Comparison of Regulatory Policies for Chinese-funded Enterprises' Overseas Listing Models (1)

At present, overseas listing has become a relatively common channel for Chinese-funded enterprises to raise funds. However, Chinese-funded enterprises have different choices of specific overseas listing models and different regulatory policy requirements. Specifically, the current overseas listing modes of Chinese-funded enterprises are mainly divided into two types. One is the direct overseas listing of domestic enterprises as the main body. Under this mode, the regulatory policies are relatively clear and the listing structure is simpler and clearer.

The other is to achieve indirect listing through the establishment of special purpose companies overseas. This model is further divided into three specific models, such as "big red chips", "small red chips" and "SPAC". There are some differences in the requirements. But on the whole, the indirect listing model has a more complex structure, and there are some vacuums and ambiguities in the regulatory policy.

Overseas direct listing

Overseas direct listing means that a company registered in China, with the approval of the China Securities Regulatory Commission, directly applies to the overseas securities authority in the name of the domestic company for registration and issuance of stocks, corporate bonds convertible into stocks, depositary receipts and other securities permitted by laws and regulations. , and the act of being publicly listed on the local stock exchange.

In the early days, the China Securities Regulatory Commission set a high approval threshold for domestic companies to list overseas. For example, in 1999, the "Notice of China Securities Regulatory Commission on Issues Concerning Enterprises Application for Overseas Listing (Zheng Jian Fa Xing Zi [1999] No. 83) stipulated that the net assets of domestic enterprises listed overseas should not be less than 400 million yuan, and the after-tax profits should not be less than 60 million yuan and the purpose of financing must comply with the national industrial policy, so there are not many listed companies, and most of them are state-owned enterprises.

In December 2012, the China Securities Regulatory Commission issued the "Supervision Guidelines on the Overseas Issuance of Shares and Listing Application Documents and Review Procedures by Co., Ltd." (China Securities Regulatory Commission Announcement [2012] No. 45), canceling the financial review requirements for overseas issuance and listing. , which lists thirteen documents that enterprises should submit for overseas stock issuance and listing. The focus of the review began to focus on enterprise information disclosure, business compliance, and compliance with national macro-industry policies.

In July 2019, the China Securities Regulatory Commission updated the "Key Points for Review of Overseas Public Offering of Shares and Listing (Including Additional Issuance) of Co., Ltd.", which further focused on foreign investment access and macro-control and industrial policies, compliance operations, shareholding structure and corporate governance, The five aspects of this issuance and the matters applicable to specific objects have listed the key points of review for overseas listing of domestic companies.

In the new version of the points of concern, the China Securities Regulatory Commission regards the real estate industry, overcapacity industries and industries with foreign investment access prohibitions or restrictions as the focus of overseas listing review, and proposes compliance for enterprises in safety production, environmental protection, securities market, etc. It also stipulates that if an enterprise needs to go through the necessary approval, approval and filing procedures for overseas listing and issuance and issuance and fundraising projects, it is necessary to go through relevant procedures.

The new version of the points of concern also applies management regulations and documents to specific overseas listing situations such as listing on the Hong Kong Growth Enterprise Market, overseas listing as a subsidiary of a domestic listed company, overseas issuance of preference shares, domestic companies that are not listed in China, financial enterprises, and overseas additional issuance of H shares. listed. In terms of foreign exchange management, the foreign exchange bureau has made several adjustments to the overseas direct listing policy of domestic enterprises, and has now established a management framework centered on registration.

The Notice of the State Administration of Foreign Exchange on Issues Concerning the Administration of Foreign Exchange for Overseas Listings (Huifa [2014] No. 54) promulgated in 2014 clarified how to handle the registration procedures for overseas listings, repurchases, changes, and cancellations. Provide guidance on how to operate the management details such as fund exchange, cross-border receipts and payments, and account landing.

The structure of domestic enterprises adopting the overseas direct listing model is relatively simple, and the flow of funds is relatively clear. The regulatory authorities have basically achieved the whole process coverage and monitoring of the management of overseas direct listing of enterprises. However, the new version of overseas direct listing points of attention also applies management to specific overseas listing situations such as listing on the Hong Kong Growth Enterprise Market, overseas listing as a subsidiary of a domestic listed company, overseas issuance of preferred shares, domestic companies not listed in China, financial enterprises, and overseas additional issuance of H shares. Regulations and documents are set out. The model still needs to be approved by the China Securities Regulatory Commission. It has the characteristics of high threshold, long process and slow time. Therefore, the enterprises adopting the overseas direct listing model are still mainly large state-owned enterprises.