China Fortune Securities recently transferred a 2% share of its joint venture company, Morgan Stanley Huaxin Securities, to Morgan Stanley, giving the JV partner a controlling stake by raising its share from 49% to 51%.
Since the China Securities Regulatory Commission (CSRC) fully liberalized the shareholding ratio of foreign-funded brokerages in April, some foreign investors have increased their controls over JV brokerages in China.
John Xu, a corporate partner in Linklaters’ Shanghai office, said: “These [new regulations] imposed new requirements for the controlling shareholder to explain its regulatory and compliance position, at both the group and subsidiary level, to the CSRC in order to establish its fitness to acquire the controlling stake in the JV. The new rules also involved significant changes to the corporate governance framework of the JV, and additional obligations of its shareholders to support the JV.”
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