1, Q: Recently, the General Office of the State Council forwarded the “Several Opinions on Launching Pilot Projects for Issuing Domestic Shares or Depositary Receipts within the Innovative Enterprise” of the China Securities Regulatory Commission. Market parties are more concerned about the background considerations and system basis of the pilot project. To explain?
A: The "Several Opinions on Launching Pilot Projects for Issuing Domestic Shares or Depositary Receipts within Innovative Enterprises" (hereinafter referred to as "Several Opinions") is issued to support innovative enterprises in issuing domestic stocks or depositary receipts within the territory. This is to implement the spirit of the Party's Nineteen National Congress. The important measure of the report on the work of the government and the First Session of the 13th National People's Congress was to effectively play a major institutional innovation in the role of the capital market in serving the real economy.
In recent years, a new round of science and technology and industrial revolution represented by information technology is booming, and innovative companies representing new modes of new technology, new industries, and industries have emerged. They have a leading role and demonstration significance for industrial development and economic transformation and upgrading. Due to restrictions on the previous capital market system and macroeconomic reform measures, a group of leading innovative companies have been listed overseas, while the second batch of fast-growing innovative companies are also preparing for listing. Support for the issuance and listing of such companies in China It will facilitate the transformation of quality, efficiency, and power for the development of the real economy, which will help enhance the domestic market's internationalization level and global influence, improve the quality of domestic listed companies, and enable domestic investors to share the fruits of economic development in the new era.
After years of reform and development, China’s capital market investor maturity, continuous supervision arrangements, and listing and listing supervision capabilities have been greatly improved. The basic system has been fully strengthened, market capacity has been steadily expanded, and the level of opening up has been further enhanced. It has already supported innovative companies. Basic Conditions for Domestic Issuance and Listing During this year's two sessions, many representatives and committee members also put forward reform proposals in this area. The promotion of institutional innovation in this area has come to fruition and a wide range of consensus has been reached.
The “Several Opinions” have made systematic and institutional arrangements for supporting innovative companies to issue listings in China. The main contents include: First, it is clear that overseas-registered red-chip companies can issue shares within the territory; Second, the introduction of depositary receipts as a new security Variety, and make arrangements for the basic system of issuance of depositary receipts; Third, to further optimize the securities issuance conditions, to solve some innovative companies have continuous profitability, but there may be cases of not yet profitable or not to make up for losses; Fourth, fully consider part The specific organizational governance issues such as the VIE structure of the innovating firm, voting rights, etc., have targeted arrangements.
After the issuance of the “Several Opinions”, the CSRC will also formulate more specific implementation measures to further improve the supporting systems and regulatory rules, thereby building up national laws, regulatory documents, regulatory documents and stock exchanges of the China Securities Regulatory Commission. Rules and regulations, including the system of rules and regulations, ensure that the pilot work is conducted in accordance with laws and regulations.
2. Q: What are the overall considerations of the CSRC for the promotion of this pilot project?
A: Considering the intrinsic characteristics of innovative companies, such as large investment, rapid iteration, and easy subversion, I will stick to the principle of striving for improvement in the overall work environment, insist on the organic combination of innovation and development, and put equal emphasis on both reform and opening up, and help the public to inspire entrepreneurship. While innovating, promoting economic restructuring and industrial transformation and upgrading, it also focuses on handling the relationship between pilots and risk prevention and control, and putting prevention and control risks in a more important position.
In order to stabilize market expectations, the pilot will select enterprises in strict accordance with standards and procedures, grasp the number of enterprises and the scale of financing, and rationally arrange the issuance timing and issuance pace. Reinforce prudential supervision and investor protection, and severely crack down on all types of illegal and irregular behaviors. Order to advance the relevant pilot work.
3, Q: What is the selection criteria for pilot companies?
A: The pilot has set a high threshold, is oriented to meet the national strategy, has core competitiveness, and has high market recognition. It belongs to the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, and biotechnology. High-tech industries such as pharmaceuticals and strategic emerging industries, to reach a considerable number of innovative companies. Mainly include: Red-chip companies that have been listed overseas and have a market value of not less than 200 billion yuan; have not yet listed overseas, and operating income in the past year is not Less than 3 billion yuan and a valuation of no less than 20 billion yuan, or rapid growth in revenue, with independent research and development, leading international technology, red chip companies and domestic companies in a relatively competitive position in the industry competition.
4. Q: What is the selection mechanism for pilot companies?
A: In order to give full play to the role of competent authorities and experts and scholars in various industries, and to better identify pilot enterprises, the Securities and Futures Commission established the Advisory Committee on Scientific and Technological Innovation Industrialization.
