Recently, with the consent of the State Council, the General Office of the State Council forwarded the “Some Opinions on Pilot Projects for Launching Domestic Shares or Depositary Receipts of Innovative Enterprises” (hereinafter referred to as “Several Opinions”) of the China Securities Regulatory Commission. In the next step, the SFC will strengthen coordination and cooperation with various regions and relevant departments, and quickly improve the relevant supporting systems and regulatory rules to steadily promote the pilot work.
Creating conditions to guide innovative enterprises in issuing equity financing instruments and listing them in China, giving full play to the supporting role of the capital market for innovation-driven development strategies. It is an important measure to deeply implement the spirit of the Party's Nineteenth National Congress and related decision-making arrangements of the Party Central Committee and the State Council. .
Considering the intrinsic characteristics of innovative companies, such as large investment, rapid iteration, and easy subversion, in support of innovative companies in the domestic issuance and listing process, they will adopt a pilot approach in line with the overall keynote of stability and progress. During the pilot process, it will focus on risk prevention and control, compliance with laws and regulations, overall planning, gradual and orderly progress, protect the legitimate rights and interests of small and medium investors, and maintain the stability of the capital market.
The main contents of the pilot include:
The first is the pilot object and the selection mechanism. The pilots are mainly targeted at a few high-tech industries and strategic emerging industries that are in line with national strategies, have core competitiveness, and have high market recognition, and belong to the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, and bio-pharmaceuticals. , to achieve a considerable scale of innovative companies.
In terms of selection criteria, first, red-chip companies that have been listed overseas have a market value of no less than 200 billion yuan. Second, innovative companies (including red chip companies and domestic registered companies) that have not yet been listed overseas have an operating income of not less than 3 billion yuan in the most recent year and a valuation of no less than 20 billion yuan; Independent research and development, international leading technology, and in the same industry competition in a relatively dominant position. The specific standards are set by the China Securities Regulatory Commission.
As for the selection mechanism, the Securities and Futures Commission established the Scientific and Technological Innovation Industrialization Consultation Committee to give full play to the role of relevant industry authorities and experts and scholars, comprehensively consider relevant factors and strictly select pilot enterprises.
The second is the issuing conditions and auditing mechanism of pilot enterprises. According to the pilot program, pilot red chip companies are allowed to issue depository receipts in the domestic capital market according to procedures; pilot red chip companies with the conditions for stock issuance and listing may also apply for the issuance of shares in China; domestically registered pilot companies may apply for The domestic issuance of shares is listed.
The public offering of stocks by pilot enterprises shall comply with the conditions for distribution as stipulated in the Securities Law and the conditions stipulated by the China Securities Regulatory Commission approved by the State Council. Regarding the possible unprofitable and unrecovered losses that may exist in the pilot enterprises, the China Securities Regulatory Commission has initiated procedures to amend relevant departmental regulations. Pilot red chip companies issuing deposit receipts for stock-based securities in China shall comply with the basic conditions for the issuance of stocks in the Securities Law and meet the requirements of the "Several Opinions."
The Securities Regulatory Commission, in accordance with the Securities Law and other regulations, approves pilot companies to issue public shares in China in accordance with the current stock issuance approval procedures. In principle, the issuance review committee shall review the issuance of deposit redemption enterprise deposit receipts in accordance with the procedures for reviewing the issuance of stocks.
Third, information disclosure and daily supervision of pilot enterprises. The conduct of pilot companies in the issuance of domestic stocks or depositary receipts, related issuances, listings, and transactions are all included in the scope of the existing securities laws. The CSRC implements supervision in accordance with the Securities Law and the "Several Opinions" and related regulations.
Pilot red chip companies shall, in principle, perform information disclosure obligations in accordance with the current information disclosure system of listed companies. For pilot red-chip companies that have been listed on overseas markets, information disclosed overseas should be disclosed simultaneously in Chinese territory. The disclosure should be consistent.
Where a pilot company illegally issues securities in violation of laws and regulations, fails to disclose information in accordance with the regulations, or has false records, misleading statements or major omissions in the disclosed information, it shall bear legal liabilities in accordance with laws and regulations such as the Securities Law.
According to the provisions of the Securities Law, the SFC will establish a supervision and management cooperation mechanism with the securities regulatory agencies of the relevant countries or regions where pilot red chip companies are listed, and implement cross-border supervision.
