THE ROAD TO an initial public offering can be far from straightforward for a company seeking overseas capital. Whichever stock exchange a company decides upon, there are many market and regulatory hurdles to overcome before it can make its shares available to the general investment community. Accounting, legal and vetting requirements take time and energy in the months before a listing, and the ability to maintain ongoing compliance after listing with local rules and regulations can be expensive, as well as onerous. CIG Yangtze Ports listed on Hong Kong's Growth Enterprise Market (GEM) last September. It has a diversified list of shareholders, including the listed Shui On group, MOL (Asia), which is a subsidiary of Japanese shipping group Mitsui OSK, and London-based fund management firm Spinnaker. Although the CIG group is Hong Kong-based, its business - the construction, development and operation of container ports - is exclusively in the central China region. The industry in which it operates is capital intensive and growth oriented. Hence the decision was taken by management to list in order to raise capital. CIG chief financial officer Frederick Wong said Hong Kong was chosen because it was the closest major capital market to the mainland. At the same time it was part of China, shared a time zone and had a ready pool of investors who were knowledgeable about the mainland market and keen to invest in mainland enterprises. Mr Wong said that before the listing there was a lot of preparatory work to be done to ensure that the group, which operated exclusively on the mainland, met international requirements in three main areas - accounting, legal and vetting. From the accounting perspective, this included the realignment of the accounting policies adopted on the mainland with international accounting standards in use in Hong Kong. Mr Wong said that in tandem with this, an important prerequisite for any China-based operation was the employment or deployment of an experienced professional management team, particularly on the accounting front, as a matter of credibility. 'We have all heard about false accounting and other irregularities taking place in companies in China. It is important not to put yourself in this position,' he said. From the legal perspective, before the listing, the management of the company in conjunction with the IPO sponsors and lawyers, need to ensure that the records kept by the China operations can withstand any due diligence challenges. This is particularly important as formal legal opinions have to be obtained from both mainland and Hong Kong lawyers to be provided to the Stock Exchange of Hong Kong as part of the vetting requirements. Having experienced this with CIG Yangtze's listing, Mr Wong said that this part of the process, and the specific vetting requirements adopted by the Hong Kong exchange, were too onerous. 'With China being a very regulated country, the task in terms of disclosure made the process much more challenging,' he said. 'All these involved costs, which are onerous, and their justification, have to be measured against the size of the funds raised.' Simplifying the vetting processes and relying more on the work performed by the sponsors, advisers and lawyers might be one way of making the preparatory work before listing in Hong Kong less onerous, Mr Wong said. Some markets, such as London's Alternative Investment Market (AIM), already did this. Nevertheless, such technical challenges could be overcome through perseverance and preparatory work, making sure that things were ready before submitting a listing application, albeit at the expense of the time that management could more productively spend on managing the business, Mr Wong said. Since listing, CIG's performance had been on target. Funds raised from the IPO provided a capital injection for its business operations in the mainland. Listing was an important milestone for the group, placing it on the global capital market map and creating a platform for future fund-raising activities to fuel business expansion, Mr Wong said. For other chief financial officers looking to access overseas capital and markets through the IPO route, his general advice is twofold. First, pay attention to important pre-listing preparation work, as this can determine how smooth the subsequent listing process will be. Second, focus on the company's corporate governance structure. This has to be capable of standing up to the rules, and a track record on this before listing is a valuable asset. 'The perception of investors regarding mainland companies not fully subscribing, or paying only lip service to good corporate governance practices, is regrettably an accepted norm,' Mr Wong said. 'Adopting good corporate governance practices and having a professional management team on board prior to listing will go a long way towards dispelling potential investors' concerns about this.'