Two methods for carrying out restructuring and back door listing

On 30 November 2013, the China Securities Regulatory Commission (CSRC) issued the Notice on Strictly Implementing the Listing Criteria for Initial Public Offerings (IPOs) of Shares When Conducting Reviews of Back Door Listings, which expressly specifies that the back door listing criteria are equivalent to the IPO criteria, and that back door listings are not permitted on the second board. In light of this, some companies have to search for a new back door listing method.

The definition

In August 2011, the CSRC issued the Decision on Amending Regulations for the Material Asset Restructuring and Ancillary Financing of Listed Companies, which expressly address back door listings for the first time: “From the date on which the change of control occurs, if the percentage of the total assets purchased by the listed company from the acquirer is equivalent to at least 100% of the period end total assets on the audited consolidated financial and accounting report for the fiscal year before the change in control of the listed company … the business entity from which the listed company purchased the assets shall have been operating as a going concern for at least three years, and its net profit for the most recent two fiscal years shall have been in the black and total more than RMB20 million [US$3.3 million]. Other regulations will be formulated by the CSRC where the assets purchased by a listed company are in a specific industry such as finance, venture capital, etc.

“Once the material asset restructuring specified in the preceding paragraph is completed, the listed company shall be in compliance with CSRC regulations on the governance and compliant operation of listed companies, be independent from its controlling shareholder, actual controller and other enterprises controlled by it in terms of business, assets, finances, personnel, organisation, etc., and there shall be no competition or obviously unfair connected transactions between it and its controlling shareholder, actual controller or other enterprise controlled by it.”