A look at listed company restructurings that failed in the first half of 2015

According to data announced at the 2015 working meeting of the China Securities Regulatory Commission (CSRC) Listed Company Acquisition and Restructuring Review Committee, 12 of the 53 restructuring plans reviewed were not approved between 30 December 2014 and 25 June. Further study of the cases that did not pass is required to guard against and resolve legal issues that may be encountered during failed restructurings.

Potential issues

Lack of compliance. The committee rejected Guangdong Weihua Corporation’s restructuring plan in January. The Committee’s review opinion was that certain assets the plan called to purchase had not undergone two procedures – the Ministry of Environmental Protection’s review of environmental protection facilities and the Ministry of Industry and Information Technology’s approval for rare earth industry access.

The plan thus did not comply with article 11 of the Measures for the Administration of Material Asset Restructurings of Listed Companies, i.e. they were not in compliance with state industry policies or with laws and administrative regulations on, e.g., environmental protection, land management or prevention of monopolies.

Relevant state industrial law generally are preconditions and compulsory requirements for restructuring plan approval. A plan that does not satisfy these requirements thus has a significant risk of failure.