Today, the Shanghai Stock Exchange (SSE) issued two sets of rules, including the Guidelines of Shanghai Stock Exchange for the Application of Self-Regulation Rules for Listed Companies No. 1 - Major Asset Restructuring (the Guidelines for Listed Companies No. 1 for short) and the Guidelines of Shanghai Stock Exchange for the Application of Self-Regulation Rules for the Listed Companies on the SSE STAR Market No. 1 – Regulated Operation of Listed Companies (the Guidelines for SSE STAR Market No. 1 for short), marking the initial results achieved in streamlining and optimizing the system of rules for continuous regulation of the SSE-listed companies.
The rules for continuous regulation of listed companies are an important part of the basic system of the stock market, and the development of the self-regulation rules is also a key task for the SSE. The regulation of companies involves multiple entities and issues, and the corresponding sets of rules are also complicated. Since the beginning of this year, with the formal enforcement of the new Securities Law, the SSE has taken the user-oriented approach to step up the integration and optimization of rules, and strived to set up a concise, clear and customer-friendly system of rules for continuous regulation. First of all, the levels are reduced. The vertical levels are decreased in the system of long-established rules consisting of basic rules, detailed rules, guidelines, notices and guides, and a system of rules for continuous regulation centered on rules for listing of stocks and supplemented by the guidelines for application of rules has been gradually formed. Secondly, efforts have been made in merging and integration. In view of the large number of business rules and the huge system, similar matters scattered in different rules are merged horizontally to reduce the number of rules, facilitate the search and use and gradually form a categorized system consisting of ordinary information disclosure, corporate governance and special businesses. Thirdly, the unified numbering has been implemented. The guidelines for application of rules and the business guides under the basic business rules are included in the numbering management and are sequentially numbered based on the business category, so as to facilitate the identification and inquiry by market entities. Fourthly, the standards are clarified. The regulatory requirements scattered in lower-level documents such as business notices and guides have been fully examined, the unsuitable provisions among them are abolished, the reasonable regulatory standards implemented in practice are integrated and merged into the guidelines for application of rules, which will be disclosed to the market, and the "hidden policies" and the "invisible thresholds" will be eliminated. Fifthly, the rules are simplified. The requirements for information disclosure in the system of rules that are not highly relevant to investors' decision-making for investment are eliminated, with redundancies deleted and key points highlighted, so as to reduce unnecessary costs of information disclosure and relieve listed companies of their burden on the premise of meeting the investors' demands for information.
Going forward, the SSE will continue to earnestly implement the requirements of "building the system, non-intervention, and zero tolerance", focus on strengthening corporate governance and supervision of information disclosure, continuously improve the system of rules for regulation of listed companies, and build a system of rules that is clear in structure and format and easy to understand and use, so as to provide effective support for the self-regulation system in improving the quality of listed companies and better serving the listed companies and other market entities.
Regarding the Guidelines for Listed Companies No. 1
Based on the SSE's Business Guidelines for Information Disclosure of Listed Companies on Major Asset Restructuring, the Guidelines of Shanghai Stock Exchange for the Application of Self-Regulation Rules for Listed Companies No. 1 - Major Asset Restructuring is released as one of the important measures taken by the SSE to implement the requirements of the China Securities Regulatory Commission (CSRC) for the market-based reform of M&A and reorganization and support and guide the listed companies in tapping into idle and existing resources and transformation and upgrading through M&A and reorganization, with 8 sets of rules at the SSE level for information disclosure on M&A and reorganization integrated and absorbed. On the whole, with the format and structure optimized and the requirements for information disclosure simplified, the incorporation of the SSE's requirements for information disclosure on reorganization into a specific set of business rules will further facilitate the listed companies' disclosure of information on M&A and reorganization, reduce the information disclosure costs, and improve the efficiency of M&A and reorganization.
First of all, efforts have been made in streamlining and merging, and the special rules for M&A and reorganization have been integrated. At present, the SSE has 8 sets of business rules and guidelines related to M&A and reorganization, which mainly regulate information disclosure and announcement formats related to mergers and acquisitions and reorganizations, and also involve procedures for handling and operating specific businesses related to M&A and reorganization such as media briefings on reorganization and listing, the financial advisory business for major asset restructuring, and cash options for listed companies. The rules mainly aim to guide the companies in effectively performing information disclosure on the specific business of M&A and reorganization. Among them, some rules were formulated a long time ago, some were specific to some stages, and some have been replaced by subsequent higher-level rules. For the users in the market, there is also the problem that some rules are scattered and inconvenient for investors to check and use. In this regard, the scattered provisions were brought together in the revision, as 8 sets of rules for reorganization including the Business Guidelines for Information Disclosure of Listed Companies on Major Asset Restructuring were merged and incorporated into the Guidelines for Listed Companies No. 1. After the optimization of the system of rules, the exchange-level rules for the special business of information disclosure on M&A and reorganization has formed the “all in one” framework, making it easier for the listed companies to understand and use the provisions.