The Advisory Committee is composed of authoritative experts from various industries, well-known entrepreneurs, and senior investment experts. According to the selection criteria for pilot enterprises, comprehensive consideration will be given to business models, development strategies, R&D investment, new product output, innovation capability, technical barriers, and team competitiveness. , industry status, social impact, industry development trends, business growth, estimated market value and other factors, make preliminary judgments on whether the applicant companies are included in the scope of the pilot. The CSRC decides whether the applicant company is included in the pilot and strictly follows the 4. The laws and regulations accept and approve the trial companies to issue applications for listing.
5, Q: How can pilot companies issue IPOs in China?
A: After thorough research, I will learn extensively from the mature experience of the international market, issue relevant financing tools, and set up appropriate institutional arrangements for enterprises to choose. Red-chip companies that meet the pilot conditions can preferentially go public through the issuance of depositary receipts. Financing; In line with the conditions for the issuance of stocks, it is also possible to choose to issue stocks. Domestic enterprises that meet the pilot conditions may directly issue shares and be listed on the domestic market.
6. Q: How do you understand the legal basis for companies registered outside China to issue shares in China?
Answer: Article 2 of the Securities Law stipulates that 'This Law shall be applicable to the issuance and transaction of securities in the territory of the People's Republic of China, stocks, company bonds and other securities legally recognized by the State Council'. The scope of application of the "Securities Law" and its specifications From the content point of view, the normative standpoint is the securities issuance and trading activities in China. Whether the company that issues securities in China must be a domestic company, that is, whether the company registered overseas can issue securities in China, the Securities Law There is no restriction. Therefore, companies registered outside China can issue securities in China. Regarding this issue, I will communicate with the relevant legal organizations as early as in 2010 when I study overseas companies’ arrangements for issuing securities in China. This reform involves the same nature issues, I will once again communicate with relevant units, and I agree that overseas companies issuing shares within the country are in compliance with the Securities Law.
7. Q: Some people think that the Securities Law only regulates the issuance and trading of stocks and corporate bonds. It does not refer to depositary receipts. This reform allows innovative companies to issue depositary receipts in China. Is there a legal basis? Talk about the views?
A: Securities is a very broad concept and it has many different types. From the perspective of legislative technology, China’s Securities Law adopts an open legislative model for securities regulations. Article 2 of the Securities Law clearly lists stocks and corporate bonds. At the same time, it was stipulated that the State Council could identify other types of securities according to law. In this reform, the State Council, in accordance with the authorization provisions of the "Securities Law", passed the "Several Opinions" to recognize depository vouchers, which are relatively mature international securities. For securities, its issuance, trading behavior is subject to the "Securities Law," and the legal basis is sufficient.
8. Q: What conditions and procedures should be met by pilot companies in issuing domestic stocks or depository receipts?
Answer: Pilot enterprises that are publicly issuing shares in China should comply with the "Securities Law", "Measures for the Management of Initial Public Offering of Shares and Listing" (hereinafter referred to as the "Administrative Measures for Initial Release"), "Administrative Measures for Initial Public Offering of Shares and Listing on the Growth Enterprise Market" (below Referred to as the "Gem Initial Management Measures") and other laws and regulations concerning the conditions for the issuance of stocks. Among them, trials of red-chip companies' equity structure, corporate governance, operational norms, etc. may be subject to the provisions of laws and regulations such as company law on overseas registration, but The overall arrangements for the protection of investor rights and interests should not be lower than the requirements of domestic laws and regulations. For pilot enterprises that have a protocol control structure, the CSRC will distinguish different situations from the relevant departments and handle them in accordance with the law.
Pilot red chip companies issuing depositary receipts based on stock-based securities in China shall meet the basic conditions for the issuance of stocks in Article 13 of the Securities Law. The following requirements shall also be met: 1. The ownership structure, corporate governance, and operating specifications Such matters may apply to the laws and regulations of companies and other places of overseas registration, but the arrangements concerning the protection of investor rights and interests shall not be lower than the domestic legal requirements. Second, if there are differences in the voting rights, the agreement control framework or similar special arrangements, it shall be At the time of initial public offering, the public issuance documents such as prospectuses have a prominent place, detail disclosure of relevant information, in particular, risks, corporate governance and other information, as well as the implementation of measures to protect the legitimate rights and interests of investors.
The Securities Regulatory Commission, in accordance with the provisions of the "Securities Law," and in accordance with the current stock issuance approval procedures, approves pilot red chip companies to make public offerings in the country. In principle, the issuance review committee shall review the issuance of depositary receipts in accordance with the procedures for reviewing the issuance of shares.
9, Q: Innovative companies have the characteristics of new modes of new technologies and new business models. In the early stage of enterprise development, large-scale R&D and market investment are generally required. Many companies are in a loss-making state during specific stages of corporate development, and do not meet the conditions for issuance and listing of relevant earnings. how to solve this problem?
