On March 2, 2018, China Securities Regulatory Commission (“CSRC”) released the "Special Provisions on Share Reduction in Venture Capital Funds of Listed Companies" ((hereinafter referred to as the "Special Provisions"). In order to implement the “Special Provisions”, the Shenzhen Stock Exchange (“SZSE”) released the “Implementation rules on Share Reduction of Venture Capital Fund of the Public Company Listed on SZSE by Shareholders” (hereinafter referred to as the “Implementation Rules”) on the same day in accordance with the relevant laws and regulations and business rules. The “Implementation Rules" comes into effect on June 2, 2018.
“Implementation Rules” implemented the spirits of the State Council and CSRC on setting up backward linking system of the share reduction and investment time of venture capital fund, encouraged the long-term healthy development of venture capital fund, regulated the behavior of share reduction by the shareholders of venture capital fund of the listed companies, giving differentiate policy support to venture capital fund that really working on long-term investment and value investment. It is provided on the “Implementation Rules” that qualified shareholders of venture capital fund who have invested in the early small-and-medium enterprises and high-tech enterprises for more than 36 month and less than 48 month, shall not reduce via centralized bidding more than 1% of capital share of the listed company of their IPO shareholding within any consecutive 60 natural days, and shall not reduce via block trade more than 2% of capital share of the listed company of their IPO shareholding. Meanwhile, it is explicitly provided that in the event of venture capital fund shareholders’ breach of the relevant provision of share reduction, or avoidance of share reduction restriction or any share reduction behavior that constituted abnormal trading, the Exchange can adopt restricted trading and other supervision measures or implement discipline punishment on them.
The related principal of SZSE expressed that the release of “Implementation Rules” was an important measure taken to conscientiously implement the decision-making and deployment of the State Council and the “Special Provisions” of CSRC. It will play a pro-active role in guiding venture capital investment fund in adhering to long-term investment and value investment, and promote the stable and healthy development of venture capital fund.
