2024-01-12 11:28:00
21st Century Business Herald reporter Yang Ping reported from Shenzhen
The overseas listing and issuance registration work of domestic enterprises is being promoted in a regular, orderly and transparent manner.
Recently, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, revealed in his speech at the founding meeting of the Overseas Listed Company Branch of the China Association of Listed Companies that:Since March 31 last year, a total of 86 domestic companies, including VIE companies, have completed registration following the implementation of the new overseas listing regulations. Among them, 51 companies plan to be listed in Hong Kong, China, and 35 companies plan to be listed in the United States.
At the same time, the China Securities Regulatory Commission has also further improved the methods for overseas issuance of global depositary receipts by domestic listed companies.A total of 23 listed companies have been approved to issue GDRs, raising a total of approximately US$12.2 billion.
On March 31, 2023, the “Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises” and supporting guidance documents (referred to as the “New Overseas Filing Regulations”) were officially implemented to promote more enterprises with high-quality development potential to obtain services suitable for their own development. The support of the capital market has established good expectations.
That year, two companies using a VIE structure, Cheche Technology (listed in the United States) and Jitu Express (listed in Hong Kong), obtained overseas listing filing notices, which greatly boosted the confidence of companies in overseas listings.
Fang Xinghai said that the China Securities Regulatory Commission will firmly promote the opening of the capital market and will work with all parties to further improve the overseas listing mechanism, enrich the issuance methods, and implement the new trial rules for overseas listing filing.
VIR structure achieves breakthrough in overseas listing filing
As an important part of the opening up of the capital market, the regulatory, regulatory and institutional system for overseas listing of domestic enterprises has attracted much attention from the market.
At present, the new pilot regulations for overseas listing registration have been implemented for more than nine months. A reporter from the 21st Century Business Herald noted from the official website of the China Securities Regulatory Commission that overseas listings currently maintain a pace of completing the registration of more than four companies per week.
From the perspective of approval time, Arnold Pharmaceuticals took the shortest time to register for listing in the United States in 2023. It only took 39 days from the application on June 29, 2023 to the approval on August 7, 2023. The longest registration time was WoKr Medical Technology applied for listing on Nasdaq on June 27, 2023, and it took a total of 177 days until it was approved on December 21, 2023.
According to statistics from Huayi Capital,The average review and approval time for U.S. listing filings in 2023 is regarding 112 days (except for 5 companies whose approval time cannot be calculated by the SEC), and the overall filing pass rate is 50.98%.
Among the companies listed in Hong Kong, the shortest time for companies to complete the registration in 2023 is Meizhong Jiahe, with a total of only 12 days, and the longest is Lexi Group, which took 215 days. There are 55 companies listed in Hong Kong that completed the registration during the year. The average approval time is 90 days.
It is worth mentioning that companies using VIE structures such as Cheche Technology and Jitu Express have completed registration, which has attracted widespread market attention.
Public information shows that Cheche Technology is the Cayman company of Beijing Cheche Technology Co., Ltd., an auto insurance technology company. According to the plan, Cheche Technology will merge with the overseas special purpose acquisition company PRIME IMPACT ACQUISITION I to achieve NASDAQ in the United States. Listed on the Grammar Stock Exchange.
On June 26, 2023, Cheche Technology applied for registration with the China Securities Regulatory Commission. On September 14 of the same year, it received the China Securities Regulatory Commission’s overseas issuance and listing registration notice.
Jitu Express submitted an IPO application to the Hong Kong Stock Exchange in June 2023. On September 15 of that year, the China Securities Regulatory Commission website published a notice on the overseas issuance and listing filing notice of Jitu Express Global Co., Ltd. The company has already completed the IPO in October 2023. Successfully listed on the 27th.
“Foreign investment restricted and prohibited industries do not necessarily fail to be registered. The core lies in whether there are domestic laws, administrative regulations and relevant provisions that clearly prohibit the use of agreements or contractual arrangements to control business, licenses, qualifications, etc., such as private schools that implement compulsory education, implementation of Non-profit private schools for preschool education, kindergartens run by state-owned assets or collective assets, non-profit kindergartens, online game operations, etc., may be difficult to complete the filing through the VIE structure.” Global Law Firm pointed out.
However, the law firm also pointed out that the overall difficulty of filing VIE structures (foreign investment restricted business) will be relatively difficult and the cycle will be long, “There are still very few registered cases, and there are still many VIE cases being filed that have not passed the filing, such as Ark Pharmaceuticals, Yisou, Naikan Entertainment, Lu Daopei, Dida, Duodian, etc. We understand that the China Securities Regulatory Commission adopts the principle of case by case for filing.”
