Today, the Shanghai Stock Exchange (SSE) officially released the relevant rules for the refinancing on the SSE STAR Market. An SSE official in charge of the business answered the questions about the issuance of the rules.
Q1: Can you brief us on the general background of the refinancing rules issued just by the SSE?
A: Since the first batch of companies were listed on the SSE STAR Market in July 2019, according to the overall deployment and arrangement of the China Securities Regulatory Commission (CSRC), the SSE has vigorously advanced the research on refinancing system for the SSE STAR Market and continued to revise and improve relevant rules for refinancing, on the basis of therequirement for "enhancing the refinancing system and making refinancing on the SSE STAR Market more convenient" in the Implementation Opinions on Establishing the Science and Technology Innovation Board and Piloting the Registration-based IPO System on the Shanghai Stock Exchange.
The collectively issued rules for refinancing on the SSE STAR Market include the Rules of Shanghai Stock Exchange for the Issuance and Listing Review of the Securities of the Companies Listed on the SSE STAR Market (the “Review Rules” for short), the Detailed Implementation Rules of Shanghai Stock Exchange for Issuance and Underwriting of the Securities of the Companies Listed on the SSE STAR Market (the“Underwriting Rules” for short) and the Q&A on the Issuance and Listing Review of the Securities of the Companies Listed on the SSE STAR Market (the “Review Q&A” for short), which have been formulated in accordance with the rules at higher levels such as the Measures for Administration of Issuance Registration of the Securities of the Companies Listed on the SSE STAR Market (for Trial Implementation) (the “SSE STAR Market Refinancing Measures” for short) promulgated by the CSRC, mainly stipulating the review standards, the review procedures and the business requirements in the issuance underwriting for the refinancing on the SSE STAR Market. The three sets of rules, together with the regulations and regulatory documents issued by the CSRC such as the “SSE STAR Market Refinancing Measures” and the Content and Format Standards for Information Disclosure of the Companies Listed on the SSE STAR Market on Public Offering of Securities, constitute a complete system of rules for securities issuance of the companies listed on the SSE STAR Market.
In addition, in order to further smooth financing channels for companies listed on the SSE STAR Market and give full play to the system function of the simplified refinancing procedures, with the approval of the CSRC, the SSE simultaneously issued the Notice of Effectively Conducting Related Work in 2020 for the Simplified Procedures for Refinancing Applying to the Companies Listed on the SSE STAR Market (the “Notice” for short), so as to adjust the requirements for the simplified refinancing procedures to apply to the listed companies on the SSE STAR Market in 2020.
Q2: The SSE has publicly solicited opinions on the "Review Rules" and the "Underwriting Rules" in the earlier stage. Can you brief us on the solicitation of opinions and the market feedback, as well as in what aspects the released rules have been adjusted and improved?
A: On November 8, 2019, the SSE publicly solicited opinions from the market on the "Review Rules" and the "Underwriting Rules" during a period of one month. In general, the "Review Rules" and the "Underwriting Rules" were fully recognized in the society, and it was believed that the refinancing system for the listed companies on the SSE STAR Market was in line with market expectations, reflecting the goals and requirements of the reform of the registration-based IPO system. At the same time,there were also specific opinions and suggestions on improving the supporting systems.
After soliciting opinions, the SSE carefully analyzed and studied the opinions and suggestions from the public, and fully absorbed reasonable and feasible opinions and suggestions into the rules and systems. During the period, the newly amended Securities Law formally took effect in March 2020. As the CSRC revised and improved the SSE STAR Market Refinancing Measures, the SSE also made further amendments and improvements to the "Review Rules" and "Underwriting Rules" at the same time.
Compared with the exposure draft released in November 2019, the "Review Rules" mainly contains the following important adjustments. First of all, the convertible corporate bonds (the“Convertible Bonds” for short) have been made a new product for the companies listed on the SSE STAR Market to apply for issuance and listing of securities, including the convertible bonds issued to non-specific targets and specific targets; second, the relevant expressions on securities issuance are adjusted according to the Securities Law and SSE STAR Market Refinancing Measures, as the "public offering" is revised to "offering to non-specific targets", and the "non-public offering" is changed to "offering to specific targets"; third, the requirements for disclosing the application documents are simplified; fourthly, the requirements are improved for the simplified procedures to apply to offering stocks to specific targets.
The "Underwriting Rules" mainly includes the following important adjustments. First of all, the business arrangement for issuing Convertible Bonds is newly added; second, the pricing arrangement for raising share from non-specific targets is adjusted, and the issuance modes, subscription procedures and requirements for information disclosure are also stipulated; third, the procedures and requirements for offering shares to specific targets are improved; fourthly, the business process of the simplified procedures applying to offering shares to specific targets is confirmed; fifthly, the mechanisms for submission of issuance plans, major event reporting after the review meeting and other matters in the securities issuance are refined, and it is also made clear that the "Underwriting Rules" and other rules can be referenced and applicable to the auxiliary financing with purchasing assets through issuing securities.
