On March 30, the General Office of the State Council forwarded the notice of the CSRC on several opinions on piloting the issuance of stocks or depositary receipts in innovative enterprises. The CSRC issued a number of opinions on piloting the issuance of stocks or depositary receipts in innovative enterprises, requiring large-scale red-chip pilot enterprises that have been listed overseas to have a market value of not less than 200 billion yuan.
State Office issued  No. 21
The people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, ministries and commissions under the State Council, and their respective agencies:
The SEC's "Several Opinions on Piloting the Issuance of Stocks or Depositary Receipts for Innovative Enterprises" has been approved by the State Council and is now forwarded to you. Please implement them carefully.
Office of the State Council
March 22, 2018
Several opinions on piloting the issuance of stocks or depositary receipts in innovative enterprises
Securities Regulatory Commission
In order to further increase the support of the capital market for implementing the innovation-driven development strategy, in accordance with the principles of marketization and rule of law, and drawing on international experience, piloting the issuance of stocks or depositary receipts in innovative enterprises, the following opinions are proposed.
I. Guiding ideology
Fully implement the spirit of the 19th National Congress of the Communist Party of China, take Xi Jinping's new era of socialism with Chinese characteristics as the guide, conscientiously implement the decision-making arrangements of the Party Central Committee and the State Council, adhere to the general tone of steady progress, and firmly establish and implement new development concepts. Quality development requirements, overall promotion of the "five in one" overall layout and coordination to promote the "four comprehensive" strategic layout, deepen capital market reform, expand openness, support innovative enterprises to issue securities in the domestic capital market, help China's high-tech industries and strategies The development of sexual emerging industries will promote the transformation of economic development quality, efficiency and power.
Second, the pilot principle
(1) Serving the national strategy. Guided by service innovation-driven development, we insist on the organic combination of innovation and development, and reform and opening up are equally important, helping the public to innovate and innovate, and promoting economic restructuring and industrial transformation and upgrading.
(2) Adhere to legal compliance. Under the framework of laws and regulations, we should do a good job in coordinating with relevant policies, and carry out institutional innovations in a sound and appropriate manner to ensure that the pilots are legally compliant, efficient and feasible.
(3) Steady and orderly advancement. Make overall plans, step by step, explore and solve the problem of domestic listing of innovative enterprises through pilot projects, and accumulate experience and create conditions for further deepening reform and perfecting the system.
(4) Effectively prevent and control risks. Fully protect the legitimate rights and interests of small and medium-sized investors, handle the relationship between pilots and risk prevention and control, and put prevention and control risks in a more important position. Strengthen supervision, maintain financial market stability, and resolutely hold the bottom line without systemic risks.
Third, the pilot enterprise
Pilot enterprises should be in line with national strategy, master core technology, and have high market recognition. They belong to high-tech industries and strategic emerging industries such as Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, biomedicine, etc. And reach a considerable scale of innovative companies. Among them, large-scale red-chip companies that have been listed overseas have a market capitalization of not less than 200 billion yuan; innovative enterprises (including red-chip companies and domestic registered enterprises) that have not yet been listed overseas have an operating income of not less than 3 billion yuan in the most recent year. The RMB is valued at not less than RMB 20 billion, or its operating income is growing rapidly. It has independent research and development, international leading technology, and is in a comparatively advantageous position in the competition in the same industry. The specific standards of the pilot enterprises shall be formulated by the CSRC. The red chip enterprises referred to in this opinion refer to enterprises whose registered places are overseas and whose main business activities are in the territory.
The CSRC established the Science and Technology Innovation Industrialization Advisory Committee (hereinafter referred to as the Advisory Committee), giving full play to the role of relevant industry authorities and experts and scholars, and strictly selecting pilot enterprises. The advisory committee is composed of relevant industry authoritative experts, well-known entrepreneurs, and senior investment experts. In accordance with the standards of pilot enterprises, comprehensive consideration of business models, development strategies, R&D investment, new product output, innovation capabilities, technical barriers, team competitiveness, industry Factors such as status, social impact, industry development trend, enterprise growth, and estimated market value, make preliminary judgments on whether the applicant enterprise is included in the scope of the pilot. The CSRC takes this as an important basis, and the audit decides whether the application enterprise is included in the pilot, and accepts the application for listing and listing of the pilot enterprises in strict accordance with laws and regulations.
