An extract from The Initial Public Offerings Law Review, 4th Edition

The offering process

i General overview of the IPO process

Listing in China involves steps that are common in other jurisdictions (due diligence, document preparation, including the prospectus), as well as steps that are unique to China (pre-listing review, conversion from a limited liability company to a company limited by shares, the CSRC approval). Below is a brief overview of the IPO process in China. For stock exchanges except the Technology Innovation Board, the time frames set forth in Table 3A reflect common practice prior to the effectiveness of the 2019 Securities Law. The time frames set forth in Table 3B reflect common practice for applicants proposing to list on the Technology Innovation Board. Specific time frames for individual applicants may vary from those set forth in Table 3A and Table 3B.

Table 3A: The IPO process for Stock Exchanges Other Than the Technology Innovation Board
StepParticularsTimetable
Due diligenceThe sponsor, auditors, legal advisers and other stakeholders conduct due diligence of the issuer, set IPO terms (such as the target amount to be raised), advise the issuer on the IPO process and assist the issuer in complying with IPO requirements.T-90 days
RestructuringThe issuer is restructured into a company limited by shares (as required under law); stakeholders prepare a restructuring plan, audit and appraise the issuer's assets, and prepare sponsor agreements and the issuer's articles of association; the issuer executes the restructuring plan and establishes relevant internal departments in accordance with listing rules.T-45 days
Pre-filing reviewThe local counterpart of the CSRC conducts pre-listing guidance work.T-15 days
FilingThe sponsor files the IPO application documents with the CSRC; once the CSRC states the application documents are complete, the CSRC decides whether to accept the filing within five business days.T*
CSRC procedures
  • Acceptance of the application from the CSRC;
  • pre-disclosure;
  • feedback;
  • face-to-face meeting;
  • reply to the CSRC's feedback;
  • pre-disclosure updates;
  • preliminary review;
  • examination of selected disclosures (if any);
  • attendance of the issuance examination committee meeting;
  • reply to the issuance examination committee's questions or requirements (if any);
  • sealing of IPO application-related documents;
  • post-meeting review by the issuance examination committee; and
  • obtaining of official approval and issuance.
Preparation by the exchange
  • Approval from the CSRC;
  • negotiation with traders about stock abbreviation, stock code, etc;
  • submission of documents to the relevant exchange;
  • amendment registration with the Administration for Industry and Commerce; and
  • listing and trading on the relevant exchange.
* T refers to the date when the CSRC accepts the IPO application. Days are calendar days.
Table 3B: The IPO process for the Technology Innovation Board
StepParticularsTimetable
Due diligenceThe sponsor, auditors, legal advisers and other stakeholders conduct due diligence of the issuer, set IPO terms (such as the target amount to be raised), advise the issuer on the IPO process and assist the issuer in complying with IPO requirements.T-90 days
RestructuringThe issuer is restructured into a company limited by shares (as required under law); stakeholders prepare a restructuring plan, audit and appraise the issuer's assets, and prepare sponsor agreements and the issuer's articles of association; the issuer executes the restructuring plan and establishes relevant internal departments in accordance with listing rules. The foregoing does not apply to applicants proposing to list under the CDR regime.T-45 days
Pre-filing reviewCommunicate potential issues with the SSE electronically or in person.T-15 days
FilingThe sponsor files the IPO application documents with the SSE; once the SSE states the application documents are complete, it has five business days to decide whether to accept the filing.T*
SSE procedures
  • Acceptance of the application from the SSE;
  • pre-disclosure;
  • first round of inquiries;
  • face-to-face meeting (if necessary);
  • feedback;
  • multiple rounds of further inquiries;
  • reply to the SSE's feedback;
  • consultation with the SSE regarding industry issues;
  • face-to-face inquirers (if necessary);
  • issuance of the audit report by a department of the SSE;
  • pre-disclosure;
  • attendance of the issuance examination committee meeting;
  • hearing;
  • release of the issuance examination committee's opinion; and
  • SSE issues opinion.
T+180 days
CSRC procedures
  • Report to the CSRC and obtain its official approval;
  • pre-disclosure updates; and
  • disclosure of the prospectus.
T+240 days
* T refers to the date when the SSE accepts the IPO application. Days are calendar days.
ii Pitfalls and considerations

Under the current IPO process (except for the Technology Innovation Board), the CSRC will conduct a thorough, substantive review of all IPO application documents. In recent years, the CSRC has raised mainly the following issues with respect to unsuccessful applicants:

  1. failure to satisfy qualification requirements;
  2. failure to satisfy sustainable profitability requirements;
  3. competition involving the controlling shareholder, actual controller or other enterprises controlled by such controlling shareholder or actual controller;
  4. use of proceeds-related issues;
  5. disclosure issues;
  6. corporate governance issues;
  7. compliance issues;
  8. finance and accounting issues; and
  9. defective reports issued by advisers.

This is not an exhaustive list of reasons, and one factor may not necessarily be decisive in an application's denial. However, they serve as a useful guide for prospective issuers. With the roll-out of the registration-based system for all issuers on 1 March 2020 pursuant to the 2019 Securities Law, we anticipate that internal controls, and the transparency, authenticity and accuracy of disclosures will be decisive factors in the IPO process.

iii Considerations for foreign issuers

As stated above, prior to the launch of the Technology Innovation Board, an issuer must be a company limited by shares incorporated in China. Accordingly, non-Chinese corporate bodies may not list on Chinese stock exchanges. However, these restrictions do not prevent joint ventures with foreign ownership that do not operate in a restricted or prohibited industry from listing in China. Established offshore incorporated eligible red-chip companies may list on the Technology Innovation Board.