China Securities Regulatory Commission, Suspending and Terminating the Listings of Loss-making Listed Companies Implementing Measures

Issued: February 22 2001
Effective: as of date of issue
Applicability: The Measures apply to the suspension, resumption and termination of the listing of the shares of a listed company that has continuously operated in a loss (Article 2). Separate Measures will be formulated for the resumption of listing of those shares the listing of which was suspended before the promulgation of the Measures (Article 24).

Main contents: The Measures provide that an exchange is authorized to suspend, at its discretion, the listing of the shares of a listed company that has continuously operated at a loss and that the resumption or termination of the listing of such shares shall be decided by the China Securities Regulatory Commission (CSRC) (Article 3). According to the Measures, if a listed company has operated at a loss for two consecutive years, and its board of directors anticipates continued losses in the third year, the company shall issue at least three risk warnings before the publication of its annual report (Article 4). Suspension of trading in its shares shall be effected upon the publication of the annual report, and the exchange shall decide whether to suspend its listing within five working days thereafter (Article 5). If the listing of a company is suspended, the company may apply for a grace period of up to 12 months to extend the suspension and to avoid termination of its listing (Article 8). The company may apply to CSRC for resumption of listing if it becomes profitable during the first accounting year within the grace period (Article 12). If the company continues to operate at a loss for the first accounting year during the grace period or if the auditor of the company gives an adverse opinion or refuses to issue an opinion on the financial report of the company, CSRC shall terminate the listing of its shares (Article 17). Termination also occurs if the grace period is not applied for, is not granted, or expires (Article 18).
Related legislation: PRC, Securities Law, Dec 29 1998, CLP 1999 No.1 p25 and PRC, Company Law (Revised), Dec 25 1999, CLP 2000 No.1 p4