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On November 27, 2020, the Shanghai Stock Exchange (SSE) issued the Business Guide No. 1 of Shanghai Stock Exchange for Corporate Bond Duration - Rules for Corporate Bond Holders' Meetings (Reference Text) (the "Reference Text" for short). The holders' meeting system is the core mechanism established by the Securities Law for the protection of investors' rights and interests in the bond market. The Minutes of the National Courts Symposium on the Trial of Bond Disputes (the "Minutes" for short) issued in July this year has further strengthened the judicial protection of this system. In this context, focusing on solving problems, the SSE has organized market institutions to study and formulate the Reference Text with focus on the issues that the market is concerned about, such as the vague decision-making scope and authority of the meeting, insufficient effectiveness of resolutions and lack of procedural flexibility. The implementation of the Reference Text will help further regulate the operation of the holders' meeting mechanism, give full play to the role of the holders' meetings as a platform for discussions, make the protection of bond investors' rights and interests more effective and propel the transformation and upgrading of the duration management mechanism for the bond market.
The Reference Text aims to guide market entities in clearly setting up the rules and procedures for the holders' meeting, and promote the formation of an effective governance and check mechanism from within the market. The Reference Text consists of seven chapters in total, mainly covering the following aspects: First, the discussion of important matters related to the holders' common rights and interests is clarified as the objective of the holders' meeting, and the specific scope of authority of the holders' meeting is detailed and determined. Second, the Reference Text attaches importance to the feasibility and pertinence of the proposals, encourages full communication on the matters to be considered among the parties concerned, enhances the role of the convener in organization and coordination, and advance the effective implementation of the resolutions of the holders' meetings. Third, the Reference Text improves the voting mechanism for the meetings, encourages bondholders to actively attend the meetings and exercise their voting rights, and establishes a voting mechanism that differentiates between general matters and major issues, so as to balance the relationship between the protection of rights and interests of individual holders and the efficiency of the protection of rights of the holders as a whole. Fourth, the Reference Text standardizes and elaborates the procedures for convening the meeting, and clarifies the procedures and requirements for changing, cancelling, and holding the meeting in an urgent or simplified manner, so as to substantially improve the efficiency of discussion of the holders' meetings.
Protection of investors' rights and interests is the fundamental mission of the high-quality development of the bond market. The SSE has always attached great importance to building the long-term mechanism for the protection of investors' rights and interests, and actively expanded market and law-based tools for default settlement. Going forward, the SSE will facilitate the effective implementation of the principles of the Reference Text by organizing special training and strengthening daily guidance. At the same time, the SSE will continue to deepen the reform of the registration-based issuance system for the bond market, accelerate the formulation of relevant supporting rules, improve the mechanisms for resolving and handling market risks and duration management, and enhance the effectiveness of the protection of investors' rights and interests.
