With the registration system coming and the regulator streamlining administration and decentralizing authority, the intensification of regulation on information disclosure is being accelerated. Recently, the Shanghai Stock Exchange (SSE) released the “Notice of Carrying out Information Disclosure Work of Mergers, Acquisitions and Reorganizations in Non-license Category” (the “Notice” for short) in a bid to further carry out the regulatory idea of “Loosening Control and Cementing Regulation” and carry out relevant requirements of the China Securities Regulatory Commission (CSRC).
It is learnt that the SSE, a frontline regulator of information disclosure, released the “Notice” to cement the in-process and aftermath regulation on mergers, acquisitions and reorganizations in non-license category, strengthen relevant information disclosure, enhance the transparency of the merger, acquisition and reorganization market, curb the violation of dodging regulation through mergers, acquisitions and reorganizations in non-license category, and prevent from any mess after decentralizing authority.
Since the beginning of this year, the CSRC has continuously propelled the market-oriented reform of mergers, acquisitions and reorganizations. In the “Administrative Measures for Significant Asset Reorganization of Listed Companies” (the “Measures for Reorganization” for short) and the “Administrative Measures for Acquisition of Listed Companies” recently released, the CSRC cancelled the examination and approval of significant purchases, sales, and replacements of assets by listed companies without being involved in back-door listing, and also cancelled the prior examination and approval of tender offer.
An analyst says that the above-mentioned cancellations consolidate the exchanges’ supervision over listed companies’ information disclosure, embody the regulatory ideas of streamlining administration and decentralizing authority, strengthening information disclosure, and cementing in-process and aftermath regulation, as well as meet the trend of the capital market’s development.
Requirements for information disclosure specified
Turning from prior examination and approval to aftermath examination and approval shows a major change in regulatory idea, which will help listed companies, reorganization parties, and intermediaries fulfill their responsibilities, thus improving the market efficiency.
The “Notice” includes the following 3 aspects: first, it is specified to carry out aftermath examination on mergers, acquisitions and reorganizations with administrative license already canceled. Nevertheless, considering the business operation issue related to tender offer, prerequisite form examination will still be carried out for a tender offer report’s full text; second, the arrangement for 6-month transition is implemented. During the transition period, a listed company should simultaneously apply for suspension of stock trading after disclosing a scheme of major asset reorganization in non-license category, or directly disclosing a report draft of reorganization in non-license category. The period of trading suspension should not be more than 10 working days, and the SSE should complete the examination on information disclosure within 10 working days; third, it is stressed that companies with problems found in aftermath examination should make supplementary disclosure. It is also specified in the “Notice” that for any document of information disclosure failing to meet relevant regulations, the SSE will require the relevant company to explain, and disclose an announcement on modification or supplementation as well as full text and abstract of the amended report.
An analyst says that aftermath examination could reduce time for trading suspension, which helps to boost relevant work items of market participants including listed companies and elevate the market efficiency. Besides, the regulation of supplementary disclosure will greatly meet investors’ right to know and protect their interests. Through reading announcements, investors could better understand details of listed companies’ mergers, acquisitions and reorganizations as well as the concerns of the regulators and relevant trading risks, which help them make decisions in their transactions.
Average time for trading suspension: only 3.67 days
Facts have proved that “Streamlining Administration and Decentralizing Authority” has lifted the market efficiency, vitalized listed companies, propelled the capital market’s function of optimizing resource allocation, thus showing the fundamental purpose of the capital market: serving the real economy.
Statistics show that since the “Measures for Reorganization” came into force, the numbers of significant purchases, sales, and replacements of assets by listed companies without being involved in back-door listing have seen dramatic increases. As of December 12, in the SSE market, 6 listed companies had disclosed schemes of major asset reorganization or report drafts of reorganization in non-license category. *ST Shanghai Sanmao Enterprise (Group) Co., Ltd., Sichuan Western Resources Holding Co., Ltd., and *ST Baoding Tianwei Baobian Electric Co., Ltd. had made supplementary disclosure of announcements on remarks on revision and resume stock trading according to the SSE’s aftermath examination opinions.
Remarkably, the average time for trading suspension after the above-mentioned 3 companies disclosed reorganization schemes is only 3.67 working days, including time for the SSE’s examination and that for the companies’ preparations for information disclosure documents for supplementary remarks, far less than the 10 working days at most as regulated.
An insider of the SSE introduces that SSE Department I of Listed Companies Supervision has established a strict, high-efficient, and orderly internal examination system for this. It carries out aftermath examination on reorganization schemes according to media reports after the reorganization schemes are disclosed, and completes the examination work in principle within 5 working days.
The insider also reveals the major concerns in aftermath examination. With information disclosure as the core, importance is attached to necessity of acquisition, cooperativity of business, compliance of ownership, fairness of target asset’s pricing, rationality of profit prediction, and appropriateness of accounting treatment. For cash offer, the SSE also pays attention to whether a purchaser could pay and whether uncertainty in implementing a scheme and other risks have been disclosed to investors.
A market participant says that the above-mentioned issues cover major core problems in mergers, acquisitions and reorganizations of listed companies in non-license category, which are also top concerns of investors. The more specific disclosure listed companies make, the better judgments investors will make. Especially, after the 6-month transition, no trading suspension will be arranged during the period of aftermath examination, and the efficiency of information disclosure for mergers, acquisitions and reorganizations in non-license category will be further elevated as well.
Source: Shanghai Stock Exchange
Notice of Carrying out Information Disclosure Work of Mergers, Acquisitions and Reorganizations in Non-license Category