CHINA: CSRC Issued Opinions on Strict Implementation of the Delisting System

Tuesday April 16 2024

On 12^th April 2024, the China Securities Regulatory Commission issued opinions on the Strict Implementation of the Delisting System (Delisting Opinions) after carefully summarizing reform experience and fully considering the national and market conditions.

The “Delisting Opinions” focus on improving the overall quality of existing listed companies, through strict delisting standards, increasing efforts to clear out “zombie shells” and “bad apples”, and reducing the value of “shell” resources. Specifically, it includes the following aspects:

• The scope of application for major illegal delisting is tightened, the threshold for two years of financial fraud to trigger major illegal delisting is lowered, and the delisting situation of one year of serious fraud and multiple years of continuous fraud is added.
• The long-term unsolved occupation of funds has led to the “hollowing out” of assets, years of continuous non-standard opinions on internal control, and disorderly competition for control rights that have led to investors being unable to obtain effective information about listed companies, into regulated delisting situations, and strengthened the strong constraints on standardized operations.
• Increase the operating income delisting indicators of loss-making companies and increase the intensity of delisting of companies with poor performance.
• Improve transaction-based delisting indicators. Improve policies and regulations such as absorption and mergers and encourage and guide leading companies to increase their efforts to integrate the industrial chain based on their main business.
• Implement compensation relief for delisting investors. Comprehensive use of various tools such as representative litigation, advance compensation, and professional mediation to protect the legitimate rights and interests of investors.

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