SSE Formulates Three-year Action Plan for Advancing Quality Improvement of SSE-listed Companies

03 Nov 2020

Earlier, the State Council issued the Opinions on Further Improving the Quality of Listed Companies. It is the mission and responsibility of the Shanghai Stock Exchange (SSE) to implement the Opinions of the State Council and the work arrangements of the China Securities Regulatory Commission (CSRC), and to effectively support the healthy development of the capital market and the real economy. Recently, the SSE formulated the Three-year Action Plan for Advancing the Quality Improvement of the Companies Listed on the Shanghai Stock Exchange (the "Three-year Action Plan" for short), which clarifies the specific timetable and roadmap for the SSE’s tasks. Under the leadership of the CSRC, the SSE will pool the efforts of all parties concerned, strengthen the implementation, focus on the key project of establishing the SSE STAR Market and piloting the registration-based IPO system, enhance the development and reform of the capital market, and strive to take about 3 years to form a large group of listed companies on the SSE market that represent the requirement for high-quality development.

Based on the functions and position of the SSE as a market organizer, an administrator and a service provider, the Three-year Action Plan focuses on the areas of issuance and listing, corporate supervision, bond market, products and tools, and investor education, and provides for the arrangements for 39 specific tasks in the five aspects of corporate governance, information disclosure, system development, regulation improvement and service enhancement, including 16 major tasks for advancement and 23 tasks for normal implementation. The Three-year Action Plan mainly involves the goals in the following five aspects:

The first goal is to regulate the corporate governance, with the efforts in focusing on the behaviors of the “critical few”, and strengthening the sense of integrity and responsibility among the actual controllers, directors, supervisors and senior executives of the companies; effectively implementing the special campaign of the CSRC on corporate governance; regulating the operation of the shareholders’ meeting, board of directors and board of supervisors of the listed companies, giving full play to the role of the shareholders’ meeting, and consolidating the internal control mechanisms of the companies; and advancing the improvement of equity incentives and employee stock ownership systems, cultivating and forming the market-oriented incentive and restraint mechanisms, and stimulating the internal motivation of the listed companies to concentrate on operations and enhance performance.

The second goal is to improve the quality of information disclosure, with the efforts in revising and optimizing the system of self-discipline rules for information disclosure centered around the Rules Governing the Listing of Stocks on Shanghai Stock Exchange, and advancing the formulation, revision, abolition and merging of the rules with the orientation toward "distinct levels, clear structure, and being easy to understand and use"; improving the guidelines for information disclosure for the industries and the format guidelines for temporary announcements, highlighting the effectiveness of information disclosure, and reducing the costs of information disclosure; guiding the listed companies toward actively releasing the information facilitating the investors' decision-making, and cutting down redundant information; and supporting the listed companies in fully communicating with investors, especially the small and medium-sized investors, through multiple channels, so as to impart the company's intrinsic value.

The third goal is to effectively develop the systems, with the efforts in strengthening the construction of channel for "entrance" and "exit"; we should further boost the growth of the STAR Market and reform of the registration-based IPO system, and propel all-round implementation of the registration-based IPO system in accordance with the deployments of the Financial Stability and Development Committee under the State Council and the CSRC, so as to effectively check the quality of the listed companies from the source; we should tighten the supervision on delisting, continuously push forward the reform of the delisting system, and optimize the risk alert board; and we should provide support for the companies to fully capitalize on the market tools such as mergers and acquisitions and reorganization, refinancing, corporate bonds, convertible bonds, preferred stocks, Real Estate Investment Trusts (REITs), and Exchange Traded Funds (ETFs); besides, efforts should be made to vigorously explore institutional innovation on the STAR Market, so as to provide impetus for the technologically innovative enterprises and forming the experience that can be promoted and replicated.

The fourth goal is to focus on the regulation of main duty and main business of listed companies. We will implement the requirement for “enhancing regulatory effectiveness by streamlining and refining administration”, carry out the classified regulation and formulate business rules for classified regulation. Special attention will be paid to risky companies and the key events, and strictly punish major violations such as financial fraud, capital occupation and illegal guarantees. We will stick with classified handling, and continuously advance the resolution of the pledge risks of the listed companies, and effectively defend the bottom line of avoiding systemic risks. We will identify problems early and nib them in the bud through pre-analysis and pre-judgment, and strictly prevent the reoccurrence of market irregularities on the STAR Market. We will strengthen the reg-tech to provide strong support for risk identification and regular supervision.

The fifth goal is to enhance service for companies. The exchange will work with all parties and vigorously support qualified companies to list on the SSE STAR Market and the main board. We will continuously carry out the special campaign on improving quality of companies in key regions, and energetically driving SOE reform and help private companies overcome difficulties. We will focus on synergy with different parties and redouble efforts in the building of ecosystem, take the initiative to enhance information sharing with local Party committees and governments, and strengthen communication and collaboration with relevant authorities. We will vigorously promote briefings on performance, regularly organize symposiums for companies in the same industry, give full scope of market institutions to play their roles, optimize market ecology, and coordinate all parties.

At present, the SSE has set up a working group to advance the improvement of the quality of listed companies, with the SSE President as the chief of the group and the main business departments of the SSE as the members. Going forward, the SSE will continue to implement the guideline of “building institutions, non-intervention, and zero tolerance”, make persistent and unremitting efforts in accordance with the deployments of the CSRC, strive for effective implementation of the Three-year Action Plan, carry out the Opinions issued by the State Council in an all-round manner, earnestly boost the high-quality development of the SSE-listed companies, and provide strong support for the sustained and healthy development of the capital market and the national economy.