Chinese enterprise D-share offering and listing practice (1)

By Frank Qu, Dentons
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On 24 October 2018, Qingdao Haier offered 265 million shares on the D-share market of China Europe International Exchange (CEINEX), passing through the admission of the Frankfurt Stock Exchange and achieving a listing that marked the birth of the first D shares on the CEINEX D-share market.

Frank Qu
Senior Partner

The term “D share” refers to stock offered and listed on CEINEX in Germany by joint stock limited companies registered in China. Generally, the offering and listing of D shares can choose one of three forms: a D share initial public offering and listing; an “A + D” simultaneous listing; or a “first A then D” model. As Qingdao Haier has listed A shares on the Shanghai Stock Exchange in 1993, its D-share offering falls into the category of “first A then B”. However, regardless of the model type, a D-share listing requires the review and approval of both Chinese and German regulators. This column looks at the Chinese approval procedure involved in a D-share offering and listing.

Pursuant to Chinese laws, before a joint stock limited company in China offers shares abroad, it is required to submit an application to, and obtain an official reply from, the China Securities Regulatory Commission (CSRC). The CSRC’s review procedure is as set out below.

Acceptance. The CSRC’s acceptance department receives the application documents and then forwards them to its international department, which conducts a pro forma review of the applications and determines whether to accept them.

Review. (1) The international department determines the reviewers based on the specific circumstances of the project, and the reviewers review the submitted materials from a compliance perspective and issue an offering overview and a preliminary feedback opinion; (2) the reviewers submit the preliminary feedback opinion to the internal feedback committee for discussion, and once the committee finalizes the feedback opinion through collective decision-making, it will forward it to the acceptance department, which then serves it on the applicant; and (3) the period between the acceptance of the materials and the issuance of the feedback opinion should be a quiet period, and during that period the personnel responsible for the review are not permitted to actively interact with the applicant or its agents.

Response to feedback. (1) Once the applicant receives the feedback opinion, it arranges for the relevant intermediary firms to prepare the response materials and submits them to the acceptance department within the specified time; and (2) once the international department records the response materials after receiving them, it will forward them to the review office where review personnel will review them.

Approval. Once the review personnel render their decision on whether or not to grant approval after they complete the review, the administrative approval document will be sent to the applicant by the acceptance department.


The CSRC conducts a substantive review on the applications for foreign listings by domestic entities. Pursuant to the provisions of the Key Points of Reviews of Foreign Public Offerings and Listings of Shares (Including Additional Offerings) by Joint Stock Limited Companies, issued by the CSRC, the key points of attention in a review include:

Administration of state-owned equity (if applicable). (1) Whether the obligation of reducing (transferring) the holding of state-owned shares for the offering has been performed; (2) whether the issuer has obtained the relevant official reply document from the state-owned assets supervision and administration authority; and (3) whether the reply from the national social insurance foundation for the reduction or transfer of the holding of state-owned shares has been obtained.

Foreign investor access, macro control and industry policies. (1) Whether the scope of business of the issuer or of a subsidiary involves a sector in which foreign investment is prohibited or restricted by the state; (2) whether the scope of business of the issuer involves real estate business, and whether it has committed any violations of state real estate control policies; and (3) whether the issuer is in an industry characterized by overcapacity or an industry subject to heavy control by the state.

Compliant operation. (1) In the past two years, whether the issuer or a subsidiary has been suspected of violating China’s Securities Law, Securities Investment Fund Law, or other laws or regulations related to securities or futures; (2) whether the issuer is being investigated by an administrative authority for an alleged violation of laws or regulations, or whether a case has opened and is being investigated by a judicial authority; and (3) whether the issuer has been subjected to regulatory measures taken by the CSRC in accordance with the law, such as restricting its business activities, ordering it to suspend operations and undergo rectification, etc., and has yet to be released from such measures.

Equity structure and corporate governance. (1) Whether the issuer’s articles of association satisfy the requirements of the Mandatory Terms of the Articles of Association of Companies Listing Abroad; and (2) whether the issuer and its subsidiaries have established and improved sound and compliant confidentiality and archiving rules and regulations.

Internal authorizations for the contemplated offering. (1) Whether the complete internal decision-making procedures have been carried out for the contemplated offering and listing and whether the necessary internal approvals and authorizations have been secured; and (2) whether the necessary approval or recordal documents (if applicable) for the project in which the proceeds from the contemplated offering are to be invested have been obtained, and whether such a project complies with regulations on the administration of investments in fixed assets.

Matters that apply to specific entities. With respect to different offshore listed entities, the review department will, depending on their special characteristics, apply special review regulations, for example: (1) if the issuer is a subsidiary of a domestically listed company, the review department will focus on whether the contemplated offering would violate the Notice of the China Securities Regulatory Commission on Issues Relevant to Regulating Foreign Listings by Subsidiaries of Domestically Listed Companies; and (2) if the issuer’s application is for a foreign offering of preference shares, the review department will focus on whether the contemplated offering and listing would violate the Administrative Measures of the China Securities Regulatory Commission for the Pilot Project for Preference Shares.

In addition to a review by the Chinese regulator, an offering and listing of D shares requires the approval of the German regulator. The author will look at the latter in the next column.

Frank Qu is a senior partner at Dentons


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