Name: Administrative Measures on the Initial Public Offering and Listing on the Second Board (Draft for Consultation) (《首次公开发行股票并在创业板上市管理办法 (征求意见稿) 》, the “Draft Measures”)
Issuing authority: China Securities Regulatory Commission (“CSRC”)
Consultation period: Ending on 31 March 2008
Subject: IPO and listing on the second board
Calls for a PRC stock exchange which targets innovative and growth enterprises have been echoed in the past years. The release of the Draft Measures marks a step closer to the launch of China’s second board, though it appears that this may not happen until the second half of this year.
Highlights
- The Draft Measures set forth a lower listing threshold as compared with the country’s main boards in Shanghai and Shenzhen. Some highlights are as follows:
(i) In addition to a business track record of at least three years, an issuer must meet certain financial requirements in order to be listed on the second board. These requirements include, among others, that an issuer must (1) either a) have two consecutive years of profit in the last two financial years, with increasing profit and additionally, the aggregate net profit for such years must be no less than RMB 10 million; or b) be profit-making for the last financial year with net profit at no less than RMB 5 million. In addition, its revenue for the last financial year must be no less than RMB 50 million and annual revenue growth or each of the last two financial years must be at least 30%; (2) have net assets of no less than RMB 20 million before the issue; and (3) have a minimum total share capital of RMB 30 million after the issue.
(ii) An issuer must engage in one core business and the capital to be raised from the issue must only be invested in such business. The registered capital of the issuer must be fully paid up by its shareholder.
(iii) There should not be significant changes in the core business of the issuer or its directors and senior management personnel or actual controller in the last two years.
- In relation to disclosure, the issuer is required to disclose the full text of the prospectus on its website and a website designated by the CSRC. At the same time, it is required to make an announcement in newspapers designated by the CSRC to inform investors of the websites on which the prospectus can be found. The Draft Measures further require the issuer to specifically disclose the investment risk in the prospectus.
- The Draft Measures prescribe certain responsibilities for sponsors, which include among others: (1) conduct due diligence and issue a specific opinion on the company’s ability in growth and innovation (if applicable); and (2) verify and issue its opinion on whether the information contained in the prospectus is true, accurate and complete.