A: We have already noticed this issue. Regarding whether the company's issuance and listing must be continuous profitable and there is no unrecoverable loss, there is an evolutionary process in our country’s relevant legislative provisions. Reviewing this evolutionary process helps us to clearly understand the spirit of legal provisions.
Article 137 of the "Company Law" of 1993 clearly stipulates that companies issuing new shares must meet the conditions for the company to "continuously make profits within the last three years." When the "Company Law" and "Securities Law" are jointly amended in 2005, they will The provisions of the Company Law concerning the conditions for the issuance of new shares of the company were transferred to the Securities Act, and substantial amendments were made in the content description. The company’s requirements for continuous profitability were specifically eliminated, and the company’s adjustment should be such that the company should have 'continuous profitability'.
From 'continuous profit' to 'sustainable profitability', it reflects the accurate grasp of economic life and market law by legislation, so that at a particular stage of development, although it does not realize book profits for the time being, it does have continuous profitability and can bring in investors. The return of companies to the stock market and the use of capital markets to become bigger and stronger have opened up the institutional space. This legislative change reflects the scientific attitude of respecting the law, advancing with the times, and is also in line with the general practice of overseas mature markets.
This reform aims at the characteristics of high-growth, high-input, and long-term profitability of innovative companies at specific stages of development. In accordance with the procedures stipulated in the Securities Law, they have been approved by the State Council to amend Article 26 of the “Administrative Measures for Initial Release”. Article 11 and Article 11 of the “Entrepreneurship Board First-line Administrative Measures” clearly stipulate that innovative enterprises that meet the conditions no longer apply the relevant profitability and there are no conditions for issuing unpaid losses.
10. Q: How do the pilot companies perform their information disclosure obligations?
A: The pilot companies, their controlling shareholders, actual controllers and other relevant information disclosure obligors should disclose information in a truthful, accurate, complete, timely, and fair manner. They must not have false records, misleading statements or major omissions. Pilot enterprises issue securities in China. , In principle, according to the current information disclosure system of listed companies, perform information disclosure obligations. At the same time, I will make corresponding arrangements for the disclosure of the characteristics of the pilot red chip companies, and urge the pilot companies to fully disclose risks.
11, Q: What are the special requirements of pilot red chip companies in the disclosure of financial information?
A: Pilot red chip companies issuing securities in China should disclose financial information in accordance with laws and regulations such as the Securities Law, and specify relevant issues during the fiscal year in the listing arrangements. Piloting the financial reporting of red chip companies issuing securities in China Information may be prepared using Chinese Accounting Standards for Business Enterprises or equivalent accounting standards approved by the Ministry of Finance and the Chinese Accounting Standards for Business Enterprises. It may also be prepared using IFRS or US GAAP, and at the same time providing adjustments adjusted in accordance with Chinese accounting standards. information.
12, Q: What are the specific institutional arrangements for pilot red chip companies to issue depositary receipts?
A: A depositary receipt is a securities issued by a depositary and issued on the basis of overseas securities in China to represent the equity of offshore securities. The relevant institutional arrangements for pilot red chip companies to issue depositary receipts are as follows:
First, pilot red chip companies should entrust depositaries to issue depositary receipts. Pilot red chip companies are base stock issuers overseas, and offshore depositors are required to issue depositary receipts in accordance with depository agreements.
Secondly, the issuance of depositary receipts is based on the issuance of offshore basic stocks. Pilot red-chip companies, as offshore basic stock issuers, participate in the issuance of external memory trust certificates, and shall bear the obligations of the relevant issuer of China’s securities laws and regulations and regulatory requirements. Responsibility, including information disclosure obligations, investor liability for damages, etc.
3. The depositary holds overseas basic stocks according to the depository agreement, issues depositary receipts, exercises the corresponding rights, and handles dividends, dividends and other services according to the depositary’s wishes.
Fourth, the holder of the depositary receipt has the right to the overseas base stocks represented by the depositary receipts and uses the depositary to exercise its rights in accordance with the agreement of the deposit agreement.
Fifth, the issuer, depositary, and depositary receipt holder of overseas basic stocks shall, through the deposit agreement, clearly identify the rights and obligations represented by the depositary receipts and the rights and obligations of the parties.
13. Q: How will the pilot companies' listing and trading related systems be arranged?
Answer: The stocks or depositary receipts issued by pilot companies in China should be listed and traded on domestic stock exchanges, and be registered, kept and settled in China Securities Depository and Clearing Corporation Limited.
14, Q: What are the requirements for daily supervision and continuous information disclosure after pilot companies are listed?
