Provisions on overseas listing

Provisions on overseas listing

With the vigorous development of some companies, the domestic market has become larger and larger, so they will want to open up new overseas markets. But what many people don't understand is, what are the regulations for domestic assets to be listed overseas?


1. What are the regulations for overseas listing of domestic assets?


1. Relevant regulations of the China Securities Regulatory Commission


Main Board: (1) Comply with my country's laws, regulations and rules on overseas listing;


(2) The purpose of raising funds is in line with the national industrial policy, foreign investment policy and the state regulations on the establishment of fixed asset investment projects;


(3) The net assets are not less than 400 million yuan, and the after-tax profit in the past year is not less than 60 million yuan, and there is growth potential. Calculated based on a reasonable expected price-earnings ratio, the fundraising amount is not less than 50 million US dollars (commonly known as "456"). Require);


(4) It has a standardized corporate governance structure and a relatively complete internal management system, with relatively stable senior management and a relatively high management level;


(5) There are reliable sources of foreign exchange for dividend distribution after listing, which is in line with the relevant regulations on foreign exchange management of the state;


(6) Other conditions prescribed by the CSRC.


GEM: (1) A joint stock limited company legally established and operating in a regulated manner;


(2) The company and its main promoters have no major violations of laws and regulations in the last 2 years;


(3) High-tech enterprises certified by the Ministry of Science and Technology of the People's Republic of China are given priority for approval.


2. Local regulations in Hong Kong


Main Board (referred to as "big h" shares): (1) Three-year operating history;


(2) Three-year profit record, 20 million Hong Kong dollars in the most recent year, and not less than 3,000 Hong Kong dollars in the other two years;


(3) Steady management and shareholders.


GEM (referred to as "small h-shares"): (1) 24-month business history;


(2) Active business records with a single main business;


(3) Steady management and shareholders.


2. The main methods of overseas listing of domestic enterprises


1. Overseas direct listing of domestic enterprises


Overseas direct listing means directly applying to the foreign securities authorities to issue stocks (or other derivative financial instruments) in the name of the domestic company, and applying to the local stock exchange for listing and trading. That is, what we usually call h-shares, n-shares, s-shares, etc. (h-shares refer to the issuance and listing of stocks by Chinese companies on the Hong Kong Stock Exchange, taking the first word "h" of hongkong as the name; n-shares refer to China's Enterprises issue and list shares on the New York Stock Exchange, taking the first word "n" of newyork as their name; the same S-shares refer to Chinese enterprises listed on the Singapore Exchange). Usually, overseas direct listings are carried out in the form of IPOs.


The main difficulty of overseas direct listing is that the laws at home and abroad are different, and the requirements for company management, stock issuance and trading are also different.


2. Overseas indirect listing of domestic enterprises, that is, "backdoor listing" overseas through overseas companies involving domestic rights and interests.


"Backdoor listing" means that domestic companies do not directly issue stocks overseas for listing, but use the name of companies registered overseas to list overseas. Realization, so that domestic enterprises can achieve the purpose of overseas listing. There are two modes of backdoor listing, namely, buying a shell listing and creating a shell listing. Whether it is "buying a shell" or "building a shell", the essence is to achieve the purpose of listing domestic assets by injecting domestic assets into shell companies.


"Buying a shell to go public" means that a domestic company acquires part or all of the equity of an overseas listed company, and then injects assets into it to achieve the purpose of overseas indirect listing. Buying a shell listing can avoid the complicated approval procedures for overseas listings in domestic law, and the financial disclosure of enterprises is relatively loose, which saves time and achieves the purpose of actual listing. The disadvantage of buying a shell to go public is (1) the high cost of buying a shell (for example, in the Hong Kong market, due to the increase in the price of shell companies, the cost of acquisition is greatly increased), which goes against the original intention of most domestic companies to go public overseas; (2) risks bigger. Because of the unfamiliarity with overseas listed companies, once the acquisition is completed, the purpose of listing is not achieved (for example, if you buy junk stocks, you will not be able to raise funds from the market after taking control, but will be burdened with debt) or the acquisition will fail, the price will be very high.


