China’s two stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE), recently made extensive changes to their respective listing rules (the Listing Rules), both of which took effect on October 1, 2008. One change that has received much publicity is the specific provision that the Exchanges may make special rules for the stock listings of overseas companies, separate from the general rules included in the Listing Rules. Commentators have seen this change as a signal that the stock exchanges are clearing the way for overseas companies to trade on the Chinese stock exchanges.
The Shanghai Listing Rules and the Shenzhen Listing Rules differ in language, but are similar in substance. Major amendments include more stringent information disclosure requirements and detailed definitions of accuracy, authenticity, completeness, and fairness of information disclosure. In addition, the Listing Rules add new provisions on listed companies’ disclosure and reporting obligations when purchasing shares or other undergoing other equity changes in which share incentive plans are involved, as well as when the companies file for bankruptcy or undergoes restructuring.
Commentators have noted that the revisions’ major impact on China’s domestic stock market will be the loosened restrictions on selling a company’s stocks after an initial public offering (IPO). According to the Listing Rules, upon the approval of the Exchanges, the controlling shareholder or actual person in control of a company may transfer shares to legal persons who share common control with them, are in their control, or are in control of them, within 36 months of the IPO. For purchasers of the company’s shares in a share capital increase within 12 months before the issuer’s publication of its IPO prospectus, the no-sale period will be shortened from 36 months to 12 months.