The "Several Opinions of the State Council on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" proposes to order the violating entities to repurchase the shares that have been reduced in violation of regulations and pay the price difference. At present, the number of cases of shareholders being ordered to repurchase in violation of regulations is increasing, and the power of ordering corrections is demonstrated.
On April 19, LONGi Green Energy announced that the company's shareholder HHLR Management Co., Ltd. (hereinafter referred to as HHLR) issued the "Simplified Equity Change Report", increased its holdings of LONGi Green Energy's shares, and promised to repurchase all the reduced shares of the target within one month. On the day of the announcement, HHLR completed its first buyback, increasing its shareholding from 4.98% to 5%. HHLR stated in the "Simplified Equity Change Report" that it promised to take the initiative to continue to increase its holdings of LONGi Green Energy shares with self-raised funds, and complete the repurchase of all the shares of the target within the next one month, and if this part of the share repurchase involves the proceeds, the income will be owned by the listed company.
Earlier, HHLR Management Co., Ltd. ("HHLR"), a shareholder of LONGi Green Energy, received a notice of filing from the China Securities Regulatory Commission ("CSRC") on November 8, 2023 due to the suspected transfer of LONGi Green Energy's shares in violation of restrictive regulations.
A reporter from the China Securities Journal combed and found that in addition to LONGi Green Energy, the listed companies that were ordered to buy back by shareholders in violation of regulations include: Laiyifen, Shanghai Xinyang, Zhengyuan Shares, Wanye Enterprise, Tongcheng New Materials, Taichenguang, Onlly Education, *ST Huichen, Jieput, Xitest Testing, Xiaosong Shares, ST Nanwei, etc.
The power of the order to correct is demonstrated
The list of listed companies ordered to buy back by shareholders who have violated the rules to reduce their holdings continues to lengthen, and the power of the order to correct is demonstrated.
A reporter from the China Securities Journal combed and found that in addition to LONGi Green Energy, the listed companies that were ordered to buy back by shareholders in violation of regulations include: Laiyifen, Shanghai Xinyang, Zhengyuan Shares, Wanye Enterprise, Tongcheng New Materials, Taichenguang, Onlly Education, *ST Huichen, Jieput, Xitest Testing, Xiaosong Shares, ST Nanwei, etc.
For example, Xiaosong Co., Ltd. announced on December 14, 2023 that its controlling shareholder, Shenzhen Huaxin Chuangli Technology Industrial Development Co., Ltd. (hereinafter referred to as "Huaxin Chuangli"), received the "Decision on Ordering Corrective Measures against Shenzhen Huaxin Chuangli Technology Industrial Development Co., Ltd." issued by the Guangdong Securities Regulatory Bureau. It is reported that Huaxin Chuangli reduced its holdings of 953,000 shares of Xiaosong through centralized bidding, which violated the provisions of Article 6 (3) of the "Several Provisions on the Reduction of Shareholdings by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies" (CSRC Announcement [2017] No. 9).
According to the "Decision on Giving Circular Criticism to Shenzhen Huaxin Chuangli Technology Industrial Development Co., Ltd." issued by the Shenzhen Stock Exchange on the same day, on August 27, the China Securities Regulatory Commission issued a clear requirement on the official website to further standardize the reduction of shareholdings, and if the cumulative cash dividend amount of a listed company in the last three years is less than 30% of the average annual net profit in the last three years, the controlling shareholder shall not reduce the company's shares through the secondary market. After the issuance of the above-mentioned requirements, Huaxin Chuangli reduced its holdings of 953,000 shares of Xiaosong shares through centralized bidding, with a reduction ratio of 0.3%. The cumulative cash dividend amount of Xiaosong shares in the last three years accounted for 19.25% of the average annual net profit in the last three years, and the above-mentioned reduction of Huaxin Chuangli does not meet the relevant requirements of the China Securities Regulatory Commission on further regulating the reduction of shares.
A reporter from the China Securities Journal noticed that Xiaosong shares issued an announcement on the expiration of the controlling shareholder's shareholding reduction plan and an apology and commitment to repurchase on the same day, saying that the reason for Huaxin Chuangli's above-mentioned shareholding reduction was to fulfill its debt repayment obligations, and the company had disclosed a pre-disclosure announcement on the reduction of shareholding in the early stage. Among the above-mentioned reductions, Huaxin Chuangli's reduction of 953,000 shares of the company on September 4, 2023 violated the relevant requirements of the China Securities Regulatory Commission's "Further Regulating Share Reductions". Hua Hin Chuangli has been deeply aware of the mistake of the illegal reduction of the company's shares, sincerely apologized for the mistake, and promised to repurchase the 953,000 shares of the company as soon as possible within the scope permitted by the rules, if this part of the share repurchase involves the proceeds will all belong to the listed company. In the future, we will strictly abide by laws and regulations, standardize our own trading behavior, and safeguard the rights and interests of small and medium-sized investors and shareholders and the good operation of the capital market.
According to professionals, after the repurchase of the controlling shareholder, due to the short-term trading constraints, it is expected to face the invisible constraint of not being able to reduce its holdings within six months, and the controlling shareholder's shares worth nearly 500 million yuan cannot be reduced in the short term. The regulatory authorities ordered corrections and made corrections in a timely manner, so as to better guide all types of market participants to focus on their main business, and truly establish a compliance awareness of respecting the market and the rule of law, which will also help enhance investors' sense of gain.
Make violators pay the price of "pain".
The "Several Opinions of the State Council on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" proposes to order the violating entities to repurchase the shares that have been reduced in violation of regulations and pay the price difference.
The China Securities Regulatory Commission (CSRC) recently formulated the "Administrative Measures for the Reduction of Shareholdings by Shareholders of Listed Companies", which clarifies that measures can be taken to "order the repurchase and pay the price difference to the listed company" for illegal shareholding reductions, increase regulatory measures such as regulatory talks and the issuance of warning letters, refine the specific circumstances that should be punished, and increase the intensity of cracking down on illegal shareholding reductions.
Guo Ruiming, director of the Listing Department of the China Securities Regulatory Commission, said that since last year, the China Securities Regulatory Commission has ordered corrections to reduce holdings in violation of regulations, requiring relevant entities to buy back and pay the price difference to listed companies, which has also been supported by investors. The shareholding reduction measures for this consultation further consolidate this measure, which is conducive to timely correction of violations, preventing relevant entities from making profits in violation of regulations, and minimizing the damage to small and medium-sized investors.
In the view of Tian Lihui, dean of the Institute of Financial Development of Nankai University, the repurchase order can be implemented relatively quickly, which has the effect of timely correction and correction, and greatly shortens the interval from filing the case to punishment and then to eliminating the impact of violations. Those who violate the rules will not be able to obtain profits, and will even pay a greater cost to buy them back, which has a good warning effect.
Zhang Cuixia, chief investment consultant of Jufeng Investment, believes that ordering the repurchase is an innovative use of administrative supervision measures to order corrections, and under the new measures, the regulatory punishment is no longer "three glasses of wine", and will make the violators pay the price of "painful". Specifically, listed companies can obtain the price difference, replenish funds, and increase their equity, and small and medium-sized shareholders will share the income from the price difference to safeguard their legitimate rights and interests, and at the same time, the sense of security and gain will also be effectively improved.
Reviewer: Ni Mingya Editor: Li Ruoyu Zhang Lijing Proofreader: Zhang Diange Issued: Fei Yangsheng
