The "equity division reform" and "debt clearing", two key phrases of the China's securities market in 2006, are the priority work of the Shanghai Stock Exchange (SSE) in this year. With its active promotion of the equity division reform and debt clearing under the precondition of a stable market, the SSE has laid a favorable foundation for the healthy and long-term development of the market. Statistics show that 762 listed companies on the SSE have completed or begun the equity division reform, with their market capitalization covering 96.99% of the total of the companies which should conduct the reform. The total clearing amount is RMB16.809 billion, accounting for 67.19% of the total, with the capital occupation balance dropped to RMB8.207 billion. In the remaining two weeks in 2006, the SSE will exert all its efforts on the "last battle" of the reform and debt clearing.
14 Memos Plus More Than 50 Training Programs
Since the launch of the equity division reform, the SSE, with continuous review on the window guidance experience, has introduced a succession of 14 memos on the reform. Moreover, the SSE, together with the Securities Regulatory Bureaus of China Securities Regulatory Commission, has consecutively visited 200 listed companies to give them reform counsels upon a good understanding of their conditions. Meanwhile, it has organized more than 50 training programs for the reform, including the Qualification Training Course for Secretaries to Directorate and the mobilization meetings of local securities regulatory bureaus. All this has effectively impelled the equity division reform.
With the arrival of the key stage of the reform, the SSE has led the listed companies, especially the companies of B and H shares, to adopt various innovative measures for the equity division reform such as the new product of warrant. In terms of scheme innovation, to solve the problem of consideration resource scarcity of major shareholders, the SSE has worked out "full-amount put rights" for the reform of listed companies unqualified for warrant issuance. As for the companies with capital occupation by major shareholders, it has arranged the "combination of debt-for-shares swap and equity division reform" to further both of their debt clearing and reform. Furthermore, the SSE has designed the mode of "combination of targeted additional issuance and equity division reform" for the companies with equity barriers.
During the active promotion for the listed companies' equity division reform, the SSE has introduced, in due time, the "New SSE Composite Index", the first of its kind on the market with the reformed companies as its constituents. This has led the market to pay further attention to the reform. Later, under the uniform arrangement of the China Securities Regulatory Commission, the SSE, by "separating new shares from the old ones" at the appropriate time, has timely resumed the capital raising function of the main board market. With this foundation, it has also established, in due time, the listing examination institution and system. After the key stage of the reform, the SSE, by taking all measures, has attracted dozens of high quality companies to go listing on the main board market. Besides, through a series of innovation policies, it has propelled some qualified companies to further optimization and development.
Debt Clearing: Special Workgroup Plus On-the-spot Supervision
Compared with the smooth progress of the equity division reform, the debt clearing met much more difficulties and obstacles. The 2005 annual reports showed that by the end of 2005, listed companies on the SSE with non-operational capital occupation by major shareholders and affiliated enterprises had totaled 233, including those released later after the reports. The total balance of the occupied capital has reached RMB25.016 billion. By the end of December 14, 196 listed companies on the SSE have completed their debt clearing, while 24 companies have it done partially, with a total clearing amount of RMB16.809 billion, accounting for 67.19%. So far, 37 companies are still under capital occupation, but the occupation balance has been reduced to RMB8.207 billion. With one year's effort, the SSE has completed 2/3 of all the debt clearing.
It is learnt that the SSE, with a special clearing workgroup organized from the very beginning, has guaranteed the orderly progress of the debt clearing. Meanwhile, officials of the SSE Listed Company Department, leading a group for the personal visits to focused areas time after time, have supervised and urged the debt clearing of the listed companies on the spot. In terms of the system regulation, with a consecutive series of notices from the end of 2005 to the first half of this year, the SSE has unified the statistical caliber and regulated the information disclosure for non-operational capital occupation. In addition, in the special section of "Listed Companies' Debt Clearing" on its official website, the SSE has announced the latest progress of debt clearing and capital occupation. Together with the Shenzhen Stock Exchange (SZSE), the SSE has also published on the designated media the "Joint Announcement of SSE and SZSE on Debt Clearing", with the current one of No.7.
In the debt clearing, the SSE has continuously summed up experience, explored the innovative clearing methods and encouraged the listed companies to take various modes for debt clearing. For example, it has advised the major shareholders without cash clearing capacity to adopt the debt-for-shares swap combined with the equity division reform. As for the companies under equity transfer and shortage of cash, the SSE has urged that the shareholders should discharge the occupied capital first with the capital from equity transfer before handling the transfer procedures. For the listed companies with long-term malicious capital occupation by major shareholders, the SSE has requested their directorates to actively take judicial measures to protect their companies' legal rights and interests. Furthermore, it has encouraged the companies under ST or *ST, whose major shareholders have weak repayment capacity, to explore combination of various clearing modes so as to complete the debt clearing before the end of this year. For the behaviors of promise violation, occupation disguise and additional occupation, the SSE has made timely public censure to the companies and persons in charge.
The recent "Choice Cases of Listed Companies' Debt Clearing in 2006" specially compiled by the SSE, with the experiences in debt clearing of the typical 27 companies on the SSE, aims to orient the companies which have not completed their debt clearing and related parties to further explore clearing and innovation methods. It is learnt that the SSE will, according to regulations, continue to urge the listed companies to complete their debt clearing on schedule. Meanwhile, it encourages the companies to file lawsuits against those stubborn capital occupiers for their legal responsibilities. It is believed that the debt clearing on the SSE, upon the last-round effort, will step forward to a new level.