension would generally remain in place until the company resolved the issues raised by its auditor.