CFIC Introduction
The delisting system has been revised again. On April 12, the China Securities Regulatory Commission issued the "Opinions on the Strict Implementation of the Delisting System", and the stock exchange simultaneously revised and improved the relevant delisting rules and solicited opinions from the market.
On the whole, the revision of the delisting criteria focuses on improving the overall quality of existing listed companies, increasing the clearance of "zombie shells" and "black sheep" through strict delisting standards, reducing the value of "shell" resources, and at the same time broadening multiple exit channels and strengthening the protection of investors of delisted companies.
The China Securities Regulatory Commission said that the next step will be to coordinate and promote the implementation of various measures as soon as possible, severely crack down on all kinds of evasion of delisting, more vigorously protect the rights and interests of investors, improve the quality of listed companies, and purify the capital market ecology.
Strict mandatory delisting criteria
According to reports, the "Delisting Opinions" specifically include the following five aspects. First, we will tighten the criteria for compulsory delisting, including the scope of application for delisting in violation of major violations, include the "hollowing out" of assets due to long-term non-resolution of capital occupation into the normative delisting situation, increase the operating income of loss-making companies and delisting indicators, and improve the market value standard and other trading delisting indicators.
Second, we will further unblock diversified delisting channels. Improve policies and regulations such as absorption and merger, and encourage and guide leading companies to increase the integration of the industrial chain based on their main business.
Third, reduce the value of "shell" resources. Strengthen the supervision of mergers and acquisitions, strengthen the relevance of the main business, and strengthen the supervision of "backdoor listing". Strengthen the supervision of acquisitions, consolidate the responsibilities of intermediaries, and standardize control transactions. Strictly crack down on violations of laws and regulations behind "shell frying". Resolutely liquidate listed companies that do not have reorganization value.
Fourth, strengthen the supervision of delisting. Strictly implement the delisting system, and severely crack down on financial fraud, insider trading, market manipulation and other violations of laws and regulations. Severely punish the "key minority" such as controlling shareholders, actual controllers, directors, and senior executives who lead to major illegal delisting. Promote and improve the three-dimensional accountability system for administrative, criminal and civil compensation.
Fifth, we will implement compensation relief for delisted investors. Comprehensive use of representative litigation, advance compensation, professional mediation and other tools to protect the legitimate rights and interests of investors.
A number of delisting indicators are planned to be further improved
The normalized delisting mechanism is the key to ensuring the sound operation of the capital market. Since the reform of the delisting system in 2020, a total of 135 companies have been delisted in Shanghai and Shenzhen, of which 112 companies have been forced to delist, and the normalized delisting has achieved a stable start. With the profound changes in the market environment and regulatory environment, the current delisting rules need to be further covered and cleared.
The revision of the delisting rules of the Shanghai and Shenzhen Stock Exchanges resolutely cracks down on malignant and long-term systematic financial fraud on the basis of retaining the original delisting criteria for major violations such as fraudulent issuance and evasion of financial delisting.
First, crack down on continuous counterfeiting for many years, and if the counterfeiting continues for 3 years or more, as long as it is determined by administrative punishment, it will be resolutely cleared. Second, we will intensify the clearance of serious fraud, and further lower the delisting standard of "fraud amount + fraud ratio". For those who have committed fraud for one year, the amount of financial fraud in that year reaches more than 200 million yuan, and the proportion of fraud reaches more than 30%, it shall be delisted; if it has been fraudulent for two consecutive years, the total amount of fraud reaches more than 300 million yuan, and the proportion of fraud reaches more than 20%, it shall be delisted. Among them, the one-year and two-year standards apply to false records in 2024 and subsequent years, and the three-year and above standards apply to false records in 2020 and subsequent years.
At the same time, three new normative delisting scenarios have been added. First, if the internal control of a listed company fails, and the controlling shareholder and its related parties occupy funds for non-operational purposes, and the balance reaches 30% of the absolute value of the latest audited net assets or the amount exceeds 200 million yuan, and is ordered by the China Securities Regulatory Commission to make corrections but fails to make corrections within the prescribed time limit, it shall be resolutely cleared. Second, it is proposed to include a company whose internal control over financial reporting has been issued a negative or unable to express an opinion for two consecutive years, or has failed to disclose the internal control audit report in accordance with the regulations, into the scope of delisting risk warning, and if it touches the aforementioned situation again in the third year, its listing will be terminated. Third, the new situation of disorderly struggle for control has urged the company to standardize internal governance.
On the one hand, the operating income index requirements for loss-making companies on the Shanghai and Shenzhen Main Boards will be raised from the current "100 million yuan" to "300 million yuan", and on the other hand, the audit opinion mechanism for internal control over financial reporting will be introduced to delist companies with delisting risk warnings with internal control problems, and the normative requirements for revoking delisting risk warnings will be raised.
The trading delisting indicator has been further improved. The Shanghai and Shenzhen Stock Exchanges appropriately increased the market value delisting target of A-share (including A+B shares) listed companies on the main board to 500 million yuan. It is worth noting that the listing rules of the Main Board, the Science and Technology Innovation Board and the Growth Enterprise Market have also added other risk warning system (ST) indicators applicable to financial fraud. According to the facts stated in the prior notice of administrative penalty issued by the CSRC, if there are false records in the financial indicators of the annual report disclosed by the listed company and the delisting criteria have not yet been met, other risk warnings shall be implemented.
Transitional arrangements announced
At the same time, the Shanghai and Shenzhen Stock Exchanges have clarified the transitional arrangements for the adjustment of the delisting system.
In terms of the delisting indicators for major violations, the newly revised mandatory delisting for major violations will be implemented from the date of promulgation of the new regulations, and the new and old ones will be divided according to the time of issuance of the prior notice of administrative penalties. If the prior notice of administrative penalty is made and disclosed before the issuance and implementation of the new listing rules, it will still be judged in accordance with the provisions of the original listing rules whether it has touched the situation of forced delisting with material violations, and if the advance notice of administrative penalty is issued after the issuance and implementation of the new listing rules, it will be judged in accordance with the provisions of the new listing rules whether the situation of material illegal compulsory delisting has been touched and implemented.
In terms of normative delisting indicators, 2024 is the first fiscal year for the delisting of non-standard opinions on internal control. The circumstances of capital occupation and disorderly struggle for control and major defects in delisting shall come into force on the date of promulgation of the new rules.
If a listed company still has non-operational funds occupied by its controlling shareholder and its affiliates at the time of the implementation of the new rules, and is ordered to make corrections by the CSRC after the implementation of the new rules, and fails to complete the rectification within the prescribed time limit, the new rules shall be applied to determine whether it has touched the standard delisting. If the actual controller has changed before the implementation of the new rules, and the current actual controller has no relationship with the capital occupant, the original capital occupation behavior will not be subject to the delisting under the new rules, and if the actual controller changes after the implementation of the new rules, the new rules will apply to the delisting of the capital occupation standard.
In terms of financial delisting indicators, the revised "loss + operating income" combination indicators of the main board financial category will be based on 2024 as the first fiscal year. At the same time, for companies that are subject to financial delisting risk warning after the disclosure of the 2023 annual report and the relevant circumstances of the original listing rules, if the financial delisting indicators stipulated in the new listing rules are met after the disclosure of the 2024 annual report, the listing of the shares will be terminated.
In terms of trading delisting indicators, the market value delisting indicators of Main Board stocks and depositary receipts in this revision will be applicable from 6 months after the date of implementation of the new listing rules.
Source of this article: China Securities Journal
Reporter: Huang Yiling, Huang Lingling, Zan Xiuli
WeChat editor: Guan Qiao
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