Secondly, the costs of information disclosure are reduced, and efforts have been made to meet the diverse needs of the market. On the basis of the developments in the market conditions and the actual demands of the listed companies, the requirements for information disclosure in some scenarios are further simplified with the aim of improving the restructuring efficiency. For example, in practice, when releasing the notice of planned reorganization, some companies may not be able to disclose the name of the specific underlying asset because they have not yet completed the integration of the underlying assets or businesses. In this regard, the new rules clarify that if the specific name of the reorganization target cannot be determined when the notice is released, the underlying assets or the business scope can be disclosed first, and then the obligation of continuous disclosure shall be fulfilled subsequently. Thus, the principle of phased disclosure is further demonstrated, and the companies will also find it easier to balance the relationship between planning reorganizations and the investors' right to know. For another example, during the pandemic prevention and control, as there might be certain difficulties in holding on-site media briefings, some companies tried to convene the briefings online, achieving satisfactory results. For this reason, fully considering the companies' reasonable demands, the new rules eliminate the requirement that media briefings should be held on-site, and the companies can hold them online on the premise of ensuring the quality of the meetings. In accordance with similar considerations and combining practical experience, multiple timing slots for the information disclosure process of public bidding, public auction and other asset transactions with specific procedures have been provided for companies to choose from, so as to avoid affecting the transaction process for the companies because of ambiguous disclosure.
Regarding the Guidelines for SSE STAR Market No. 1
The Guidelines for SSE STAR Market No. 1 issued this time merges and integrates 22 sets of business rules for regulated operation on the SSE STAR Market that originate from the main board, with improvement made in three aspects at the same time.
First of all, efforts are made in organic integration. According to the logic of the rules, different matters are classified into categories for organic integration. For example, the model rules of procedure for board of directors and board of supervisors, the guidelines for operation of audit committee and the guidelines for internal control are merged into the Chapter of Corporate Governance, and the guidelines for selection and appointment and conduct of directors, the guidelines for registration and training of independent directors and the measures for management of board secretaries are incorporated into the Chapter of Directors, Supervisors and Senior Executives. There are a total of 282 articles in the integrated guidelines, nearly half the number of the 530 articles in the 22 sets of rules before the integration.
Secondly, reasonable simplification is implemented. To fully respect the decision-making right of the companies on the SSE STAR Market, some rules and requirements that are not compatible with the reform of the registration-based IPO system are adjusted, with flexibility retained for the internal governance of the companies on the SSE STAR Market. For example, some matters of the companies' internal governance such as nomination, selection and assessment of directors are no longer subject to compulsory provisions, and the companies can clarify these matters in their articles of incorporation according to actual needs. At the same time, considering the particularity of red-chip companies in terms of corporate governance, necessary differentiated provisions have been formulated.
Thirdly, the key points are highlighted. In addition to integration and simplification, a special chapter is set in the Guidelines for SSE STAR Market No. 1 to collectively regulate in terms of corporate governance, internal control and the responsibilities of the key people and avoid the violations and major risk such as financial fraud, capital appropriation, illegal guarantees and high-proportion equity pledges that are of great concern to the investors, so as to effectively prevent market chaos from recurring on the SSE STAR Market.
In addition, in the integration of the rules, 7 sets of commonly used guidelines for announcement format on the SSE STAR Market have also greatly simplified, involving acquisition or sale of assets, outbound investment, offering guarantees, related party transactions, signing of strategic framework agreements, shareholding increase, and joint investment with private equity funds, etc. On one hand, in strict accordance with the significance principle, a number of redundant requirements for information disclosure are deleted, with a total of more than 100 requirements for disclosure and statement removed. For example, in the notice of the acquisition or sale of assets, the matters to be disclosed that have little impact on the decision-making for investment such as the transaction background, the use of proceeds from the sale of assets, and the gender and nationality of the natural person counterparty are deleted. On the other hand, a large number of items required to be disclosed are transformed into principled guidelines plus guiding suggestions. Take the notice of outbound investment as an example, when a company is set up to carry out outbound investment, it is no longer mandatory to disclose the target company's business scope, registered capital, capital contribution mode, management personnel arrangements and other matters. Instead, it is clarified that the notice should provide the target company's basic information, and based on the degree of importance, the company is allowed to specifically disclose the matters listed above that have a significant impact on investment decisions.
It should be noted that as a board of incremental reform, the SSE STAR Market applies both dedicated business rules and some general business rules in the system of continuous regulation for its listed companies. Regarding the general rules, the SSE has published and continuously updated the Catalogue of General Business Rules for Continuous Regulation of Listed Companies on the SSE STAR Market on its official website to facilitate the market participants' inquiries and understanding. In addition, the names and structures of the information disclosure memorandums have been rearranged, and No. 1 to No. 8 business guidelines for information disclosure of the listed companies on the SSE STAR Market have been issued, making the system of rules clearer and more concise.
