By Yin Lei
China’s securities watchdog decided last Friday to amend its delisting rules for A-share companies, a move intended to shore up the operation of the domestic stock market.
The revisions build on the four years of experience after 2014 when the securities watchdog put into effect its guidelines for improving the A-share delisting mechanisms. They cover a wider range of irregularities, set more requirements on the two exchanges in Shanghai and Shenzhen, and subject stakeholders of the related companies to a higher degree of responsibility.
The trading of a company’s shares should be suspended or terminated if it is found to have committed fraud in its listing process, failed to properly disclose material information, or acted to the detriment of national and public security, production safety, public health, or the ecosystem.
The two exchanges, namely the Shanghai Stock Exchange and the Shenzhen Stock Exchange, are required to set out their own implementation rules in this regard and see to their proper execution.
The controlling shareholders, actual controllers, members of the board of directors and board of supervisors, and senior managers should be cooperative during the delisting process, and duly perform their duties in the future business operations of the delisted companies.
This year, five delisting cases have occurred at the A-share market for various reasons.
The first two came in May when the Shanghai Stock Exchange targeted two companies that had suffered straight losses. This action was followed two days later by the Shenzhen Stock Exchange. It held a delisting hearing on a company whose auditor stated in this listed firm’s financial statement that it was unable to express an opinion.
A study by the Economic Daily found that China’s stock market has seen a total of 108 shares delisted over the past 18 years, mainly as a result of straight losses or mergers and acquisitions.
Among these cases, most companies were forced to leave the A-share market instead of choosing to do so, a sharp contrast to markets such as the New York Stock Exchange where half of the companies drop out based on their own decision.
