Sponsors' prospectus liability in initial public offerings in Hong Kong

Abstract

This article critically analyses the current and controversial issue of whether sponsors in Hong Kong should be subject to civil and criminal liability for misstatements in an IPO prospectus under the Companies Ordinance. It argues that the existing legal regime provides insufficient deterrence and advances policy justifications for imposing liability. It then examines the principal objections against the imposition of liability — negligible deterrence and over-deterrence — and finds them unpersuasive. It also specifically addresses the concerns arising from making sponsors criminally liable.