"Shell-building and listing" means that domestic companies use companies registered in overseas Bermuda, Cayman, Cook Islands and other places (or acquire local companies that already exist) to control domestic assets through cash or equity swap, etc., while domestic companies After becoming a foreign holding company, the corresponding proportion of equity and profits will be merged into the overseas company to achieve the purpose of listing. The main purpose of overseas listing is to avoid policy monitoring, and to use the tax avoidance island policy to achieve reasonable tax avoidance. However, there are also defects in shell-making and listing: First, domestic enterprises must first take out a foreign exchange or other assets to register and set up companies overseas, which is difficult for most state-owned enterprises that are currently short of funds; second, from overseas It can take years from the establishment of a holding company to the eventual issuance of shares to go public. Generally speaking, overseas securities management departments often require companies to have a certain period of business records before they can issue stocks and go public.


3. The main factors for overseas exchanges to attract Chinese companies to list


1. The threshold for listing is low and the financing speed is fast.


Overseas exchanges usually have lower listing thresholds, especially overseas ChiNext for small and medium-sized innovative companies. In addition, the issuance of stocks in overseas markets generally adopts the registration system, the application procedure is simple and the cycle is short. For example, Singapore can generally complete the approval process within 4 months, South Korea is 3 months, and Nasdaq is only 2 months. In addition, the refinancing speed of overseas exchanges is also quite fast. For example, Nanjing Hongguo International Holding Company conducted a refinancing three months after its listing in Singapore in 2003, raising 8.95 million Singapore dollars (about 45 million yuan). A large number of innovative companies with good quality and urgent need for financing have not yet met the listing requirements of domestic exchanges, or have to queue up in the approval channel when they need funds to break through the development bottleneck, which seriously restricts their development process. Under the circumstance that the domestic market cannot meet their development needs temporarily, a considerable number of innovative enterprises have to turn to overseas capital markets.


2. The market and investors are relatively mature


The overseas capital market is dominated by institutional investors. After a long-term market evolution, a relatively mature investment concept has gradually formed, and mature institutional investors are also more likely to understand the business model of innovative companies. At the same time, there have been many precedents for the successful listing of similar innovative companies overseas. For example, before Baidu, a Chinese search engine company in my country, was listed in the United States, Google, an English search engine company in the United States, had established the main position of search engines in the Internet age with its dazzling performance on Wall Street. Therefore, Baidu's profit model is very easy to achieve. The acceptance of the US market, coupled with its Chinese concept, made Baidu an unprecedented pursuit of international institutional investors on the first day of its listing on Nasdaq. As Baidu’s CFO said: “I chose the US for listing because there is no market that understands Baidu’s business better than the US. If there are similar companies in the capital market, they will be easily accepted by investors. It is easy to send out, and the stock price performance is relatively good.


3. The market restraint mechanism helps enterprises to grow


The overseas capital market has a good nurturing mechanism for enterprises, especially innovative enterprises. Through overseas listing, Chinese enterprises are supervised by more mature international institutional investors and more standardized market mechanisms, which will greatly improve their own governance structure and management level. great promotion. For example, foreign capital markets have relatively high requirements for continuous information disclosure after companies go public, and maintaining a good relationship with institutional investors for a long time is more important for companies to refinance and achieve long-term development. At the same time, in order for a listed company to gain long-term market recognition, the company must have substantial improvements in its own management level, capital utilization efficiency and corporate development planning. A large number of small and medium-sized and innovative enterprises in my country stand out after being baptized by overseas capital markets. For example, companies such as UT Starcom and Focus Media have grown rapidly after their listing on Nasdaq, enhancing their competitiveness; It has the strength to compete with Yili Group, which is inseparable from the stricter market restraint mechanism of the international capital market.


4. International reputation and overseas opportunities


Companies listed on overseas exchanges often gain a high reputation and join the ranks of well-known domestic or international companies. At the same time, overseas listing can also bring rich international cooperation resources, attract high-quality investors to improve the credibility of the company itself, and the improvement of international reputation and cooperation opportunities from various aspects provide many companies with opportunities for long-term development . Therefore, brand effect is also an important reason why many companies choose to list on NASDAQ and NYSE. For example, after Wuxi Suntech was listed on the New York Stock Exchange, which is known as the "rich man's club", its brand value was greatly enhanced, which in turn enhanced its ability to expand into the international market.



In summary, we know the regulations for the listing of domestic assets overseas. Although there are many advantages and benefits of listing overseas, there are still many points to pay attention to.