On the path to pursuing a dual listing in both the A-share and Hong Kong markets, the established men's apparel giant Hla Group has encountered significant inquiries from regulators, putting its Hong Kong listing process on hold. On December 26, in the supplementary material requirements for overseas listing filings issued by the China Securities Regulatory Commission, Hla Group was notably included. Key concerns highlighted by regulators included the risk to control stability arising from the high proportion of share pledges by its controlling shareholder, doubts about the compliance of business qualifications, and issues regarding equity evolution and employee shareholding arrangements. The capital advancement journey of this veteran apparel enterprise is now shrouded in layers of risk.
As a leading men's apparel company rooted in Jiangyin, Hla Group's Hong Kong listing plan has drawn considerable attention since it submitted its prospectus to the Hong Kong Stock Exchange on November 21. Backed by the absolute control of the Zhou Jianping family, boasting over 7,200 global stores, and ranking fourth in revenue among Chinese apparel groups in 2024, this impressive track record conceals a share pledge risk substantial enough to shake the company's foundation, which is also the core issue of this regulatory inquiry.
The focus of regulatory attention zeroes in on the risk exposure from the share pledges of Hla Group's controlling shareholder and whether this risk could undermine the company's control foundation. This is not without basis; it stems from the actual pledge data disclosed in Hla Group's prospectus and the underlying debt repayment concerns. As of the last practicable date disclosed in the prospectus, the controlling shareholder, Hla Group, had pledged 875 million A-shares of Hla Group, representing 18.22% of the company's total shares. While this proportion may not seem extreme, it accounts for nearly half of the shares held by Hla Group—data shows that Hla Group holds a total of 1.766 billion shares of Hla Group, constituting 36.77% of the total share capital, with the pledge ratio reaching a high-risk threshold of 49.55%.
More alarmingly, the share pledges by Hla Group are not an isolated incident but a常态化 financing tool. In June of this year, Hla Group completed a pledge of 75 million shares to the Jiangsu Branch of the Export-Import Bank of China for its own operational funding, after which the total pledged scale settled at 875 million shares. Regarding the pledging activities, Hla Group explained in its prospectus that due to its diversified business layout—which includes investment holdings, cultural tourism, commercial management, and comprehensive energy services beyond its stake in the listed company—it has substantial funding needs, making share pledges a常规 financing guarantee method.
However, such explanations显然 fail to alleviate regulatory concerns or ease market apprehensions. Regulators explicitly required Hla Group to supplement details on whether the share pledges could lead to changes in the controlling shareholder or company control before and after the Hong Kong share issuance, based on the debt repayment capacity of the controlling shareholder and actual controller, while also verifying if this scenario triggers prohibitive clauses for overseas listings. This inquiry precisely targets Hla Group's core risk: the essence of share pledges is debt guarantee. Should Hla Group face insufficient repayment capacity and fail to repay bank loans on time, the pledged shares could be forcibly executed. This would significantly reduce Hla Group's shareholding比例, jeopardizing the control structure built by the Zhou Jianping family, and any change in control would inevitably lead to adjustments in the listed company's operational strategies and management framework, ultimately harming its fundamentals and the interests of minority shareholders.
In fact, Hla Group itself acknowledged this risk in the prospectus, admitting that if the pledged shares are disposed of, Hla Group would be unable to maintain its current shareholding比例, adversely affecting the company. However, this risk disclosure is deemed insufficient by regulators, and the market remains skeptical about Hla Group's true debt repayment capacity. A group company primarily in the apparel business, venturing into capital-intensive sectors like cultural tourism and energy, is bound to face cash flow pressures. Using listed company shares as a primary financing担保 essentially ties the operational stability of the listed company to the group's capital operations, creating a risk transmission chain that, if broken, could trigger a chain reaction.
Beyond the looming control risk, Hla Group also faces regulatory scrutiny over business compliance issues. The internet-related segments within its business portfolio are required to disclose actual operations and qualification compliance, exposing compliance shortcomings in this traditional apparel company's transformation journey.
The China Securities Regulatory Commission demanded that Hla Group provide detailed explanations on the specific operations of businesses within its and its subsidiaries' scope, including internet data services, data processing and storage, big data services, and advertising agency services, verifying whether these businesses are genuinely operational and if the necessary operational qualifications and permits have been obtained. While seemingly minor, this issue touches upon the bottom line of compliant operations. Internet data services and big data processing are sectors with high qualification thresholds, requiring licenses such as value-added telecommunications业务 permits and compliance with data security and personal information protection laws. Any lack of qualifications or unlicensed operations could lead to administrative penalties and even impact the listing process.
As a company core to men's apparel retail, including internet-related businesses in its scope is a常规 move for digital transformation in traditional enterprises. However, the focused regulatory inquiry suggests ambiguities in the disclosure of these businesses. The market questions whether Hla Group has genuinely ventured into these areas or merely registered them to broaden its business scope. If operations are underway, are they compliant? The answers not only affect Hla Group's compliance image but also influence capital market perceptions of its transformation effectiveness.
Additionally, the authenticity of equity evolution and the compliance of employee shareholding have become significant parts of the regulatory inquiry. The China Securities Regulatory Commission requires Hla Group to comprehensively verify whether the company and related entities have engaged in share entrustment arrangements in current and historical contexts, while also thoroughly examining employee shareholding plans and equity incentive arrangements. Share entrustment has always been a regulatory red line in capital markets, as hidden entrustment relationships can lead to unclear share ownership and misidentification of actual controllers. The compliance of employee shareholding and equity incentives relates to the standardization of corporate governance and fairness to shareholder rights. For Hla Group, with family control exceeding 60%, clarifying equity relationships and standardizing shareholding arrangements is both a basic regulatory requirement and a governance gap that must be addressed for its Hong Kong market entry.
From an equity structure perspective, the Zhou Jianping family remains the absolute core of Hla Group. Zhou Jianping, his children Zhou Lichen and Zhou Yanqi, and several控股 platforms collectively control 60.13% of the company's shares. This highly concentrated ownership structure deeply binds corporate governance decisions with family interests. The regulatory demand to verify share entrustment and employee shareholding essentially constitutes a comprehensive test of its equity transparency and corporate governance standards.
The requirement for supplementary materials signifies that Hla Group's Hong Kong listing process is not smooth sailing; it necessitates thorough remediation and full disclosure regarding core risks such as control, compliance, and equity governance. For this veteran enterprise long entrenched in the men's apparel industry, pursuing a dual A+H listing is a strategic move to broaden financing channels and enhance brand value. However, the gates of capital markets open only to enterprises with compliant operations and controllable risks.
Amid the三重 challenges of pledged share risks, business compliance ambiguities, and unresolved equity governance issues, Hla Group has substantial homework to complete for a successful Hong Kong listing. For the capital market, this listing inquiry reaffirms that no enterprise can bypass the bottom lines of compliance and risk control on its capitalisation path. Whether Hla Group can clear these obstacles and achieve its Hong Kong listing, and whether its controlling shareholder can resolve debt and pledge risks to maintain control, will remain focal points for market attention. For other traditional enterprises, Hla Group's experience serves as a warning: on the path of transformation and capitalisation, only by upholding risk boundaries and strengthening compliance foundations can one proceed steadily and sustainably.
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