86 companies are under review
A reporter from the 21st Century Business Herald noted that the companies that have completed the filing and are in the process of filing are mainly companies with operating entities in China.
The latest update of the China Securities Regulatory Commission’s “Domestic Enterprises Overseas Issuance of Securities and Listing Filing Status Table” shows that as of January 4, 2024, there are still 86 domestic enterprises under review (excluding completed and terminated enterprises). Among them, There are 60 companies planning to be listed in Hong Kong, 25 companies planning to be listed on Nasdaq in the United States, and one company planning to be listed in Switzerland.
From an industry perspective, the number of Chinese companies listed overseas has gradually expanded from large-scale state-owned enterprises to private and entrepreneurial enterprises in consumption, technology, medicine, new Internet economy, new energy and other fields. In terms of application types, 64 were indirect overseas listings, 20 were direct overseas listings, and 2 were full circulation projects.
From the perspective of sponsors/lead underwriters, the project sponsors applying for registration are mainly Chinese securities firms. Among them, China International Capital Corporation Hong Kong Securities Co., Ltd., a subsidiary of CICC, has the most projects, with a total of 17 projects (including joint sponsors, below) (same), including popular projects such as Aurora, Chenqi Travel, and Changxing Information (Dida.Inc).
Following closely, CITIC Securities (including CITIC Securities (Hong Kong) Co., Ltd.) has 14 projects under registration, including popular projects such as Shulan Medical, Yimai Sunshine, Hypros, and Wanda Commercial. In addition, Haitong Securities and CCB International each have 6 projects under review.
In terms of international securities firms, JPMorgan Securities (Far East) Limited (JP Morgan) has 6 projects under review, Univest Securities LLC (Universal Securities LLC) and Revere Securities LLC have 4 projects each under review.
Equity structure and business compliance attract attention
During the registration review process of enterprises, the China Securities Regulatory Commission simultaneously publicized feedback opinions.
Specifically,Regulators are particularly concerned regarding issues such as equity structure, red-chip structure construction, agreement control, historical evolution, legal compliance, and equity incentives.
Take the latest disclosure by the China Securities Regulatory Commission of the “Supplementary Material Requirements for Overseas Issuance and Listing Filing (December 29, 2023 – January 4, 2024)” as an example. In the current period, the International Department of the China Securities Regulatory Commission issued supplementary material requirements for 5 companies, 3 of which They were all asked regarding “shareholding structure.”
For example, JIADE LIMITED (Chinese abbreviation as “Curriculum Technology”) and Smart Logistics were required to provide additional responses on “Compliance of the establishment of equity control structures”; Raytheon Energy was required to provide additional information on “Foreign exchange registration involved in establishing offshore structures overseas and return investments.” , overseas investment, foreign investment and other regulatory procedures, conclusive opinions on compliance”, etc.
In terms of historical evolution, Jixin State Control Inspection was required to explain “whether there were any defects in the historical evolution of its predecessor in terms of capital contribution, registration, changes, evaluations, approvals, etc., whether there were violations of relevant regulations on the supervision and management of state-owned assets, and whether they were serious violations of the law.” Whether the violation constitutes a substantial obstacle to the issuance and listing of this offering?”
In the field of compliance, Yinlifu was asked to explain the “compliance of tax treatment”; Raytheon Energy was asked to explain “the reason why the registered capital of the main domestic operating entities has not been paid in full and the compliance, and whether it has a negative impact on the company’s business operations and debt solvency.” cause significant impact” etc.
In addition, corporate governance is also the focus of regulatory attention. For example, Jixin State Control Testing was asked to explain “whether there are situations where funds are occupied by controlling shareholders, major shareholders or other related parties, whether a reasonable dividend system has been established, and please explain the relevant internal control systems and safeguards to prevent the occupation of funds by related parties.” Because Xu Jinliang, the indirect natural person shareholder, is the brother of the spouse of the chairman of the board of directors, Huang Wenzao, Lifu was asked to explain whether the “directors and senior managers of the issuer are not related to each other or to shareholders” contained in the filing report were related to the above situation. consistent.
Cai Mingyang, audit partner of PwC China, said that although the new filing regulations do not put forward many new requirements for the audit of overseas listed financial statements, such as the assessment of the company’s ongoing operations and solvency, and the fairness of pricing of inter-company related-party transactions Issues such as whether there is transfer of benefits and the rationality of goodwill formed during company acquisitions are still the focus of regulatory attention. Enterprises should carefully consider and conduct appropriate accounting treatment and full disclosure of the above-mentioned related issues.
“In addition, since the filing application and the IPO audit are carried out at the same time, in the process of responding to the exchange’s questions, the company should fully and appropriately disclose the progress of the filing application in the prospectus to reduce the company’s compliance risk.” Cai Mingyang further added road.
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