New Third Board oversight of connected transactions and horizontal competition

Activity on the New Third Board has continued to warm to its current red-hot state since 2014. This is due to the board expanding country-wide, the transaction settlement system going online, and the implementation and expansion of the market-maker system. Parallel with this, major investment firms have been closely pursuing companies proposing a listing on the New Third Board.

If an investor proposes an acquisition, its short-term focus falls on whether the enterprise is qualified to list and trade on the New Third Board in addition to considering its growth potential and ability to increase its acquisition and investment value. Accordingly, an investor should conduct due diligence of the enterprise before investment or acquisition.

As when investing in an enterprise to be listed on a main board, the enterprise’s connected transactions and horizontal competition remain a focus of attention for the investor when conducting the legal due diligence for an investment in, or acquisition of, an enterprise to be listed on the New Third Board. The authors have handled a number of recent listings of this type and would like to analyze and explore the regulatory requirements for connected transactions and horizontal competition on the New Third Board.

Cindy Hu is a partner and Gu Qiuhua is an associate of East & Concord Partners