Shanghai Securities News｜SSE STAR Market Listing Rules Comprehensively Revised, with Multiple Measures Promoting the Quality Improvement of Listed Companies

Translated from Shanghai Securities News—www.cnstock.com

(Shanghai Securities News, www.cnstock.com) (Reporter He Xinyi) Recently, the Shanghai Stock Exchange (SSE) revised the SSE STAR Market Stock Listing Rules and supporting guidelines for nearly 60 announcement formats, focusing on institutional coordination after the implementation of the new revised Company Law. The aim is to optimize the corporate governance structure, strengthen the "key minority" constraints, and upgrade the investor protection mechanism. It is also adding rules for specific conditions to merge companies that have been listed for less than three years, consolidate the institutional foundation for the development and supervision of listed companies, and further promote the quality improvement of listed companies.

Optimizing the corporate governance structure, with the Audit Committee fully "taking over" the Board of Supervisors

On December 27, 2024, the China Securities Regulatory Commission (CSRC) issued a notice to solicit public opinions on supporting rules such as the Guidelines on Articles of Association of Listed Companies (Draft for Comments), requiring listed companies to stipulate in their articles of association that they should set up an Audit Committee within the Board of Directors before January 1, 2026, to exercise the functions of the Board of Supervisors stipulated in the Company Law. There should be no Board of Supervisors or supervisors. On March 28, 2025, the Guidelines on Articles of Association of Listed Companies was officially released.

So far, 36 SSE STAR Market-listed companies have canceled the Board of Supervisors, and the Audit Committee composed mainly of independent directors has "taken over" the members of the Board of Supervisors. Many listed companies are also preparing for or promoting the cancellation of the Board of Supervisors while actively responding to investors' questions about the cancellation of the Board of Supervisors on interactive platforms.

On April 25, the SSE STAR Market Stock Listing Rules implemented the requirements of higher-level rules such as the Company Law, Guidelines on Articles of Association of Listed Companies, and Administrative Measures for Information Disclosure of Listed Companies while refining and clarifying the arrangements for the Audit Committee's responsibilities. The document has clarified that the Board of Directors shall set up an Audit Committee to undertake the functions of the Board of Supervisors. The Audit Committee is required to hold a meeting at least once a quarter, and more than two-thirds of the members must be present before it can be held. Meeting minutes should be prepared and signed according to the regulations. Meanwhile, companies can set up other special committees such as those for strategies, nomination, remuneration, and assessment in the Board of Directors.

Optimizing "key minority" responsibilities and further consolidating the responsibilities of controlling shareholders and actual controllers

On the one hand, the new revised Company Law has detailed the functions and responsibilities of directors and senior executives, clarifying the boundaries between loyalty obligations and diligence obligations in the form of legal provisions for the first time. The SSE STAR Market Stock Listing Rules correspondingly stipulated the connotation of the loyalty and diligence obligations of directors and senior executives and simultaneously improved the specific review requirements for directors and senior executives to enter into contracts or conduct transactions with their companies, snatch business opportunities from their companies, and operate similar businesses to their companies, among others.

On the other hand, the new revised Company Law has introduced the "de facto director" rule to provide a legal basis for regulating the behavior of controlling shareholders and actual controllers. Specifically, controlling shareholders and actual controllers who have not been formally appointed as directors but exercise the functions of directors should also abide by the provisions of loyalty and diligence obligations of directors. The SSE STAR Market Stock Listing Rules also coordinated and implemented relevant regulations.

Improving the rights and interests protection of shareholders and taking that of small and medium-sized shareholders to a new level

Small and medium-sized shareholders play an important role in corporate governance and serve as a crucial guarantee for the healthy development of companies. The new revised Company Law has made significant progress in protecting the rights and interests of small and medium-sized shareholders. Through a series of innovative provisions, such as strengthening shareholders' right to know, clarifying shareholders' proposal rights, improving dissenting shareholders' repurchase request rights, and introducing a dual shareholder subrogation mechanism, it has comprehensively improved the status and rights of small and medium-sized shareholders in corporate governance.

Correspondingly, the SSE STAR Market Stock Listing Rules reduced the shareholding ratio of shareholders who made temporary proposals from 3% to 1% and stipulated that companies shall not increase the shareholding ratio of such shareholders, thereby providing robust protection for the proposal rights of small and medium-sized shareholders. Additionally, it improved the decision-making mechanism of companies with differential arrangements for voting rights and clarified the applicable circumstances of the "one share, one vote" principle for special voting shares and matters that must be reviewed and approved by the special voting shareholders' meeting to balance the internal interests of companies and lay the foundation for establishing a more fair, transparent, and efficient corporate governance environment.

Optimizing the rules for information disclosure suspension and exemption to better meet the needs of sci-tech innovation enterprises

On April 25, the CSRC formulated and issued the Regulations on Suspension and Exemption of Information Disclosure by Listed Companies, which will take effect from July 1, 2025. This is the first information disclosure exemption rule at the CSRC level. Under the original regulatory framework, relevant provisions on suspension or exemption of information disclosure were scattered in the rules of the CSRC and exchanges. The introduction of this regulation means an improvement in the level of regulations, complying with market calls, making the rules clearer and easier to implement in practice, and regulating the abuse of exemptions.

The SSE STAR Market Stock Listing Rules implemented higher-level regulations and further clarified the matters and scope of exemptions allowed and the circumstances under which exemption reasons could be eliminated. Listed companies need to formulate information disclosure exemption systems according to these requirements. When implementing exemptions, they should perform internal audit procedures and register and manage exempted disclosure matters. Within 10 days after the disclosure of regular reports, listed companies should submit relevant materials on suspension or exemption of disclosure due to commercial secrets during the reporting period to the securities regulatory bureau and stock exchange where they are registered.

Optimizing the exemption circumstances for transferring shares during the restricted period to provide room for rules to merge companies that have been listed for less than three years

There are different understandings in the market as to whether SSE STAR Market-listed companies that have been listed for less than three years can be merged. In particular, the previous SSE STAR Market Stock Listing Rules did not clarify whether controlling shareholders and actual controllers could transfer shares within three years after listing, while other sections all stipulated specific exemption circumstances for such share transfers.

As one of the reform measures regarding M&A and restructuring of the "Eight Measures", this revision of the SSE STAR Market Stock Listing Rules has also considered this issue. Compared with other sections, it has added exceptional circumstances for controlling shareholders of listed companies that have been listed for less than three years to transfer shares, including transfers under the control of the same actual controller, bailouts of listed companies, and other circumstances recognized by the exchange, thus eliminating barriers in rules for SSE STAR Market-listed companies that have been listed for less than three years to be merged.

The above information is provided for reference purposes only and does not constitute investment advice.