Fourth, the pilot method
The pilot enterprises may choose to apply for the issuance of stocks or depositary receipts in accordance with relevant regulations and their own actual conditions. The pilot red-chip enterprises are allowed to issue depositary receipts in the domestic capital market according to procedures; pilot red-chip enterprises with the conditions for stock issuance and listing may apply for listing of shares in China; domestically registered pilot enterprises may apply for listing of shares in China. The depositary receipts referred to in this opinion refer to the securities issued by the depositary and issued in China on the basis of overseas securities, representing the interests of overseas basic securities.
The stocks or depositary receipts issued by the pilot enterprises in China shall be listed and traded on the domestic stock exchanges, and shall be registered and deposited and settled in China Securities Depository and Clearing Co., Ltd. The funds raised by the pilot enterprises can be remitted abroad in the form of RMB or foreign exchange purchases, or they can be retained for domestic use. The use of funds raised by pilot enterprises, dividend distribution of depositary receipts, etc. shall comply with relevant regulations on foreign investment and foreign exchange administration in China.
In accordance with the laws and regulations of the Securities Law and other laws and regulations, the CSRC approves the pilot red-chip companies to issue shares in China in accordance with the current stock issuance approval procedures; in principle, in accordance with the stock issuance approval procedures, the issuance audit committee shall review the issuance of pilot red chip corporate depository receipts in accordance with the law. Application.
The issuance, listing and trading of stocks or depositary receipts in the domestic pilot enterprises are all included in the scope of the current securities law. The CSRC implements supervision in accordance with the Securities Law and this opinion and relevant regulations, and establishes a supervisory cooperation mechanism with the securities regulatory authorities of relevant countries or regions such as the place where the pilot red chip enterprises are listed, and implements cross-border supervision.
V. Issuance conditions
The issuance of stocks by domestic pilot enterprises shall comply with the conditions for the issuance of shares as stipulated by laws and regulations. Among them, the pilot red-chip enterprise's shareholding structure, corporate governance, operational norms and other matters can be applied to the laws and regulations of the overseas registration company law, but the arrangements for the protection of investor rights should not be lower than the domestic legal requirements. For pilot enterprises that have a protocol control structure, the CSRC will distinguish different situations from relevant departments and handle them in a prudent manner according to law.
The depositary receipts of the stock-based securities issued by the pilot red-chip enterprises shall comply with the basic conditions of the securities law regarding the issuance of shares, and meet the following requirements: First, the shareholding structure, corporate governance, operational norms, etc. may be applied to the overseas registered company. Laws and other laws and regulations stipulate, but the arrangements for the protection of investor rights should generally not be lower than domestic legal requirements; second, there are differences in voting rights, agreement control structures or similar special arrangements, which should be in the initial public offering, in the prospectus Such publicly-issued documents are prominently located, detailed disclosure of relevant information, especially risks, corporate governance and other information, as well as the implementation of various measures to protect the legitimate rights and interests of investors.
6. Basic institutional arrangements for depositary receipts
The issuance of depositary receipts in China shall comply with the following basic institutional arrangements and strictly abide by relevant regulatory rules.
(1) Participating entities.
The underlying securities issued by the issuer of the underlying securities are held by the depositary, and the depositary is issued by the depositary in the territory. The issuer of the underlying securities shall comply with the basic conditions of the securities law regarding the issuance of securities such as stocks, participate in the issuance of depositary receipts, perform information disclosure and other obligations in accordance with the law, and accept supervision and management by the CSRC and the stock exchange as required.
The depositary shall, in accordance with the depositary agreement, exercise the corresponding rights of the overseas basic securities according to the will of the depositary certificate holder, and handle the dividends and dividends of the depositary receipts. The depositary qualification shall comply with the relevant provisions of the CSRC.
The holder of the depositary receipts shall enjoy the rights of the overseas basic securities represented by the depositary receipts in accordance with the law, and exercise their rights through the depositary in accordance with the depositary agreement.
(2) Depositary agreement.
The issuer of the underlying securities, the depositary and the holder of the depositary receipts shall clarify the rights and interests of the depositary receipts and the rights and obligations of the parties through the depositary agreement. An investor who holds a depositary receipt becomes a party to the depositary agreement and is deemed to have agreed to and abide by the depositary agreement. The depositary agreement shall stipulate that disputes arising from depositary receipts shall be governed by Chinese laws and regulations and shall be subject to the jurisdiction of domestic courts.
