China’s two stock exchanges said they aim to widen criteria for delisting companies to better protect investors’ interests.
The Shanghai Stock Exchange and Shenzhen Stock Exchange are seeking public feedback on planned changes by May 20, according to statements on their Web sites yesterday.
Current procedures do not “fully serve their purpose” and the changes should allow swifter removal of companies from trading and a faster path to relisting, according to the Shanghai statement.
Guo Shuqing (郭樹清), who was appointed as China’s top securities regulator in October last year, has pledged to fight insider trading and misconduct in the nation’s securities markets.
The agency is studying ways to make its delisting policies more effective as companies are using loopholes to avoid removal from trading, according to an April 20 statement on its Website.
“Improving the delisting rules will allow capital markets to work more efficiently, improve the quality of listed companies and protect the interests of small investors,” the Shanghai Exchange said in the statement.
Among the proposed changes, companies with negative net assets will no longer be allowed to remain listed. The bourse will look at net income excluding one-time gains as the benchmark for an accurate picture of the profits of companies seeking to relist.
The China Securities Regulatory Commission (CSRC) may exclude non-recurring items from net income, as some unprofitable companies use government subsidies or other sources to book profits and avoid delisting, according to its statement.
Companies are taking advantage of 2007 accounting-rule changes that allowed one-time gains to be counted as profit, it said.
‧ Companies with negative net assets will no longer be allowed to remain listed.
‧ Net income, excluding one-time gains, will be used as the benchmark to determine the profits of companies seeking to relist.
‧ Companies will be delisted if they are censured by the exchange three times over a three-year period.
‧ They will also be delisted if their shares close below par value for 20 consecutive days.
Other criteria being considered by the bourses are annual revenue and trading volume, according to exchange statements.
In November, the Shenzhen exchange proposed new rules for delisting stocks on the ChiNext market, a board for startup businesses.
Companies would be delisted if they were censured by the exchange three times over a three-year period, if their shares closed below par value for 20 consecutive days, if combined trading volumes fell below 1 million shares for 120 straight trading days, or if net asset values were negative for two consecutive years.
On Saturday, the CSRC released new rules for initial public offerings (IPOs), saying the changes should make the price of shares “more reasonable” and improve disclosure.
The guidelines set out the responsibilities of issuers and other organizations involved in IPOs, including law and accounting firms, and pledge to punish illegal practices, according to a statement posted on the commission’s Web site.
The regulator also removed a three-month lock-up period for institutional investors to boost the circulation of new shares in the market.
Guo said last month IPO prices are “too high,” and vowed to improve market transparency and information disclosure.
Underwriters may invite five to 10 individual investors to participate in the pricing procedure, according to the new rules, in addition to the seven types of institutions currently allowed.