Shenzhen Bourses’s ChiNext Board Set for Major Reform Agenda

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China’s securities regulator has unveiled a range of ambitious reforms for Shenzhen’s ChiNext Board (创业板).

On 27 April the Central Committee for Comprehensive Deepening of Reform (中央全面深化改革委员会) give its approval to the “ChiNext Board Reform and Trial Registration System Overall Implementation Plan” (创业板改革并试点注册制总体实施方案).

On the same date the China Securities Regulatory Commission (CSRC) and the Shenzhen Stock Exchange (SSE) issued a slew of draft measures for the solicitation of opinions for the public that outline an overall reform and trial registration framework for the ChiNext Board.

These included the:

  • ChiNext Initial Public Offering Stock Registration Administrative Measures (Trial) (创业板首次公开发行股票注册管理办法(试行)),
  • ChiNext Listed Company Securities Issuance Registration Administrative Measures (Trial) (创业板上市公司持续监管办法(试行)),
  • ChiNext Listed Company Ongoing Regulation Measures (Trial) (创业板上市公司持续监管办法(试行)),
  • Securities Issuance Listed Sponsor Operations Administrative Measures (证券发行上市保荐业务管理办法).

The raft of measures outline a number of major changes to existing regulations governing the ChiNext Board, including: –

  1. Cancellation of current listing conditions in relation to profit performance and absence of losses that have been made up.
  2. Cancellation of the suspended listing and restoration of listing steps. Removal of the market withdrawal rectification period for transactional withdrawals. Adjustment of the market withdrawal trigger period for failure to promptly make regular disclosures and amendment of financial reports four months. Shift of the time for suspension in the case of forceable market withdrawal due to major legal breaches from after “knowledge of dispatch of administrative penalty advance notice or judicial decision” to “receipt of administrative penalty decision or judicial decision coming into effect,” in order to provide more ample transaction opportunities to investors.
  3. No restrictions on price movements for the 5 trading days prior to issuance of new shares. Optimisation of temporary suspension mechanisms during trading. Setting of 30%, 60% suspension indexes, with 10 minute suspension for each. ChiNext share bidding transaction price movement threshold is widened to 20%.
  4. Confirmation that individual investors applying for authorisation to connect to ChiNext must have average daily assets of no less than 100,000 yuan in their securities accounts and funds accounts for the 20 days prior to connection, as well as have participated in securities transactions for over 24 months. Cancellation of regional 2 and 5 day cooling off period.
  5. Starting from the date of notification, CSRC will suspend the acceptance of IPO and ChiNext Board listing applications, and continue to accept ChiNext board listed company refinancing and restructuring applications. Prior to the implementation of the ChiNext Board trial registration system, CSRC will perform as normal the aforementioned administrative licensing work in accordance with regulations.
  6. Allowing ChiNext Board strategic investors and offline investors to lend shares placed with them during the guaranteed holding period. The SSE announces loan interest for allocated shares. Confirmation that publicly offered funds, social insurance funds and other institutional investor can lend shares.

In order to list on the ChiNext Board regular enterprises must satisfy at least one of the following:

  1. Positive net profits over the past two years, as well as accumulated net profits of no less than 50 million yuan;
  2. Projected market capitalisation of no less than 1 billion yuan, positive net profits for the past year, and operating revenues of no less than 100 million yuan.
  3. Project market capitalisation of no less than 5 billion yuan, and operating revenues of no less than 300 million yuan for the past year.

Red chip enterprises are required to either:

  1. Projected market capitalisation of no less than 10 billion yuan, and positive net profits for the past year.
  2. Projected market capitalisation of no less than 5 billion yuan, and positive net profits for the past year as well as operating revenues of no less than 500 million yuan.

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