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On November 27, the Shenzhen Stock Exchange (SZSE) issued the Guidelines for Preparing Rules Governing Corporate Bondholders’ Meetings (Reference Text) (“Reference Text”), providing preparation guidance for the rules governing on corporate bondholders’ meeting convening, holding, resolutions and other work that have wide market attention recently. Through this move, SZSE aims to further implement the requirements of the new Securities Law on increasing investor protection, strengthen the protection of corporate bond investors’ rights and interests, bring the bondholders’ meeting mechanism into better play, and provide market players with more targeted and warmer regulatory services.
Designed to improve the decision-making efficiency of bondholders’ meetings and facilitate the decision implementation, this Reference Text emphasizes both the standardization and flexibility of meeting regulations, defines the rights and liabilities of all parties including trustees, issuers, and investors, guides the establishment of a clear, efficient and pragmatic bondholders’ meeting discussion mechanism, and makes bondholders’ meetings function better in protecting investors’ rights and interests.
Defining the scope of meeting resolutions and establishing a layered voting mechanism. On the basis of relevant regulations such as the Measures for the Issue and Trading of Corporate Bonds released by the China Securities Regulatory Commission and the Listing Rules for Corporate Bonds released by SZSE, the Reference Text further enumerates all specific circumstances where relevant decisions should be made through meeting resolutions. The Reference Text also adds financial indicators to help define such circumstances. Accordingly, the Reference Text becomes more operable and applicable. Besides, the Reference Text divides meeting proposals into special and general ones basing on their impact on bondholders’ rights and interests, and establishes a proportion-based differentiated voting mechanism to improve the decision-making efficiency of meetings while protecting investors’ rights and interests.
Specifying all participating parties’ rights and liabilities and promoting the implementation of meeting resolutions. In terms of meeting preparations, the Reference Text stipulates that a trustee serves as the main convener for a bondholders’ meeting.The Reference Text highlights the main convener’s leading role, requiring that the main convener should strengthen its communication with issuers, credit enhancement entities, bondholders and other stakeholders, and revise and refine the proposals to ensure their legitimacy, compliance and feasibility. The Reference Text sets out that during a corporate bondholders’ meeting, the issuer or its related parties should attend the meeting, accept inquiries and make explanations as per the convener’s requirements. According to the Reference Text, after a meeting resolution is made, the trustee shall actively perform its responsibility to urge the issuer or its related parties to timely reply to or implement the resolution.
Raising the standardization of meetings and considering the flexibility of procedures. The Reference Text comprehensively regulates the general meeting procedures, with detailed procedural requirements set out for all key nodes in holding and convening meetings and reviewing resolutions. Meanwhile, the Reference Text stipulates that the meeting notice time can be shortened in a circumstance which is emergent and beneficial to protecting bondholders’ rights and interests. And the Reference Text allows establishing simplified procedures for the matters expected to have no significant adverse impact on protecting bondholders’ rights and interests.
Complying with the requirements of the Minutes of the National Courts Symposium on the Trial of Bond Disputes issued by the Supreme People’s Court and raising the uniformity of regulations. The Supreme People’s Court recently issued the Minutes of the National Courts Symposium on the Trial of Bond Disputes (“the Minutes”) to regulate such issues as voting avoidance for bondholders’ meetings, the binding force of resolutions, and qualifications of litigation subjects. According to relevant requirements of the Minutes, the Reference Text defines the specific scope of the issuers and their related parties that should avoid the voting, and lists the circumstances where credit enhancement entities and debt receivers should avoid the voting. The Reference Text sets out that unless otherwise stipulated or agreed, the resolutions of the bondholders’ meeting are effective for all holders. The Reference Text reiterates that trustees have the right to initiate and participate in litigation after obtaining authorization from all or part of holders according to the meeting resolutions.
As investors are the foundation for market development, respecting, revering and protecting investors embodies the practice of people-centered development in the capital market. Next, SZSE will continue to implement the guiding principles of the new Securities Law, and earnestly carry out the policy of “system building, non-intervention and zero tolerance”. In line with the requirements of the China Securities Regulatory Commission, SZSE will constantly refine the basic systems, actively respond to market concerns, and provide sustained and intensified legal guarantee and institutional supply. SZSE will keep protecting investors’ legitimate rights and interests throughout the regulatory process, to help create a standardized, transparent, open, dynamic and resilient capital market.
