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Shenzhen Stock Exchange (“SZSE”) recently promulgated the Format of Announcement on Equity Pledge (including Freeze, Auction and Trust Creation) by Shareholders of Listed Companies (hereinafter referred to as “Format of Announcement on Equity Pledge by Shareholders of Listed Companies”), aiming to further standardize the information disclosure on the behaviors of equity pledge (including freeze, auction and trust creation) by shareholders of listed companies and improve the effectiveness and pertinence of information disclosure on equity pledge of listed companies.
In recent years, with the active trading in capital market and high demand for capital liquidity, it is common for shareholders of listed companies to get financing by way of equity pledge, etc.. According to the data statistics of Wind, shareholders of more than 900 listed companies in the Shanghai and Shenzhen Stock Exchange got financing by equity pledge from January to June 2015, with more than 2700 times of pledge. Some controlling shareholders of listed companies pledge more than 80% of shares held by them, the pledge proportion is relatively high.
Related officer of SZSE said, SZSE has been paying great attention to the high-proportion equity pledge of listed companies, as for the circumstances that controlling shareholders of listed companies pledge high proportion of shares held by them, it has reinforced the regulation for information disclosure on equity pledge behaviors of controlling shareholders by ways of sending regulation concerned letter to listed companies and requiring listed companies to strengthen risk disclosure in announcements, etc.. According to the statistics, SZSE has sent 69 regulation concerned letters to 63 listed companies for the circumstances that controlling shareholders of listed companies pledge high proportion of shares held by them since the beginning of 2015. During the abnormal stock price fluctuation in Chinese stock market in 2015, some controlling shareholders of listed companies faced the risks of their equity pledge proportion to touch the warning line or position liquidation line, SZSE required more than 30 companies applying for trading suspension to disclose the equity pledge proportion of controlling shareholders in announcements, and more than 10 listed companies to disclose controlling shareholders and their position liquidation risk status, so as to strengthen the requirements for information disclosure on equity pledge behaviors of controlling shareholders of listed companies and reinforce the revelation of equity pledge risk of controlling shareholders.
As for new problems and situations arising in the market, the Format of Announcement on Equity Pledge by Shareholders of Listed Companies formulated by SZSE, on one hand, enables investors to fully understand the equity pledge, freeze and other situations of shareholders of listed companies, on the other hand, enables investors to timely know the position liquidation risk existed in the equity pledge of controlling shareholders of listed companies. It is said that listed companies should timely disclose announcements when more than 5% shares of the Company held by any shareholder are pledged, frozen or under other situations, or shares held by controlling shareholders have position liquidation risk or compulsory transfer risk. It is known that the information disclosure requirements in the Format of Announcement on Equity Pledge by Shareholders of Listed Companies cover the following three aspects:
Firstly, it requires disclose relevant equity pledge information of shareholders in a table format, including name of shareholder, number of pledged shares, pledgee and proportion of pledged shares in total shares held by the shareholder. Relevant information disclosed in a table format enables investors to understand relevant situations of equity pledge of shareholders of listed companies in a more intuitive and comprehensive way.
Secondly, it further defines that listed companies should disclose the name of shareholder, the first majority shareholder or not, number of frozen, auctioned or trust-created shares and proportion of such shares in total shares held by the shareholder, and specific situation of equity freeze, auction or trust creation when shareholders’ shares are frozen, auctioned or created trust.
Thirdly, it clearly defines that listed companies should disclose the possibility of change in actual control right, remedial measures adopted by controlling shareholders and risk of change in actual controller when pledged shares of controlling shareholders exist the position liquidation risk, or frozen, auctioned or trust-created shares of controlling shareholders exist compulsory transfer risk. Meanwhile, listed companies should fulfill the obligations of continuous information disclosure on subsequent progress.
Related officer of SZSE said, SZSE would continue to strengthen the regulation on equity pledge, freeze and other behaviors of shareholders of listed companies. Moreover, the Format of Announcement on Equity Pledge by Shareholders of Listed Companies had been included into the Memorandum of Information Disclosure Business of Listed Companies, relevant contents can be found under the Rules and Regulations Section of SZSE’s official website.
