New opportunities for Chinese enterprises to list D-shares in Europe

It has always been uncommon for wholly Chinese owned enterprises to choose and seek a foreign listing in Germany. Germany is the economic and manufacturing heart of Europe and since the United Kingdom’s declaration to leave the European Union (EU), Germany’s central position in the European capital markets has become evidently more important. Deutschland shares or D-shares, as a new means for wholly Chinese owned enterprises to list abroad, have drawn the attention of the capital markets industry. The offering to wholly Chinese owned enterprises of D-shares in Germany can be conducive to enhancing their global competitiveness and expanding their international strategic deployment. This column briefly describes the requirements and conditions of the China Europe International Exchange (CEINEX) for the offering and listing of D-shares.

CEINEX was established with respective investments of RMB200 million by the Shanghai Stock Exchange, Deutsche Börse Group and China Financial Futures Exchange. The term “D-share” means a share directly listed and offered on CEINEX in Germany, based on the relevant listing and trading rules of the German stock market, and by a joint stock limited company registered in China following review and approval by both the Chinese and German regulators. A D-share is an overseas listed foreign share under China’s Company Law and is similar in form to a Hong Kong H-share.

Conditions for the listing of D-shares. CEINEX’s listing rules show that its financial conditions for listing are simple. CEINEX conducts its review mainly to determine whether the issuer satisfies the listing conditions, which include the company’s financial indicators, liquidity indicators, etc. By taking a “General Standard” as an example, the main listing conditions include: (1) an operating history of at least three years; (2) a forecast market value for the listed shares of not less than €1.25 million; (3) a minimum offer quantity of 10,000 shares entering the market for trading; (4) the listed shares can be freely traded without a minimum offer percentage; and (5) before submission of the application to the exchange, the issuer is required to prepare a prospectus which is subject to the review and approval of the German financial regulator known as the Federal Financial Supervisory Authority (BaFin).

Qu Feng is a senior partner at Dentons