The Regulatory Framework and Reform Direction of China's Listed Company Reorganization: Moving towards an Era with Strict Regulation

Author: Llinks Law Offices Partner Amy Ren
E： amy.ren@llinkslaw.com ； T：+86 134 1852 2285
Llinks Law Offices Contractual Partner Lawrence Liu
E: lawrence.liu@llinkslaw.com; T: +86 186 8697 0824

Introduction

The reorganization of listed companies combines the bankruptcy system and capital market system, and is subject to dual supervision by judicial authorities and securities regulatory bodies. For China, both systems are essentially "imported" and have a relatively short history. This has led to a long-term situation where the practice of bankruptcy reorganization of listed companies in China faces a lack of legal and normative supply, a lack of regulatory rules, and abuse of the system.

Considering the public nature and special economic status of listed companies, as well as the wide-ranging impact that their bankruptcy reorganization may cause, China's policymakers and regulatory authorities have always sought a balance between responding to market needs and effective regulation. However, the balance may tip this year. We believe that China's listed company reorganization is about to enter an era of strong regulation, where the Supreme People's Court of China will work with the China Securities Regulatory Commission to revise a series of rules and measures to further tighten the approval process for listed company reorganization. This view can be initially confirmed by the frequent advocacy by regulatory authorities in recent times to improve the listed company bankruptcy reorganization system. On the other hand, considering the broader context, the "New Nine Policies of State Department" was issued after which China will strictly tighten IPO approvals and implement a "exit at all costs" delisting system, which will further discourage the so-called "shell-preserving restructuring" phenomenon.

Based on the above background, on the one hand, by tracing the development trajectory of judicial practice, this article will attempt to divide China's listed company reorganization into different historical periods and summarize its regulatory features and main problems; on the other hand, based on an understanding of legislative policies and a dynamic grasp of the market, we will make certain predictions about the regulatory direction of future China's listed company reorganization, with the aim of providing reference for relevant institutional reform and judicial practice activities.

To access to full article, please click The Regulatory Framework and Reform Direction of China's Listed Company Reorganization: Moving towards an Era with Strict Regulation (llinkslaw.com)