(3) Depositary certificate basic property.
The basic assets of depositary receipts include overseas basic securities and their derivative interests. The depositary can entrust a financial institution to act as a custodian outside the country. The custodian is responsible for the basic assets of the depository depository and is responsible for handling other business related to the trusteeship. The depositary and the custodian shall be independent households of the depositary receipts, and the basic assets of the depositary receipts shall be effectively separated from their own property, separately managed, and separately accounted, and the basic assets of the depositary receipts shall not be attributed to their own property. It shall not violate the fiduciary duty to encroach on the basic assets of the depositary receipts.
(4) Cross-border conversion.
The specific requirements and methods for the conversion between depositary receipts and basic securities shall be prescribed by the CSRC.
Seven, information disclosure
The relevant information disclosure obligors of the pilot enterprises and their controlling shareholders, actual controllers, etc. shall disclose the information truthfully, accurately, completely, promptly and fairly, without false records, misleading statements or major omissions. In principle, the pilot red chip enterprises fulfill their information disclosure obligations in accordance with the current information disclosure system of listed companies. The information disclosed by the pilot red chip enterprises and their controlling shareholders, actual controllers and other relevant information disclosure obligors shall be disclosed in Chinese in a timely manner, and the disclosure content shall be consistent with the disclosure in the overseas market.
When a pilot red chip enterprise issues securities in China, it shall disclose financial information in accordance with the laws and regulations such as the Securities Law, and clarify relevant issues during the fiscal year period in the listing arrangement. The financial report information of the pilot red-chip companies that issue securities disclosures in China may be prepared in accordance with the Chinese Accounting Standards for Business Enterprises or the accounting standards recognized by the Ministry of Finance and equivalent to the Chinese Accounting Standards for Business Enterprises. It may also be prepared in accordance with International Financial Reporting Standards or US Accounting Standards. At the same time, it provides information on the difference adjustment adjusted in accordance with the Chinese Accounting Standards for Business Enterprises.
Eight, investor protection
Pilot companies must not have any special arrangements or actions that harm the legitimate rights and interests of domestic investors. For the issuance of stocks, the current domestic investor protection system shall be implemented; the controlling shareholders, actual controllers, directors and senior management personnel of the unprofitable pilot enterprises shall not reduce the shares held before the listing before the enterprise realizes the profit. Where the depositary receipts are issued, it shall be ensured that the holders of the depositary receipts actually enjoy the rights and interests of the holders of the overseas basic stocks, and the depositary shall exercise the rights of the foreign basic stock issuers on behalf of the domestic investors. When the legitimate rights and interests of investors are damaged, the pilot enterprises should ensure that domestic investors receive compensation comparable to those of foreign investors.
Nine, legal responsibility
If the relevant market entities such as pilot enterprises issue securities in violation of laws and regulations and fail to disclose information according to regulations, if the disclosed information has false records, misleading statements or major omissions, or if there are other illegal acts such as insider trading and manipulation of the market, they shall be in accordance with the securities laws and other laws. The regulations stipulate legal responsibility. If the relevant market entities such as pilot enterprises cause damage to the legitimate rights and interests of investors, they shall be liable for compensation according to law, and investors may directly demand that they bear the liability for damages according to law. If the depositary or custodian violates this opinion and the relevant provisions of the CSRC, the CSRC may take regulatory measures according to law and pursue its legal responsibilities.
X. Organization and management
All regions and relevant departments must attach great importance to the unification of ideas, raise awareness, increase efforts, and ensure that the pilots are carried out in an orderly manner. The CSRC shall, in accordance with the Securities Law and the provisions of this Opinion, strengthen coordination and cooperation with various regions and relevant departments, steadily promote relevant work, improve relevant supporting systems and regulatory rules, and strengthen market supervision, investor education and cross-border supervision and law enforcement cooperation. Seriously investigate and deal with violations of laws and regulations in accordance with the law, supervise pilot enterprises to earnestly fulfill their information disclosure obligations, and urge intermediaries to be honest and trustworthy, diligent and responsible, and effectively protect the legitimate rights and interests of investors.