New ChiNext rules provide answers for old grievances

The China Securities Regulatory Commission (CSRC) officially published on 16 May 2014 the Measures Governing Initial Public Offerings and Listings on ChiNext and the Interim Measures Governing the Issuance of Securities by Companies Listed on ChiNext (refinancing measures), which came into effect as of the date of publication on 16 May.

The measures for ChiNext

ChiNext has been operating for nearly five years since its launch in 2009. The lack of adequate requirements for share issuance under the system established in the initial stage of ChiNext has become an increasingly prominent issue. On the one hand, ChiNext is not flexible and inclusive enough in handling the requirements for sustained growth in the performance of companies, so that a group of startup companies with substantial fluctuations in performance were denied access. On the other hand, it has set relatively high financial access indicators, failing to meet the financing needs of more growth-oriented and innovative small and medium-sized enterprises (SMEs). Because of these issues, there was an urgent need for ChiNext to revise the former rules.

The revised measures contain 57 articles in six chapters, covering general principles, conditions for share issuance, issuance procedures, information disclosure, supervision and management, as well as legal liability and supplementary provisions. The main amendments are: first, the financial access indicators are appropriately relaxed by cancelling the requirements for sustained growth in performance; second, other conditions for share issuance are streamlined and information disclosure discipline is strengthened; third, the protection of the legitimate rights and interests of small investors and initial public offering (IPO) reform are enforced comprehensively. The Circular on Further Improving the Guidelines for ChiNext Sponsorship (CSRC announcement [2010] No. 8) is also rescinded. As a result, the reporting companies on ChiNext are no longer limited to those in the nine major industries.

Yao Zhengwang is a partner at Zhonglun W&D Law Firm