On April 30, SZSE revised the Rules Governing the Review of Major Asset Restructuring of Listed Companies on the ChiNext Board and the Measures on Administration of the Listing Committee of the ChiNext Board and solicited public opinions, in an effort to conscientiously implement the Opinions of the State Council on Further Improving the Quality of Listed Companies, improve review procedures for mergers and acquisitions ("M&A") under the pilot project of the registration-based IPO system of the ChiNext Board and better play the role of M&A in improving the quality of listed companies.
Since the implementation of the pilot project of the registration-based IPO system of the ChiNext Board, SZSE has endeavored to establish open, transparent and predictable review procedures in the direction towards marketization and legal compliance and based on three principles of respecting basic implications of the registration-based IPO system, drawing on international best practices and reflecting Chinese Characteristics and development stage as well as the reform characteristics of current markets, so as to ensure smooth review of M&A on the ChiNext Board and stronger sense of gain of market players.
First, strictly controlling the quality of review of M&A with the focus on information disclosure. In view of financial indicator abnormality of some M&A subjects, SZSE has effectively formed regulatory deterrence and continuously urged listed companies to improve information disclosure through stepping up efforts in targeted inquiry, consulting industrial experts, requesting on-site supervision, taking self-regulation measures and other methods. By April 30, 2021, SZSE conducted on-site supervision of independent financial advisers for three M&A applications, took self-regulation measures against two independent financial advisers and one listed company and issued a letter of regulatory concern to two independent financial advisers. Of particular note, six companies withdrew and terminated transactions.
Second, working hard to raise review efficiency and enhance the sense of gain of enterprises in reform. While strictly ensuring review quality, SZSE kept improving review efficiency through streamlining M&A review process, proactively supported the listing of eligible subjects of M&A and constantly enhanced the sense of gain of enterprises in reform. By April 30, 2021, eight M&A applications have passed SZSE's review and another seven M&A applications have been registered and become effect.
Third, sticking to transparent reform and clarifying market expectations. Through review information disclosure website and SZSE Service APP, the whole chain of review standards, processes, results and regulatory measures have been made known to the public, and the whole audit process has been made visible, clear and understandable to investors. In addition, SZSE has publicized review standards and interpreted policies by preparing typical cases or answering common questions to reflect review updates, highlighting review transparency and clarifying market expectations.
With steady advancement of the registration-based IPO system, some new circumstances and problems emerged. On the one hand, the underlying assets of some M&A projects on the ChiNext Board declined in quality and showed asset-light feature, and their value-added rate was overestimated. On the other hand, a few listed companies have not really developed the concept commensurate with the registration-based IPO system and their information disclosure was low-quality. Relevant rules and arrangements should be adjusted and improved based on the registration-based IPO system practice.
On the basis of summarizing previous practice and experience in the review of M&A on the ChiNext Board and operation of the Listing Committee, SZSE further refined review procedures for M&A and proposed to set up a committee for M&A on the ChiNext Board that is responsible for reviewing the application of listed companies on the ChiNext Board for issuing shares to purchase assets and for M&A and listing. Meanwhile, the review period was extended from 45 days to two months. The period extension was intended to cater to the needs of added review steps. SZSE has been committed to improving review efficiency. Taking eight M&A applications that have passed review as an example, the period taken from acceptance to submission to CSRC for registration was 35.8 days on average.
The registration-based IPO system is an outline of this round of capital market reform and a critical and major reform. SZSE will continue to conscientiously practice the policy of "system building, non-intervention, and zero tolerance", persistently improve basic rules according to the requirements of "stand in awe of the market, rule of law, professionalism and risks, and the capital market’s development needs the efforts of all sides", the work concept of "open-minded, transparent, honest and strict" and the principle of focusing on information disclosure, exert stricter control over review quality, constantly raise review efficiency and take solid steps in the assessment, improvement and optimization of pilot registration-based review of M&A on the ChiNext Board to accumulate experience for current market reform. At the same time, SZSE will give full play to the role of M&A as a main channel in the capital market, properly balance the implementation of the registration-based IPO system and improvement of quality of listed companies, and steadily promote the reform of the ChiNext Board and the pilot project of the registration-based IPO system.
