21st Century Business Herald reporter Cui Wenjing reports from Beijing Strict supervision has been one of the main tones of the work of the China Securities Regulatory Commission since the beginning of the year. Judging from the new version of the "National Nine Articles" released on April 12 and the series of policies issued by the China Securities Regulatory Commission and the Shanghai and Shenzhen Stock Exchanges, the roadmap for strict supervision of listed companies has become clearer.
The 21st Century Business Herald reporter found that among the series of reform measures, the delisting system is the most powerful and highly praised. Compared with the old version, the new version has been significantly strengthened.
On the one hand, four new delisting situations have been added: "serious fraud for one year, continuous fraud for many years", "non-standard opinions on internal control for many years", "long-term disorderly struggle for control that leads to investors' inability to obtain effective information of listed companies", and "failure of internal control of listed companies, and large amounts of funds occupied by major shareholders and failure to rectify" have been added. On the other hand, the conditions for financial delisting and delisting of the main board market value are also more stringent.
The relevant system for listed companies with a similar praise to the delisting system is the New Shareholding Reduction Regulations, which regulates the shareholding reduction of listed companies from multiple dimensions, such as strictly regulating the shareholding reduction of major shareholders, effectively preventing detour shareholding reduction, refining the liability clause for violations, optimizing the provisions on the prohibition of shareholding reduction in violation of laws and regulations, and strengthening the responsibilities of major shareholders and board secretaries.
Among them, in response to the "divorce-style shareholding reduction" that has attracted much attention, the new regulations clearly require the relevant parties to continue to jointly comply with the shareholding reduction restrictions after the divorce, termination of legal persons or unincorporated organizations, division, etc., and clarify that the parties shall continue to jointly comply with the shareholding reduction restrictions within 6 months after the termination of the concerted action relationship.
At the same time, while increasing the intensity of delisting and strengthening the constraints on reducing shareholdings, this series of regulations also further refines the requirements for dividends of listed companies on the basis of the previous provisions. For example, the amount of repurchase cancellation is clearly included in the calculation of cash dividends.
In the opinion of the interviewees, the introduction of the regulations will greatly increase the enthusiasm of listed companies to repurchase and write-off, and the latter is regarded as the most beneficial repurchase method for investors.
The mandatory delisting standard has been greatly improved
"The capital market needs to keep the number of listed companies stable as a whole, and only by clearing out inferior companies in a timely manner and encouraging more companies to take the initiative to delist can we leave room for more IPO companies to successfully go public. At the same time, only when the capital market is truly flowing can we improve the quality and investability of listed companies and safeguard the interests of the vast number of investors, especially small and medium-sized investors. Therefore, it is very important to formulate stricter new rules for delisting and increase the intensity of delisting", a number of industry insiders from universities and institutions have expressed similar views to reporters.
On April 12, with the new version of the "National Nine Articles" clearly requiring greater delisting, the China Securities Regulatory Commission (CSRC) and the Shanghai and Shenzhen Stock Exchanges respectively issued relevant regulations on delisting (hereinafter collectively referred to as the "New Delisting Regulations"), which are both strict and specific, and make strict provisions on the delisting of listed companies from all aspects.
The most noteworthy is the increase in the standard of mandatory delisting. Compared with the previous version, the new delisting rules add four new types of delisting situations, bringing the number of mandatory delisting types to six categories.
First of all, there is a new situation of serious fraud for one year and continuous fraud and delisting for many years. Specifically, it is divided into three categories: first, the amount falsely recorded by the listed company reaches more than 200 million yuan in one year, accounting for more than 30%; second, the amount falsely recorded in two consecutive years reaches more than 300 million yuan, accounting for more than 20%; and third, there are false records for three consecutive years or more.
In the August 2023 version of the delisting regulations, the mandatory delisting criteria for false records are mainly reflected in one article: false records for two consecutive years, and the amount of false records exceeds 500 million, and exceeds the total amount of two years or 50% of the total amount at the end of the biennium.
Secondly, the delisting of non-standard opinions on internal control for many consecutive years has been added. The new delisting regulations make it clear that if a listed company's internal control audit report is unable to express an opinion or negative opinion for two consecutive years, or fails to disclose the internal control audit report in accordance with the regulations, the company's shares will be subject to a delisting risk warning, and if the company's internal control audit report is non-unqualified in the third year, the listing of the company's shares will be terminated.
In addition, if a listed company has a long-term disorderly struggle for control, resulting in investors not being able to obtain effective information about the listed company, the company will be forced to delist. There was no previous delisting requirement.
Fourth, the new "capital occupation" delisting indicator is added, that is, if the internal control of a listed company fails, and a large amount of capital is occupied by a major shareholder and is not rectified, it will be considered in the compulsory delisting. The specific indicators of capital occupation and non-rectification are: the capital occupation accounts for more than 30% of the absolute value of the audited net assets, or the amount exceeds 200 million yuan, and the correction is ordered within two months but is not implemented.
At the same time, the financial delisting standards have been raised. For the risk warning criteria for the delisting of loss-making enterprises, the adjustment of the STAR Market and the Growth Enterprise Market is relatively limited, and only the "total profit" is included in the scope of loss, and the revised indicator is the total profit, net profit, and non-net profit, whichever is lower and negative, and the main board adjusts the minimum requirement for operating income on this basis, from 100 million yuan in the past to 300 million yuan.
In addition, the delisting criteria for the main board market value have also been raised, with the "total daily closing market value of stocks on the Exchange for 20 consecutive trading days" raised from $300 million to $500 million.
