CSRC revises rules on asset restructuring and related financing by listed companies

On 1 August, the China Securities Regulatory Commission (CSRC) published the Amendment of Provisions for Major Asset Restructuring and Related Financing by Listed Companies (CSRC Order No. 73) and the Application of Articles 13 and 14 of the Major Asset Restructuring by Listed Companies Administrative Measures Opinion – Application of Securities and Futures Laws Opinion No. 12 (CSRC Announcement [2011] No. 17). The Amendment came into force on 1 September. The Amendment and Opinion contain new rules governing back-door listings and related financing by means of share issues to fund asset purchases. They primarily cover the following.

• Back-door listings: from the date of a change of control of a listed company, if that company purchases assets which represent more than 100% of its total assets as at the end of the period for the audited consolidated financial and accounting statements in the fiscal year prior to the change of control, this major asset restructuring is to be regarded as a back-door listing.
• Requirements for a back-door listing: in addition to the requirements set out in the Measures, a back-door listing must also meet the following conditions: (1) the business entity from which a listed company purchases assets must have been in operation for more than three years on a continuing basis; and (2) it must have had profits for the last two fiscal years with an aggregate value of more than RMB20 million (US$3 million). However, if the assets belong to specific industries like the financial or venture capital industry, separate regulations will apply.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.