Fourth, pilot investor protection requirements. If a pilot enterprise issues shares, it shall be implemented in accordance with the investor protection system for the issuance of existing domestic stocks. The controlling shareholders, actual controllers, directors, and senior managers of pilot companies that have not yet been profitable may not reduce their holdings of shares held prior to the listing until the company achieves profits.
Where a pilot enterprise issues a deposit receipt, it shall ensure that the actual rights and interests of the holder of the depositary certificate are equivalent to the rights of the holder of the overseas basic stock. The depositary shall exercise the right of the domestic investor to the overseas basic stock issuer on behalf of the investor. Where the legitimate rights and interests of investors are infringed by illegal activities, the pilot enterprises shall ensure that domestic investors receive compensation equivalent to that of foreign investors.
In order to actively and steadily push forward the pilot work, I will strictly control the pilot companies, control the number of pilot entrepreneurs and the amount of funding, and reasonably grasp the pace of trials; strengthen information disclosure, market supervision, and investor education, and urge the market participants to fulfill their duties. Responsibility. It is hoped that all parties in the market will invest rationally and do not follow suit to promote the smooth development of the pilot work.
Notice of the General Office of the State Council on Forwarding the Opinions of the China Securities Regulatory Commission on Launching Pilot Projects for the Issuance of Domestic Shares or Depositary Receipts within the Innovative Enterprise
The State Council issued No. 21 
The people's governments of provinces, autonomous regions, and municipalities directly under the Central Government, the ministries and commissions of the State Council, and the agencies directly under the State Council:
The "Several Opinions on Launching Pilot Projects for Issuing Domestic Shares or Depositary Receipts within the Domain of Innovative Enterprises" of the China Securities Regulatory Commission has been approved by the State Council and is now forwarded to you. Please carefully implement them.
Office of the State Council
March 22, 2018
Several Opinions on Pilot Projects for Issuing Domestic Shares or Depositary Receipts within the Innovative Enterprises
In order to further increase the support of the capital market for the implementation of innovation-driven development strategies, and in accordance with the principle of marketization and the rule of law, learn from international experience and carry out trials of innovative companies issuing domestic shares or deposit receipts, the following opinions are proposed.
First, the guiding ideology
Fully implementing the spirit of the Nineteenth Party Congress, guided by the socialist ideology of Chinese characteristics under the new era of Xi Jinping, conscientiously implemented the decision-making and deployment of the Party Central Committee and the State Council, adhered to the principle of stability and progress, and firmly established and implemented new development concepts. Quality development requirements, coordinate the overall layout of the "five in one" and coordinate the promotion of the "four comprehensive" strategic layout, deepen the reform of the capital market, expand the opening up, support innovative enterprises in the issuance of securities in the domestic capital market, help our country's high-tech industries and strategies The development of new and emerging industries will be promoted, and the reform of economic development quality, efficiency and reform will be promoted.
Second, the pilot principle
(a) Serve the national strategy. It is guided by service innovation-driven development, insists on the organic integration of innovation and development, emphasizes both reform and opening-up, helps mass innovation for the public, and promotes economic restructuring and industrial transformation and upgrading.
(b) Adhere to legal compliance. Under the framework of laws and regulations, do a good job of coordinating with related policies, carry out institutional innovations in a moderate and appropriate manner, and ensure that the pilots are in compliance with regulations and are highly efficient and feasible.
(3) Steadily and orderly progress. We will make overall plans, step by step, and explore ways to solve the problem of innovating companies’ domestic listing through trials, so as to accumulate experience and create conditions for further deepening reform and perfecting the system.
(d) Effectively prevent and control risks. Fully protect the legitimate rights and interests of small and medium 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 firmly hold on to the bottom line where systemic risks do not occur.
Third, pilot enterprises
Pilot enterprises should be high-tech industries and strategic emerging industries that are in line with national strategies, have mastered core technologies, and have a high degree of market acceptance. They are Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, and bio-pharmaceuticals. And reached a considerable scale of innovative companies. Among them, the large-scale red-chip companies that have been listed overseas have a market value of no less than 200 billion yuan; innovative companies (including red-chip companies and domestic registered companies) that have not been listed overseas have an operating income of no less than 3 billion yuan in the most recent year. The renminbi has a valuation of no less than RMB 20 billion, or its operating income has grown rapidly. It has its own R&D, leading international technology, and is in a relatively dominant position in competition with the industry. The specific standards for pilot enterprises are set by the Securities Regulatory Commission. The term "red chip enterprise" as used in this opinion refers to an enterprise whose registered place is overseas and whose main business activities are in the territory.
