NOVEMBER 2013 1 SGX AND CHINA SECURITIES REGULATORY COMMISSION ESTABLISH DIRECT LISTING FRAMEWORK On 25 November 2013, the Singapore Stock Exchange ( SGX ) and the China Securities Regulatory Commission ( CSRC ) announced that they have established a Direct Listing Framework ( DLF ) to facilitate for PRC-incorporated companies to list directly in Singapore. The DLF took effect on 26 November 2013. Definition of a PRC-incorporated company A PRC-incorporated company means a company duly registered and validly existing under the PRC Companies Act, and includes a company established by foreign investors in China, such as a Sinoforeign equity joint venture and a wholly foreign-owned enterprise. PRC regulations for overseas listing of PRCincorporated companies Regulations governing S-share listings prior to 1 January 2013 Before 1 January 2013, the regulations governing S-share listings were the State Council Special Regulation on Overseas Listing of Companies Limited by Shares ( 国务院关于股份有限公司境外募集股 份及上市的特别规定 ) dated 4 August 1994 and the CSRC Notice on Application for Overseas Listing by PRC Companies ( 关于企业申请 境外上市有关问题的通知 ) ( 1999 Notice ) dated 14 July 1999. The two regulations set out various requirements on the overseas listing of a PRC company limited by shares, among which the most important quantitative requirements were as follows: The net tangible asset ( NTA ) of the proposed listing company must be more than RMB 400 million; The proceeds raised from listing exercise must not be less than US$50 million based on a reasonable expected price-toearnings ratio; and The after tax profit of the proposed listed company for the most recent financial year must be more than RMB 60 million with growth potential. The above quantitative requirements are also widely known as the 456 Requirements which are rather high thresholds and are different from the quantitative requirements imposed on listing applicants by SGX.
NOVEMBER 2013 2 Simplification of procedure for overseas listings On 20 December 2012, the CSRC issued the Supervision Guidance on Overseas Listing and Application, as well as Review and Examination Procedures for Companies Limited by Shares ( 关于股 份有限公司境外发行股票和上市申报文件及审核程序的监管指引 ) (effective from 1 January 2013) ( Supervision Guidance ) which repealed the 1999 Notice. The Supervision Guidance effectively removed the 456 Requirements and simplified the whole procedure for overseas listings. With this Supervision Guidance and now the DLF between CSRC and SGX in place, the procedure for the listing of S-shares by PRC-incorporated companies in Singapore has been made much simpler and clearer. Steps to be taken by a PRC-incorporated company in order to list on the SGX Needs to be a company limited by shares The PRC-incorporated company ( Applicant ) will need to restructure itself from a limited liability company to a company limited by shares. The Applicant will also need to appoint a financial institution in Singapore to be its issue manager (which will act as its sponsor in relation to its listing on the SGX) and a Singapore legal firm to oversee the Singapore legal aspects of the listing as well as various other professionals in China and Singapore as required (e.g., auditors, public relationship advisor, financial advisor, etc.). Pre-Consultation with SGX advised Prior to submission of the listing application to the SGX, the Applicant is advised, together with its issue manager, to consult the SGX to resolve any specific deal-breaker issues ( Pre-Consultation ) ( 上市初步申请 ). This will speed up the listing process and reduce any additional costs that may arise due to a delay. Documents to be submitted to CSRC Concurrent with the Pre-Consultation, the Applicant will also file its application to the CSRC ( CSRC Application ). The Supervision Guidance currently lists out 13 documents that are to be submitted to the CSRC, which is a much shorter list when compared to the previous requirement of 28 documents. CSRC may issue notice of acceptance after preliminary review Upon submission of the CSRC Application, the CSRC may accept or reject the CSRC Application after a preliminary review. If it is satisfied with the CSRC Application at this time, it will issue a notice of acceptance ( 受理通知 ).
