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In recent years, as new economy, new business formats and new modes keep springing up, listed companies, based on the needs of development and transformation, are more and more willing to explore new fields through various means including signing framework agreements. According to statistics, ChiNext companies disclosed 415 strategic framework (cooperation) agreements in 2015, an increase of 99% from that in 2014. In the future, as the listed under new economic normal develop and transform, such disclosure would be of larger scale.
Overall, by signing and performing those agreements, listed companies have effectively expanded their room of growth to offer better return to investors. The disclosure, however, reveals the following deficiencies in the framework agreements disclosed by a few listed companies: 1) announcement content caters to the market hotspot and exerts one-sided impact on company stock prices; 2) announcement content is general and delivers more positive statement but fewer risk warnings; and 3) some announcements contain no material content and just abet short-term speculation.
To further intensify front-line regulatory effort, improve market transparency and protect investors' legitimate interests, Shenzhen Stock Exchange (SZSE) issued the Announcement Format for Signing Strategic Framework (Cooperation) Agreement by ChiNext Listed Companies ("Framework Agreement Format" for short) to fully regulate the information disclosure of interest, specifically adding the following disclosure requirements:
To strengthen the disclosure of agreement performance risk. This mainly manifests in three aspects: first, companies should make adequate risk announcement if the key terms are not certain, such as performance schedule, cooperation scale or amount, parties' rights and interests, distribution plan and default liabilities. Second, if the coming-into-force conditions or performance conditions are not yet ready, companies should offer special reminder and disclose the preceding procedures for coming-into-force or performance, e.g., the procedures of review and decision-making, approval or putting on records. Third, if the agreements involve new business, new technologies, new modes, new products or other matters of high market attention, companies should disclose the feasibility demonstration of relevant matters and the present stage. In addition, risk warnings contain the source of agreed investment amount, the risk of payment capability, the risk of share lessening by majority shareholders and other content.
To disclose the agreement influence on the current-year performance and operation. Previous disclosure indicates that some listed companies have bypassed the risk and uncertainty of framework agreements and used statements of publicity nature to enhance investors' expectations and mislead them to believe the agreements would have major impact on the current-year company performance. Therefore, the Framework Agreement Format requires that listed companies, when disclosing such agreement influence on the company, should clearly state the impact on the annual performance and operation of the current year and subsequent years and be specific on such impact as possible to let investors set clear expectations.
To review implementation results of previous framework agreements. Framework agreements feature great uncertainty and free of mandatory constraint on parties to contract. In order to protect investors' right to know, the Framework Agreement Format requests statements on the progress as of present of the framework agreements disclosed in recent three years and special revelation of circumstances having no subsequent development or failing the expectations.
To keep disclosing the agreement development. In order to prevent some companies from chasing market hotspots via framework agreement disclosure, the Framework Agreement Format sets that after the disclosure, listed companies should exert discretion in judging the progress or major changes of relevant matters and disclose important development in the form of interim reports and agreement performance progress in periodic reports.
Responsible officers of SZSE reminds investors that a few framework agreements do lack of material content and mandatory constraint and that subsequent progress is uncertain; therefore, investors should fully understand the risk of investment, avoid bandwagon or speculation, and make rational investment. SZSE will strictly regulate in accordance with law and press ChiNext companies to improve the information disclosure quality of framework agreements to protect investors' legitimate interests.
