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Listings no longer requires gov't OK
By Zhang Ran (China Daily)
Updated: 2005-12-28 06:32
Companies applying to list in the Shanghai Stock Exchange (SSE) will no
longer need the government's permission, thanks to newly amended rules released
yesterday.
The SSE announced the long-expected revisions, which declare the exchange not
the government has the power to suspend or stop stock trading and decide whether
a company is qualified for listing.
The rules also created a standard for what information companies were
required to disclose. Top-level management must disclose the amount of company
shares that are purchased and traded. Information such as investment activities,
guaranty activities, sale and purchase issues are required to be disclosed as
well.
The rules have been submitted to China Securities Regulatory Commission for
approval.
When approved, listing candidates will only need to sign a contract with the
SSE, displaying China's resolution to do business following the global market
standard.
Experts say requiring more detailed disclosure should help uncover
embezzlement by substantial shareholders of listed companies and the practice of
illegal guaranty.
SSE announced at the same time that the rules are amended to fit in with the
new Securities Law and Company Law.
These two laws, effective on Sunday, are expected to improve the
infrastructure of the securities industry. They are also expected to promote
steady development of China's capital market by minimizing risks, optimizing
corporate governance and strengthening protection of investors' rights.
The Securities Law will allow investors to sue misbehaving listed companies
or controlling shareholders. Investors' compensation rights and the issuers'
obligations are clearly defined by law.
The Company Law confirmed the "one vote for one shareholder" rule, and
declared that a board director should avoid voting when he is related in a
certain case.
This law also focuses on the protection of shareholders' right to
information.
According to the new law, shareholders are entitled to examine a limited
company's financial accounts and sue executives who infringe on the company's
interests .
At a time when corporate fraud is rampant in the domestic stock market, such
provisions are expected to demand more accountability from majority
shareholders.
However, some fear the enforcement of the laws will continue to be a
practical problem.
(China Daily 12/28/2005 page11)
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