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The Administrative
Measures on the Split Share Structure Reform of Listed
Companies (the Administrative Measures) is promulgated
by the China Securities Regulatory Commission (the CSRC)
to regulate practices in connection with the Split Share
Structure Reform of Listed Companies (the Reform),
protect investors legitimate interests and rights, and
promote the reform, opening-up and sustained development
of China capital market. The Administrative Measures
have been formulated on the basis of opinions and
comments received from the related public consultation
in accordance with the Guidance Notes on the Split Share
Structure Reform of Listed Companies (the Guidance
Notes) jointly issued by 5 Government Ministries and
Commissions including the CSRC. Today the CSRC held a
press conference to answer questions on issues of market
concern relating to the Reform.
Q1: The Reform has
successfully made its way through the experimental stage
and is now setting off progressively on a large scale;
so why does the CSRC promulgate the Administrative
Measures at this moment?
The Spokesman: The
earlier experiment program for the Reform has provided
valuable practical experiences due to innovative efforts
made by both the regulators and market participants in
taking forward the Reform. Under the requirement that
the Reform shall be carried out in a prudent, active and
systematic manner, measures and techniques proven to be
effective and widely accepted in the early experimental
stage will be persistently practiced while some
procedures and policies need to be adjusted or improved
to suit changing circumstances and requirements for the
coming stage of the Reform. Although basic operating
procedures for the experiment program have been set out
in the Circular on Issues relating to Experimental
Program for the Split Share Structure Reform of Listed
Companies and the Circular on Issues relating to
Implementation of the Second-Batch Experimental Program
for the Split Share Structure Reform of Listed Companies
promulgated during the experimental period, we need to
establish a general policy framework to guide and
promote the Reform in a prudent and active manner, as
well as special procedures designed specifically for
part of listed companies to carry out the Reform under
unique circumstances. Moreover, policies and
mechanisms may be formed to address particular problems
identified in the experiment program. In light of the
circumstances for the coming stage of the Reform, the
CSRC promulgates the Administrative Measures in
accordance with the Guidance Notes following the
conclusion of the experimental program in an effort to
improve relevant procedures and set out guiding
principles for the Reform.
Q2: The CSRC has
consulted the public on the Administrative Measures. How
is the response to the consultation and what
modifications have been made to the Administrative
Measures?
The spokesman: The CSRC
issued a consultation paper on the Administrative
Measures (Exposure Draft) on August 26 to seek opinions
from the public, and received 350 submissions as at the
close date of the public consultation. The respondents
are generally of the view that, the Administrative
Measures are in line with the spirit of the Guidance
Notes on the Split Share Structure Reform of Listed
Companies, and enhanced basic operating procedures
adopted during the experimental program. The
Administrative Measures are generally considered sound,
easy to carry out, and express in forming the tone of
Reform policy. Constructive opinions and proposals
submitted during the consultation have demonstrated the
responsible attitude towards the Reform adopted by the
respondents and have also been very useful in our work
to improve the Draft Administrative Measures. Based on
careful study of the market feedback, the Draft
Administrative Measures were modified to become more
coherent and sound. There are a total of 151
modifications made to the exposure draft over about 45
provisions and related wordings on operating procedures,
reform scheme, principals of the Reform, intermediaries,
supervisory measures, etc.
Q3: What are the major
changes made to the Reform procedures practiced during
the experiment program in the Administrative Measures?
The spokesman: The
Administrative Measures basically follow the operating
procedures adopted during the experimental period of the
Reform in consideration of continuity of the systemic
approaches established during the experimental stage of
the Reform. In light of experiences of the early
experiment program as well as proposals from the public,
we established the principle approach and operating
principle for the Reform known as “flexible
decision-making to suit different circumstances under
centralized coordination”, and provided for a
progressive implementation of the Reform in a prudent
and active manner in the Administrative Measures.
Provisions on some key areas of the Reform that are
adjusted and complemented in the Administrative Measures
include the approval for Reform motion, assembly system,
timing of the negotiation between non-floating
shareholders and floating shareholders, modification of
the Reform scheme, dealings suspension arrangement, etc.
First, the approval
criteria for Reform motion are modified. Under the
Administrative Measures, the Reform motion shall be
approved by shareholders holding not less than a
two-thirds majority of the non-floating shares either
individually or collectively, which is an alternative to
the principal condition requiring unanimous approval by
all non-floating shareholders adopted during the
experimental stage.
Second, the
Administrative Measures established Relevant
Shareholders Meeting as the assembly system for the
Reform. Under the Guidance Notes, the nature of the
Reform is defined as a systemic approach towards the
float of the non-floating shares of A-Share companies,
as well as the issue concerning balancing of interests
between shareholders through negotiation. Under the
Administrative Measures, “Extraordinary General Meeting
Arrangement “ adopted in the experimental stage is
further defined as “Relevant Shareholder Meeting of
A-share Market” with related wording and procedural
arrangements adjusted accordingly.