Q3: Can you brief us on the purpose and main content of the "Review Q&A"?
A: In order to further settle the market expectations and help the market participants better understand and grasp relevant regulatory requirements, the SSE focuses on issuance conditions and information disclosure requirements for the refinancing on the SSE STAR Market to formulate the“Review Q&A” on the key issues, which mainly includes ten questions and answers on the financing scale and time interval of financing, the investment, use and management of the raised funds, the understanding and grasp of the newly added horizontal competition with significant adverse impacts, apparently unfair related transactions and major violations, and related procedural requirements in review.
It should be noted that the “Review Q&A” focuses on the differentiated issuance conditions and information disclosure requirements of the SSE STAR Market to clarify the corresponding concerns in review. For the general and common issues involved in the review of refinancing issuance, the SSE refers to and applies the "Answers to Several Questions on the Refinancing Business" issued by the CSRC.
Q4: Can you brief us on how to demonstrate the principle of “focus on information disclosure” for the registration-based IPO system in the refinancing review for the listed companies on the SSE STAR Market?
A: In the refinancing review for the listed companies on the SSE STAR Market, the SSE will adhere to the IPO review guidelines for the SSE STAR Market, strictly implement the principle of focusing on information disclosure for the registration-based system of securities issuance, and urge the listed companies to disclose relevant information in an authentic, accurate and complete manner with the orientation toward the needs of investors inmaking in vestment decisions.
At present, the SSE STAR Market Refinancing Measures issued by the CSRC has further simplified and improved the issuance conditions. The refinancing on the SSE STAR Market mainly focuses on the regulated operation of listed companies and no longer takes the profitability requirement as an issuance condition. In addition to paying attention to whether the listed companies meet the issuance conditions, in the refinancing review for the SSE STAR Market, the SSE will focus on examining whether the listed companies fully disclose the information that has a significant impact on investors' making investment decisions and whether they fully unveil the risk factors in operation.
Q5: Can you brief us on the changes made to the procedures and time limit of review for refinancing of listed companies on the SSE STAR Market in comparison with the IPO review?
A: Regarding the review procedures, those for refinancing of the listed companies on the SSE STAR Market are basically the same as IPO review procedures on the board, which means that the SSE conducts issuance and listing review and the CSRC is in charge of the registration. Moreover, in order to further improve the review efficiency and shorten the time limit of review, the refinancing review for the listed companies on the SSE STAR Market distinguishes between issuing securities to non-specific and specific targets, and adopts differentiated review procedures. In the issuance of securities to non-specific targets, the application will be submitted to the listing committee for consideration after the SSE’s review body provides the preliminary review opinions; in the issuance of securities to specific targets, it is not necessary to refer the application to the listing committee for deliberation.
With regard to the time limit for review, compared with the IPO review for the SSE STAR Market, the review cycle for refinancing of listed companies on the SSE STAR Market is further shortened. The SSE will issue the review opinion within 2 months from the date of acceptance (excluding the reply time of the listed company); the time for issuing the first round of review inquiries is within 15 working days from the date of acceptance. In addition, the total time for the listed company and its sponsor and securities service agencies to reply to the review inquiries of the SSE shall not exceed 2 months. The CSRC will make the decision on whether or not to approve the registration for the registration application of the listed company within 15 working days.
In addition, simplified procedures have been designed for issuing stocks to specific targets in the refinancing system for the SSE STAR Market. For listed companies on the SSE STAR Market with good track record, the annual general meeting of shareholders can authorize the board of directors in accordance with the company's articles of association to decide to issue to specific targets the shares with a total financing amount less than RMB300 million and not exceeding 20% of the net assets at the end of the most recent year. After accepting application for simplified procedures, the SSE will no longer conduct review inquiries if the sponsor expresses a clear affirmative opinion on the verification, and within 3 working days from the date of acceptance, the review opinion will be issued and submitted to the CSRC for the registration procedure. The CSRC will make decision on whether or not to approve the registration within 3 working days after receiving the review opinion from the SSE. It is worth noting that, considering that the listed companies on the SSE STAR Market have basically completed the convening of the 2019 annual general meetings of shareholders, in order to give full play to the financing function of the simplified procedures, the "Notice" issued this time adjusts the requirements for the applicability of the simplified procedures in 2020, as a listed company may authorize the board of directors to decide to apply for the simplified procedures by convening an extraordinary general meeting.