Shanghai Stock Exchange Revises Rules on Reviewing Major Asset Restructurings by Listed Companies

On the evening of September 24, Shanghai Stock Exchange (SSE) released the draft revision to the Rules for Review of Major Asset Restructurings of Listed Companies (hereinafter referred to as the Rules) to solicit public opinions. The comment period will last until October 9.

The draft revision focuses on four aspects:

I. Specify scope of application of a simplified review

Two transactions types are eligible:

(1) stock-for-stock merger between listed company; or

(2) high-quality companies issue shares to purchase assets without constituting major asset restructuring. (High-quality companies refer to listed companies with a market cap over 10 billion RMB and a A-grade rating on disclosure quality by the SSE in recent two years.)

II. Establish a negative list that does not qualify for simplified review

First, if listed companies, their controlling shareholders, de facto controllers, intermediaries or related personnel have been subject to administrative penalties by China Securities Regulatory Commission (CSRC) or disciplinary actions by trading venues within a certain period, or if they have other issues of serious dishonesty, they will be excluded from the simplified procedures.

Second, if the transaction plan involves serious unprecedented situations, significant public concern, or other highly complex circumstances, it will also be excluded.

III. Set up simplified review mechanism

For restructuring transactions that meet the conditions for simplified review, the SSE will accept the application within 2 working days based on the verification opinions of the intermediaries, and issue a review opinion within 5 working days after acceptance.

The restructuring review institution on the SSE will not conduct inquiries, and the transaction will not be submitted to the M&A and restructuring committee for deliberation.

IV. Reinforce responsibilities of all parties in the simplified review

Listed companies and related parties are required to commit that the transaction meets the criteria for applying simplified review procedures.

The verification and gatekeeping responsibilities of intermediaries should be strengthened. Independent financial advisors are required to give clear, affirmative opinions on whether the transaction complies with the simplified review procedure requirements.

At the same time, to prevent misuse of simplified review procedures, the SSE will strengthen post-event supervision of related restructuring transactions. Any violations of the simplified review requirements will be strictly disciplined in accordance with the applicable rules.

A market insider commented that the revised Rules will streamline the review process and shorten the time needed for review and registration, which is expected to enhance the quality and efficiency of the real economy, vitalize the market and promote quality of listed companies.

The SSE stated that it will continue to follow the decisions made at the third plenary session of the 20th CPC Congress, and fully implement policies set out in Five Major Financial Works (technological finance, green finance, inclusive finance, elderly care finance, and digital finance), the Nine-point Decisions (Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Capital Market by State Council), STAR Market Eight Measures (Eight Measures on Deepening the Reform of the STAR Market to Serve Technological Innovation and the Development of New Quality Productive Forces by the CSRC). It will uphold market-driven and law-based principles and support market-oriented transaction arrangements and innovative plans established in accordance with regulations. The SSE aims to facilitate the implementation of more exemplary cases, further enhancing the role of the capital market as the main channel for M&A and restructuring cases, which will contribute to improving the quality of listed companies and strengthening the foundation for the healthy development of the market.