NOVEMBER 2013 3 Administrative licensing approval granted after full review The CSRC may also consult the relevant PRC authorities regarding industrial policies, foreign direct investment restrictions and fixed assets investment during its full review. The CSRC will grant an administrative licensing approval ( 行政许可核准文件 ) for listing in Singapore if it is satisfied with the application package after full review. This administrative licensing approval ( 行政许可核准文件 ) will be valid for 12 months. Clearance by SGX Once the SGX is satisfied that all specific deal-breaker issues have been resolved at the Pre-Consultation and that CSRC has issued the notice of acceptance ( 受理通知 ), the SGX will give its clearance to the Applicant for it to file its listing application with the SGX ( SGX Application ). Eligible-to-list letter issued Subject to a satisfactory review of the Applicant s SGX Application and the receipt of the administrative licensing approval ( 行政许可核准文件 ) from the CSRC, the SGX will issue an eligible-to-list letter ( ETL ) 1 to the Applicant. Period of review by MAS After the receipt of the ETL, the Applicant would be able to lodge its preliminary prospectus with the Monetary Authority of Singapore ( MAS ) for its review. The MAS review period would generally take between two to three weeks (subject to extension) ( MAS Review Period ). During the MAS Review Period, the preliminary prospectus will also be made available by the MAS for public review and comment. Consent by MAS to lodge final prospectus for registration Following the MAS Review Period and subject to a satisfactory review of the preliminary prospectus by the MAS, the MAS will provide its consent to lodge the final prospectus for registration. Listing status in Singapore following IPO Once the final prospectus has been registered by the MAS, the Applicant will be able to launch its initial public offer ( IPO ). Upon completion of the IPO, the Applicant would attain listing status in Singapore. 1 Other than having to comply with the relevant PRC law requirements, the SGX will only issue an ETL to the Applicant if it is able to comply with the SGX listing criteria and other listing requirements imposed by the SGX Listing Rules; for example, the financial statements of the Applicant must be audited by certified public accountants in accordance with the Singapore Financial Reporting Standards, International Financial Reporting Standards, or US Generally Accepted Accounting Principles.
NOVEMBER 2013 4 Written report to CSRC within 15 business days of IPO completion The Applicant is required by the Supervision Guidance to submit a written report to the CSRC within 15 business days of the completion of IPO. Post-listing, the Applicant will need to comply with the securities regulations and listing rules of the SGX. In addition, certain corporate actions (e.g., the issuance of new shares) would also need further approvals from the CSRC. If you would like information on this or any other area of law, you may wish to contact the partner at WongPartnership that you normally deal with or contact any of the following partners: Joseph He Joint Head China Practice DID: +65 6416 8218 Email: joseph.he Click here to see Joseph s CV. Gerry Gan Joint Head China Practice DID: +65 6416 8006 Email: gerry.gan Click here to see Gerry s CV. Miao Miao Partner DID: +86 21 3306 4990 Email: miao.miao Click here to see Miao s CV.
NOVEMBER 2013 5 CONTACT DETAILS Singapore 12 Marina Boulevard Level 28 Marina Bay Financial Centre Tower 3 Singapore 018982 Tel: +65 6416 8000 Fax: +65 6532 5711/5722 China Beijing Representative Office Unit 3111 China World Office 2 1 Jianguomenwai Avenue, Chaoyang District Beijing 100004, PRC Tel: +86 10 6505 6900 Fax: +86 10 6505 2562 Malaysia Foong & Partners (an associate firm) Advocates & Solicitors 13-1, Menara 1MK, Kompleks 1 Mont Kiara No 1 Jalan Kiara, Mont Kiara 50480 Kuala Lumpur Malaysia Tel: +60 3 6419 0822 Fax: +60 3 6419 0823 Website: foongpartners.com Middle East Abu Dhabi Branch Al Bateen Towers Building C3 Office 11-01 (P1) P.O. Box No. 37883 Abu Dhabi, UAE Tel: +971 2 651 0800 Fax: +971 2 635 9706 contactus Shanghai Representative Office Unit 5006 Raffles City Office Tower 268 Xizang Road Central Shanghai 200001, PRC Tel: +86 21 6340 3131 Fax: +86 21 6340 3315 Licensed by the QFCA Office 12-20 Amwal Tower, West Bay P.O. Box No. 15397 Doha, Qatar Tel: +974 4491 2332 Fax: +974 4491 2339 wongpartnership.com