The China Securities Regulatory Commission established the Advisory Committee on Technological Innovation Industrialization (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. According to the pilot enterprise standards, the business model, development strategy, R&D investment, new product output, innovation capability, technical barriers, team competitiveness, and industry are taken into consideration. Factors such as status, social influence, industry development trend, company growth, estimated market value, etc., make preliminary judgments on whether the applicant company is included in the pilot scope. The Securities Regulatory Commission used this as an important basis to review whether the applicant company was included in the pilot, and strictly follow the laws and regulations to accept the audit application for the issuance of the pilot company.
IV. Pilot method
Pilot companies may choose to apply for the issuance of stocks or depositary receipts in accordance with the relevant regulations and their actual conditions. The pilot red-chip companies are allowed to issue the deposit receipts in the domestic capital market according to procedures; pilot red-chip companies with the conditions for stock issuance and listing may apply for the issuance of shares in China; domestically registered pilot companies may apply for the issuance of domestic stocks in the domestic market. The depositary receipts referred to in this opinion refer to the securities issued by the depositary and issued on the basis of overseas securities in China, representing the equity of offshore basic securities.
The stocks or depositary receipts issued by the pilot companies in China shall be listed and traded on domestic stock exchanges, and shall be registered, deposited, and settled in China Securities Depository and Clearing Corporation Limited. The funds raised by the pilot enterprises may be remitted abroad in the form of RMB or purchased in foreign currency, and may also be retained for domestic use. The use of funds raised by pilot enterprises and the dividend distribution of depositary receipts shall comply with relevant regulations concerning foreign investment and foreign exchange management in China.
The Securities Regulatory Commission shall, in accordance with laws and regulations such as the Securities Law, approve the pilot red chip companies to issue shares in China in accordance with the current approval procedures for issuance of stocks; in principle, the issuance and review committee shall review the issuance of depositary certificates for red-chip enterprises in accordance with the procedures for approval of stock issuance. Application.
The acts of issuing, listing, and trading of the stocks or depository receipts of the pilot companies in the country are all included in the scope of the existing securities laws. The CSRC implements supervision in accordance with the Securities Law, this opinion and related regulations, and establishes a regulatory cooperation mechanism with the securities and regulatory agencies of the relevant countries or regions where pilot red chip companies are listed, and implements cross-border supervision.
V. Issuance conditions
Pilot companies issuing stocks in China shall comply with the conditions for issuing stocks as required by laws and regulations. Among them, the pilot red chip companies equity structure, corporate governance, operation specifications and other matters can be applied to overseas laws and regulations such as company law, but the arrangement of investor rights protection should not be lower than the domestic legal requirements. For pilot companies that have a protocol control structure, the CSRC will distinguish the different situations from the relevant departments and handle them in accordance with the law.
Pilot red chip companies issuing depositary certificates based on stock-based securities in China shall comply with the basic conditions for stock issuance under the Securities Law, and meet the following requirements: First, the ownership structure, corporate governance, and operational specifications are applicable to overseas registered companies. Laws and other laws and regulations stipulates, but the arrangements concerning the protection of investors’ rights and interests shall not be lower than the domestic legal requirements in general; second, there are differences in voting rights, agreement control structures or similar special arrangements, which shall be made at the time of initial public offering in the prospectus. The public issuance documents are prominently located, and 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.
Sixth, the basic arrangement of depositary receipts
The issuance of depositary receipts in China should comply with the following basic institutional arrangements and strictly abide by relevant regulatory rules.
The basic securities issued by a basic securities issuer overseas are held by the depositary, and the depositary shall issue a deposit receipt within the territory. The basic securities issuer shall meet the securities law's basic conditions for the issuance of securities such as stocks, participate in the issuance of depositary receipts, perform information disclosure obligations in accordance with the law, and accept the supervision and management of the CSRC and the stock exchange as required.
The depositary shall, in accordance with the agreement of the deposit agreement, exercise the corresponding right of overseas basic securities according to the wishes of the holder of the depositary receipt, and apply for depositary receipts dividends, dividends and other services. The qualifications of the depositary shall comply with the relevant regulations of the Securities and Futures Commission.
The holder of a depositary receipt shall enjoy the rights of the overseas base securities represented by the depositary receipt in accordance with the law, and shall exercise its rights through the depositary in accordance with the deposit agreement.
(b) Depositary agreement.
