SOE participation in material asset restructurings of listed companies (Part 1)

The reform of state-owned enterprises (SOEs) that rolls out nationwide is driving more and more SOEs to take part in the restructurings of listed companies. Examples include material asset restructurings between SOEs and listed companies under their control or between listed companies under common control of SOE conglomerates, as well as transactions whereby SOEs seek to acquire equity in outperforming listed companies as counterparties in their restructurings.

Pursuant to the Measures for the Administration of Material Asset Restructurings of Listed Companies (amended in 2016), the Guidelines on the Contents and Formats of Information Disclosure by Companies Publicly Offering Securities No.26 – Material Asset Restructurings of Listed Companies (amended in 2017) and other applicable regulations, material asset restructurings of listed companies must undergo necessary, lawful and valid approval or authorization procedures. The procedures for listed companies’ material asset restructurings that involve SOEs are no doubt top concerns of reviewers.

This article looks at approval procedures for two usual scenarios where SOEs are involved in restructurings of listed companies, the first relating to participation by SOEs that results in change of their equity in the listed companies, and the second relating to acquisition of shares as new shareholders by financial SOEs through the participation. In the first part of the article we look at the first scenario.