Third, the timing of
negotiation between non-floating shareholders and
floating shareholders is adjusted to reduce the Reform
period to around 30 days. Under the Administrative
Measures, the negotiation between shareholders starts
with the release of the notice on Relevant Shareholder
Meeting in connection with the Reform, compared with the
earlier practice that set the announcement on the
decision to undertake the Reform as the starting point
for the negotiation.
Fourth, the
Administrative Measures impose restrictions on the
modification of the Reform scheme. Compared with the
earlier practice that revision of Reform scheme was
allowed during the 15-day period prior to convening of
the extraordinary general meeting, no modification to
the Reform scheme is allowed once the negotiation result
is announced and the share dealing is resumed under the
Administrative Measures. Such arrangements provide for
adequate negotiation under the condition that
consistency of the Reform scheme and protection of
investor’s interests against asymmetric information are
satisfied.
Finally, the dealings
suspension arrangement is changed as compared with the
experimental program. The Administrative Measures
abolished the provision that the listed company may opt
for dealings resumption following the announcement on
the resolution of the extraordinary general meeting, and
adopted the arrangement for Dealings suspensions during
two periods, one is the negotiation period, and the
other is between the next date following the record date
for the Relevant Shareholder Meeting and the end of the
standard Reform procedures.
Q4: Apart from the
sponsor, do other professional institutions have the
opportunities to take part in the Reform?
The Spokesman: Securities companies registered with the
CSRC as sponsor may act as a sponsor in the Reform. As a
market intermediary bearing special identity and duties,
a sponsor plays crucial parts in the Reform, such as
assisting in the development and execution of the Reform
scheme, overseeing performance of undertakings, etc. The
Administrative Measures provide that: “the board of
directors commissioned by non-floating shareholders in
writing to carry out the Reform shall appoint a
sponsor.” The sponsor requirement is not only a systemic
approach adopted to protect investors and ensure the
order of the Reform, but also a proven practice during
the experiment program. The Administrative Measures
clearly set out responsibilities and duties of the
sponsor with respect to the Reform, as well as the
supervisory measures and disciplinary actions that shall
be taken against breach of sponsor duties.
In addition, the
Administrative Measures do not impose any restrictions
on listed companies shareholders to make normal business
decisions as to the appointment of additional
professional institutions other than the sponsor for
more consulting services.
Q5: The Market was
particularly concerned about compliance of non-floating
shareholders with their undertakings with respect to the
Reform during the experiment program. Could you explain
what approaches the Administrative Measures adopt to
provide reasonable assurance that undertakings of
non-floating shareholders are duly discharged?
The Spokesman:
Undertaking given by non-floating shareholders
represents one of the crucial components of the Reform
scheme for it’s a matter concerning interests of
floating shareholders. Performance of undertakings by
non-floating shareholders is under supervision of the
CSRC who has been focusing on this issue and sets out
specific provisions in the Administrative Measures.
First, minimum
restraint requirements are imposed on non-floating
shareholders in their performance of undertakings to
prevent deliberate attempt to avoid complying with
undertakings. Under the Administrative Measures,
“undertakings by non-floating shareholders shall either
be feasible under present technological conditions for
supervision available in the stock exchange and
securities depository & clearing company, or be secured
against certain guarantees provided by the party giving
the undertakings; the non-floating shareholder shall
pledge full compliance with its undertakings in written
statement.” In addition, “the non-floating shareholder
shall not transfer its holding unless its undertakings
are fully discharged, except where the acquirer agrees
and has the capability to take on relevant obligations.”
Second, relevant
intermediaries are obliged to exercise inspection over
the discharge of obligations undertaken by non-floating
shareholders. Under the Administrative Measures, “ the
sponsor shall give its opinions on the capability of the
non-floating shareholder to perform its pledged
obligations, and has the duty to exercise continuous
inspection over the performance of obligations by
parties involved.”
Third, liabilities of
non-floating shareholders for breach of their
undertakings as well as the liabilities of the sponsor
for failure to perform inspection functions are
respectively set out in the Administrative Measures,
i.e. “ the shareholder failing to discharge its
undertakings with respect to the Reform is subject to a
public censure by the stock exchange, the order to take
corrective action and other disciplinary actions taken
by the CSRC; where interests of other shareholders are
damaged, legal consequences will be caused; the sponsor
and its representatives failing to perform on-going
inspection duties with respect to the Reform are subject
to a public censure made by the stock exchange, and the
order of the CSRC to take corrective action; where the
breach of sponsor duties is serious, the wrongdoer will
be removed from the CSRC’s approved list of sponsor and
sponsor representatives.
In conclusion, the Administrative Measures may
effectively enforce the proper discharge of undertakings
by non-floating shareholders, and therefore, provide
institutional protection for floating shareholders.
The spokesman concluded
that, the Administrative Measures have put together the
Reform practices of market participants as well as the
intelligence of the market, and the Reform is an
evolving process in which the CSRC is engaged,
exploring, reflecting, and adapting its regulatory
efforts to the evolving Reform.
The China Securities
Regulatory Commission
(This English version
by Shenzhen Securities Information Co., Ltd. is for your
reference only. In case any discrepancy exists between
the Chinese and English context, the Chinese version
shall prevail.) |