The issuers, depositaries, and holders of depositary receipts of basic securities shall, through depository agreements, clearly identify the rights and interests of the depositary receipts and the rights and obligations of the parties. Investor holding the depositary receipt becomes the party to the depository agreement and regards it as its consent and abides by the deposit agreement agreement. The depositary agreement shall stipulate that the disputes arising from depositary receipts shall be subject to the provisions of Chinese laws and regulations and shall be subject to the jurisdiction of domestic courts.
(3) Depositary receipts basic property.
The basic assets of depositary receipts include offshore basic securities and their derivative interests. The depositary may appoint a financial institution overseas as the custodian. The custodian is responsible for the depository of the depositary receipts basic property and is responsible for handling other business related to hosting. The depositary and the custodian shall be single-proprietors of the basic property of the depositary receipts, effectively separate the depositary receipts' basic properties from their own property, manage them separately, keep separate accounts, and shall not classify the depositary receipt’s basic property in their own property. , may not violate the obligation to encroach on the depositary receipts basic property.
(d) Cross-border conversion.
The specific requirements and methods for conversion between depositary receipts and basic securities are stipulated by the Securities Regulatory Commission.
VII. Information Disclosure
The relevant information disclosure obligors such as pilot enterprises, their controlling shareholders and actual controllers shall disclose information in a true, accurate, complete, timely and fair manner, and shall not have any false records, misleading statements or major omissions. Pilot red chip companies shall, in principle, perform information disclosure obligations in accordance with the current information disclosure system of listed companies. Information released by pilot red-chip companies, their controlling shareholders and actual controllers and other related information disclosure obligors should be disclosed simultaneously in Chinese territory, and the disclosure content should be consistent with the content disclosed in overseas markets.
Pilot red chip companies issuing securities in China shall disclose financial information in accordance with laws and regulations such as the Securities Law, and specify the fiscal year period and related issues in the listing arrangements. The financial reporting information of pilot red chip companies that issue securities in China may be prepared in accordance with the Chinese Accounting Standards for Business Enterprises or equivalent accounting standards approved by the Ministry of Finance and the Chinese Accounting Standards for Business Enterprises, and may also be prepared in accordance with International Financial Reporting Standards or US accounting standards. At the same time, it provided adjustment adjustment information according to the Chinese Accounting Standards for Business Enterprises.
VIII. Investor Protection
Pilot enterprises must not have any special arrangements or actions that damage the legitimate rights and interests of domestic investors. In the case of issuance of stocks, the existing investor protection system in the territory shall be implemented; the controlling shareholders, actual controllers, directors, and senior management personnel of the not yet profitable pilot companies may not reduce the shares held prior to the listing until the company realizes profits. When issuing a depositary receipt, it shall ensure that the actual interest of the holder of the depositary receipt is equivalent to the equity of the holder of the overseas basic stock, and the depositary shall exercise the right of the domestic investor on behalf of the overseas basic stock issuer on behalf of the investor. When the legitimate rights and interests of investors are compromised, the pilot enterprises shall ensure that domestic investors receive compensation equivalent to those of foreign investors.
Nine, legal liability
Pilot enterprises and other relevant market entities issuing securities in violation of laws and regulations, failing to disclose information in accordance with relevant regulations, and having false records, misleading statements or major omissions in disclosed information, or having other illegal acts such as insider trading or market manipulation, shall be subject to securities laws and other laws. Regulations provide legal liability. If pilot companies and other relevant market entities cause damage to the legitimate rights and interests of investors, they shall be liable for compensation according to law. Investors may directly request them to bear the liability for damages. If the depositary or the custodian violates this opinion and the relevant regulations of the China Securities Regulatory Commission, the China Securities Regulatory Commission may take regulatory measures in accordance with the law and pursue their legal responsibilities.
X. Organization and management
All regions and relevant departments must attach great importance to unifying ideas, raising awareness, and intensifying efforts to ensure that the pilots are conducted in an orderly and lawful manner. The Securities Regulatory Commission shall, in accordance with the Securities Law and this opinion, strengthen coordination and coordination with various regions and relevant departments, steadily promote related work, improve related supporting systems and supervision rules, and strengthen market supervision, investor education, and cross-border supervision and law enforcement cooperation. Severely investigate and punish violations of law and regulations in accordance with the law, supervise pilot companies to earnestly fulfill their obligation of information disclosure, and urge intermediaries to be honest, diligent and responsible, and to effectively protect the legitimate rights and interests of investors.
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