Pursuant to the coordinated plan of China Securities Regulatory Commission, Shanghai Stock Exchange (SSE) recently revised the Rules for Review of Major Asset Restructurings of Listed Companies (hereinafter referred to as the "Restructuring Review Rules") and supporting business guides. This initiative represents a significant step forward in implementing the Several Opinions on Strengthening Supervision, Preventing Risks and Promoting High-Quality Development of the Capital Market (hereinafter referred to as the "Several Opinions") as well as the M&A Six Opinions.
The newly revised Restructuring Review Rules streamlines the review procedures and improves efficiency by significantly simplifying the review process and shortening the timeline for qualified listed companies seeking share issuance restructuring. Compared with the draft for comment, the final revision loosens the eligibility requirements for the "small rapid financing" and the simplified review process, and encourages eligible listed companies to opt for a more efficient review process. At the same time, the revision adjusts the disclosure and review requirements for such matters as installment payment of consideration in share restructuring. Along with the Restructuring Review Rules, amendments are made to No. 5 Major Asset Restructuring of Listed Companies of SSE Guide No. 4 for Review Business of Issuance and Listing—Self-Checklists for Frequently Encountered Issues Related to Disclosure and Verification Requirements. They include adding new disclosure and verification requirements concerning the acquisition of unprofitable assets, cross-industry mergers and acquisitions (M&As), mergers by absorption, and installment payments, which aims to support technological innovation and the development of new quality productive forces; adding disclosure and verification requirements for using multiple assessment methods as pricing basis, in order to further enhance regulatory inclusiveness; amending the specific disclosure and verification requirements for the suitability of the listing board and the listing standards of restructuring companies, setting clear self-assessment criteria for loss-making target assets, high appraisal increases, goodwill, and impairment risks, so as to ensure the quality of the acquired assets while enhancing system adaptability.
Since the release of the Several Opinions and the M&A Six Opinions, the SSE has continued to optimize the mechanism and process of restructuring review and stepped up efforts to support listed companies in acquiring high-quality assets.
First is to implement the "Three Opens (open-door review, open-door regulation, and open-door service)" initiative in restructuring review. This includes optimizing the consultation mechanism prior to the application for restructuring review. Before listed companies issue restructuring plans, they can request exchanges for information under the condition of confidentiality, and the time needed for feedback will be reduced from 10 working days to 5 working days. Since the release of the M&A Six Opinions, more than 40 consultations have been conducted before restructuring applications, a significant increase year-on-year. In response to the issues raised during pre-application communication, the SSE will promptly analyze the concerns and provide constructive feedback, effectively addressing market requests. During the review process, the SSE will step up communication efforts through various channels, such as phone calls and in-person meetings, to clarify regulatory guidance and requirements, thereby reducing and avoiding "information discrepancies".
Second is to focus on improving the quality and efficiency of restructuring review. Since the release of the M&A Six Opinions, SSE-listed companies have disclosed 31 new restructuring plans that intend to acquire assets through new share issuance. Among those, 21 applications have been accepted and 9 applications have successfully concluded. This has significantly boosted market vitality. The review efficiency has been significantly improved, with the timeline from application acceptance to registration averages at 3 months. The SSE will implement the requirements of "strengthening supervision in accordance with the law", strictly ensure intermediaries fully discharge their duty, clarify the precautions for restructuring pre-communication, and outline the relevant requirements for independent financial advisors to play their professional role. This approach aims to boost the market synergy and enhance the quality of listed companies.
Third is to support the implementation of exemplary deals. Deals fostering technological innovation and the development of new quality productive force include: Seres Group Co., Ltd., JDM Jingda Machine (Ningbo) Co., Ltd., and Huada Automotive Technology Corp., Ltd. deeply integrated with peer companies and upstream and downstream companies through restructuring; Shanghai Sanyou Medical Co., Ltd. expanded its ultrasonic bone scalpel business via M&As to identify new growth drivers. Cross-industry M&A deals that fit business logic include: Guangdong Songfa Ceramics Co., Ltd. acquired profitable shipbuilding operations through M&A while divesting loss-making assets. M&A Deals by securities companies to enhance their core competitiveness include: Guotai Junan Securities Co., Ltd. merged with Haitong Securities Company Limited, marking the first merger between leading securities firms since the release of the Several Opinions, which is currently the largest A+H share merger by absorption. Deals that improve the inclusiveness of restructuring valuation include: RIGOL Technologies Co., Ltd.'s M&A target has an appraisal appreciation rate exceeding 900%, aligning with the pricing logic of targets with science and technology innovation merits. Deals that diversify restructuring payment methods include: 3peak Incorporated issued targeted convertible bonds to acquire target assets, marking the first project following the introduction of the targeted convertible bond restructuring rules.
Going forward, the SSE will leverage this revision to implement reforms by organizing training on regulatory rules, enhancing pre-application consultation and communication services, improving the efficiency of the restructuring review process, and increasing regulatory inclusiveness. At the same time, the SSE will continue to strengthen supervision and guide all parties involved in transactions to conduct M&A activities in a regulated manner.
