CHINA: CSRC publishes revision to China takeover and major shareholdings rules

Tuesday November 4 2014

The CSRC has published its amendments to the ‘Administrative Measures on Takeover of Listed Companies’. A number of changes have been made as below:

Major shareholdings

Article 13 of the Measures has been amended to provide as follows:

“Where, through trading on a Stock Exchange, the stake of investors and parties acting in concert in shares of a listed company reaches 5% of the issued shares, such persons shall be required within 3 days from the date of occurrence to submit an equity change report to the Chinese Securities Regulatory Commission and the stock exchange, notify the listed company, and publish an announcement; within the said period, such persons may not trade in the shares of listed the companies.”

Article 14 has been amended as follows: “Where by way of the transfer agreement, the stake of investors and parties acting in concert in a listed company will reach or exceed the 5% threshold in the issued shares of a listed company, such person shall be required within 3 days from the date of occurrence of the facts to file an equity change report to the China Securities Regulatory Commission, the stock exchange, notify the listed company and make a public announcement.

A previous requirement to submit a copy of the report to a CSRC local agency office has been removed.

Takeovers
The takeover changes are largely procedural in nature. Changes have been made to clarify that offerors in a takeover should only seek approval where this requirement is stated in specific legislation, such as in sensitive industries. However the requirement to seek approval for takeover documents continues to apply.

Additionally, the criteria for applying for an exemption from the mandatory bid rules have been amended.

In any of the following circumstances, the purchaser may apply to the CSRC for an exemption to the requirement to increase its stake:

(A) The offeror and the transferor can prove that the transfer has not caused alteration of the actual controller of the listed company;

(B) The listed company is facing serious financial difficulties, and the Offeror proposed a restructuring plan to save the company which has been approved by the general assembly of shareholders of the company, and the acquirer promises not to transfer its owned equity in the company for a minimum of 3 years.

A previous exemption, applicable where the purchaser had obtained the new shares issued to it by the listed company upon the approval of the non-related shareholders of the general assembly of shareholders of the listed company, which causes that the shares of which the entitlements are held by it in the company exceed 30% of the issued shares of the company, and the purchaser promises not to transfer the shares of which the entitlements are held by it within the future 3 years, and the general assembly of shareholders of the company agrees to the exemption from sending out a tender offer, has been removed.

Changes have also been made to exemptions from takeovers by summary procedure under Article 63.

Otherwise, the changes largely concern the removal of the requirement to file documents with the local agency of the China Securities Regulatory Commission.

The amendments to the takeover rules will take effect on 23 November 2014.

Click on the above link for the revisions (in Chinese).