CSRC Spokesperson on Delisting of Loss-Making Companies

In an interview with Xinhua reporters, spokesperson of China Securities Regulatory Commission (CSRC) talked about regulations on delisting of listed poorly-run companies on March 21.

Question (Q): CSRC released Implementation Measures for Suspending and Terminating Listing of Loss-making Companies (hereinafter referred to Measures) according to Company Law on March 22. The Measures stipulate procedures for delisting of listed poorly-performed companies, thereby providing a guarantee for China's securities market to operate under an operational delisting mechanism. Since delisting Measures were released, how will CSRC continue to work for a more complete and perfect delisting mechanism?

Answer (A): Positive market response has been found after issuance of the Measures. This indicates that delisting Measures in meeting wide market demand have been well received. So far, related checking procedures and information disclosure standards have been initially formulated, CSRC will earnestly deal with delisting problems in accordance with the Measures.

Q: PT companies have already been suspended from market. If they fail in putting forward working out feasible restructuring measures, delisting is unavoidable, how will CSRC react on the restructuring of PT companies?

A: Companies will be delisted if they have been loss making and fail to turn losses into gain for three consecutive years according to Company Law. PT companies should take efficient and active measures to retrieve losses, reshaping is also a way for delisted companies to earn money. Lawful rights and interests of shareholders, creditors and share investors shall be protected under law. Any company that turns to reshaping shall make its own decision through consultation in compliance with regulations and legal procedures. CSRC shall fulfill its supervision duty according to law and maintain market order and have rights to require reshaped companies to truly, accurately and fully release information.

Q: Since PT companies are facing delisting, there is only one special transfer service once a week, but prices still stay very high or may even surge unexpectedly, how should CSRC urge PT companies to disclose the possible risks?

A: PT and those to-be PT companies are both high-risk companies, they may also face bankruptcy or closedown in addition to delisting. Most PT companies have little possibility to be found again on feet due to huge debts and bad assets. China has already seen 6 such companies till now. CSRC warned investors to be careful about investment risk. Stock exchanges have requested PT companies to issue risk-alert information before they announce yearly report. PT companies should also give detailed descriptions on the possibility of suffering losses whether they have mapped out feasible reshaping plans and their current financial situation. Investors should pay close attention to PT company's information release and should not be affected by inaccurate information or invest blindly and depend on speculation.

Q: PT companies continue to be in deficit in their yearly reports for 2000, whether CSRC shall have to give a 45-day of reprieve before determining to terminate listing?

A: The Measures stipulate a 45-day reprieve period for suspended companies, this reprieve gives the newly falling-into PT companies a time-limit for applying for extension period, CSRC will terminate listing of those over 45 days. In accordance with the Circular on Promulgating Implementation Measures for Suspending and Terminating Listing of Loss-making Companies, CSRC will terminate the listing of the following three kinds of companies:

1. Companies fail to submit yearly reports for 2000 before April 30,2001 but have been suspended from market before the Measures were released;

2. Companies have not made decisions to apply for reprieve;

3. And companies have applied for reprieve, but no practical measures are taken and fail to foresee possibility of turning profit and stock exchanges would not give reprieve under the Measures.

PT companies that have been predicted to be in the red in year 2000 and suspended from market before issuance of the Measures are required to submit reports on the possibility of making profit or measures to turn for the better. If PT companies could not give feasible measures, CSRC will make timely decision to terminate listing and the 45-day reprieve limit will not take effect.

Q: after PT companies are terminated from stock exchanges, how will their stocks be transferred?

A: Unqualified companies' stocks shall be transferred and will not be traded. Qualified securities companies will be enabled to provide stock transfer service for the delisting companies. But before some certain securities companies help transfer stocks, they have to entrust other companies to deposit the stocks. Delisted companies shall transact their stock transfer and trustee deal in delisted order.

By PD Online staff member Li Yan

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