A: The listing and trading activities of stocks or depositary receipts issued by pilot companies in China are all included in the scope of the current Securities Law. The CSRC implements supervision in accordance with the Securities Law and the “Several Opinions” and related regulations.
Pilot red chip companies shall, in principle, perform information disclosure obligations in accordance with the current information disclosure system of listed companies; for pilot red chip companies that have been listed overseas, information disclosed overseas shall be disclosed simultaneously in Chinese within the territory, and the disclosure content shall be disclosed in the overseas market. Consistent.
If the pilot companies, their controlling shareholders, actual controllers and other relevant information disclosure obligors fail to fulfill the obligation of continuous information disclosure in accordance with regulations, false information, misleading statements or major omissions in the disclosed information shall be governed by laws and regulations such as the Securities Law. Regulations assume legal responsibility.
15, Q: What are the specific arrangements for investor protection in this pilot?
A: In order to effectively protect the legitimate rights and interests of investors, based on international experience and combining the characteristics of pilot companies, I will require pilot companies to treat domestic investors fairly and not to have any special arrangements or behaviors that will materially undermine their rights and interests. Introduced multi-faceted investor protection measures:
First, in the event that the legitimate rights and interests of investors have been violated by illegal activities, the pilot enterprises should ensure that domestic investors receive compensation equivalent to those of foreign investors.
Second, in order to strengthen the control of the controlling shareholders, actual controllers, directors, and senior management personnel of pilot companies that have not yet profited, and to strengthen their sense of responsibility to investors, the above personnel must not reduce holdings before the pilot companies achieve profitability. Stocks.
Third, the issuance of depositary receipts shall ensure that the actual rights and interests of holders of depositary receipts are equivalent to holders of offshore stocks.
Fourth, in order to ensure the safety of depository receipts basic assets, depositors and custodians are required to effectively segregate the depositary receipts' underlying assets from their own assets, and must not classify depositary receipts' underlying assets in their own property, and they must not violate their obligations. Misappropriation of depositary receipts.
Fifth, it is required that the depository agreement clearly stipulates that disputes arising from the depositary receipts shall be subject to Chinese laws and shall be subject to the jurisdiction of domestic courts.
16, Q: The issuance of deposit receipts involves overseas entities such as issuers and depositaries of basic securities. When you clearly violate the obligations of the Securities Law concerning issuance and disclosure of information, who is responsible for the relevant legal liabilities?
A: According to the provisions of the Securities Law, the depositary receipts are classified as securities by the State Council, and its issuance and trading activities are subject to the Securities Act. The issuance of depositary receipts by overseas basic stock issuers should bear the securities laws and regulations of China. The supervision requires the obligations and responsibilities of the relevant issuer; after the relevant depositary receipt is listed, it shall bear the liabilities of the listed company under the “Securities Law”.
Specifically, pilot companies and other relevant market entities violate the regulations for the issuance of securities, fail to disclose information in accordance with regulations, and have false records, misleading statements or major omissions in disclosure of information, or there are insider trading, market manipulation, and other illegal activities. In accordance with the "Securities Law" and other laws and regulations stipulated by the legal responsibilities; causes the legitimate rights and interests of investors have been infringed, pilot companies and other relevant market entities should bear the liability for compensation in accordance with the law, investors can be directly requested by the law to assume its liability for compensation. The above arrangements are also overseas The mature market is consistent with the basic practice of depository receipts.
If the depositary or the custodian violates the "Several Opinions" and the relevant regulations of the Securities Regulatory Commission, the CSRC may take supervision and management measures in accordance with the law and investigate its legal responsibilities.
17, Q: How to prevent the risk of excessive speculation in the pilot?
A: For the pilot companies, there are many concept themes, they are vulnerable to the market, and there may be over-hype market risks after the listing. I will take the following measures:
The first is to strengthen investor education and combine the inherent risks of innovative companies with large investment, rapid iteration, and easy subversion. Do a good job of investor education, guide investors to correctly understand the investment risks of innovative companies, and rationally invest.
The second is to strengthen market monitoring, give full play to the frontline regulatory functions of the exchanges, strengthen the functional supervision of abnormal fluctuations and conceptual hype, prevent market speculation, crack down on illegal activities, and protect the legitimate rights and interests of investors.
The third is to increase the information disclosure requirements of pilot enterprises in corporate governance, profit model, R&D model, technical product substitution, etc., to fully disclose possible business risks such as possible R&D failures, performance fluctuations, etc.
18, Q: When will the pilot start?
A: The "Several Opinions" have already been issued. The SFC will quickly formulate a pilot-related supporting system and will announce the relevant legal procedures to the market. At the same time, the SFC will carefully organize the implementation of pilot projects.