"If the delisting standards are strictly implemented, many inferior companies will be cleared, which provides space for the listing of high-quality new shares, so that the overall quality of listed companies can be improved, which is conducive to the improvement of investors' returns. The interviewed insurance agent told reporters.
It is worth noting that since the delisting system has a transition period, which will be officially implemented on January 1, 2025, according to the analysis of relevant experts, listed companies that have reached the mandatory delisting standard now are not equivalent to companies that will be compulsorily delisted, and such listed companies can avoid compulsory delisting if they are adjusted above the delisting standard line by the end of this year.
The reporter learned that the transitional arrangement has many benefits. On the one hand, in order to allow time for self-correction for listed companies on the verge of forced delisting, the main purpose of implementing a strict delisting system is to force listed companies to improve their quality and pay attention to the interests of investors, rather than blindly pursuing the number of delisted companies. On the other hand, the existence of a transition period leaves room for investors who invest in stocks facing mandatory delisting, minimizes investor losses, and avoids market turmoil.
It is worth mentioning that the interviewees generally believe that the new rules for delisting are very strong and have a good start, and they must withstand the pressure and strictly implement them in the future, and do not "open their mouths", otherwise it is easy to reduce the effect of the new regulations.
The new rules for reducing holdings are both increased and "relaxed"
The illegal reduction of holdings by listed companies is also the focus of market attention. In particular, "divorce-style reduction" and "restricted stock refinancing disguised reduction" have caused heated discussions and even debates among netizens many times. The newly issued new regulations on shareholding reduction regulate the issue of shareholding reduction of listed companies in an all-round way. Based on the analysis of the interviewees, the main regulatory measures for reducing holdings can be summarized into six aspects.
First of all, it is necessary to strictly regulate the reduction of shareholdings by major shareholders. The pre-disclosure obligation before the major shareholder reduces its shareholding through block trading is increased, requiring the persons acting in concert with the major shareholders and those acting in concert with a total shareholding of more than 5% to comply with the obligations of the major shareholders, and clarifying that the controlling shareholders and actual controllers shall not reduce their holdings through centralized bidding or block trading in the event of a broken issue or a net break, or the dividend is not up to standard. Among them, the non-compliance of dividends specifically refers to: the cash dividends have not been implemented in the fiscal years of the last three disclosed audited annual reports or the cumulative cash dividend amount is lower than the average annual net profit attributable to shareholders of listed companies in the same period.
There are two areas of this provision that deserve special attention. On the one hand, linking the reduction of holdings with dividends will force listed companies to increase their dividends and give back to investors; on the other hand, the objects of restraint are controlling shareholders and actual controllers, and financial investors will not be affected as long as they are not the largest shareholders. When the shareholding reduction regulations were issued on August 27, 2023, many market participants, mainly private equity investors, strongly recommended that financial investors should not be included in the constraints of the restrictions on the breakage of listed companies and the reduction of dividends that do not meet the standards, otherwise it will increase the difficulty of exiting and lead to a sharp decline in investment activity in the primary market. Judging from the new rules on reducing holdings, the above opinions have been adopted.
Secondly, effectively prevent the reduction of detours. On the one hand, in terms of "divorce-style shareholding reduction", which has attracted the most attention, the relevant parties are required to continue to jointly comply with the shareholding reduction restrictions after divorce, termination of legal persons or unincorporated organizations, division, etc., clarify that the parties shall continue to jointly comply with the shareholding reduction restrictions within 6 months after the dissolution of the concerted action relationship, and require the transferee to lock in for 6 months after the transfer by agreement, and the transferor who has lost its status as a major shareholder to continue to comply with the relevant restrictions within 6 months.
On the other hand, the "refinancing and lending of restricted shares" and "disguised reduction of securities borrowing and selling" that have complained to the market several times are expressly prohibited. The new regulations prohibit major shareholders from selling securities or participating in derivatives transactions with the company's shares as the subject matter, and prohibit the refinancing and lending of restricted shares and the selling of restricted shares by shareholders of restricted shares.
At the same time, the new regulations also require judicial enforcement, default disposal of pledge and securities lending, and gifts to comply with the Administrative Measures for Shareholders of Listed Companies to Reduce Their Shareholdings, clarify the pre-disclosure time point for judicial compulsory passive disposal, and enhance the enforceability of the rules.
In addition, the regulatory requirements for information disclosure on share reductions will be strengthened. Strictly implement the pre-disclosure requirements for shareholding reductions, and further strengthen the pre-disclosure requirements for reducing shareholdings through block transactions 15 trading days in advance. The time period of the shareholding reduction plan will be adjusted from a maximum of 6 months to a maximum of 3 months to better clarify market expectations.
In addition, the liability clauses for violations have been refined, and the crackdown on illegal reductions has been strengthened.
In addition, it is worth mentioning that while the new regulations on shareholding reduction have increased strict supervision in an all-round way, they have also been moderately relaxed in some places, such as optimizing the regulations on illegal and illegal holdings. In the past, the reduction of shareholdings by major shareholders of listed companies was restricted by both their own and the listed company's violations, but under the new version of the new shareholding reduction regulations, only the controlling shareholder and the actual controller are restricted from the perspective of their own violations.
"The introduction of this measure means that the regulatory regulations of listed companies are not blindly strict, but rationally adopt market suggestions and flexibly adjust according to the actual situation. The interviewee analyzed.
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