New Share Offerings in the PRC

Insufficient regulations and the limited disclosure of relevant information are just some of the issues contributing to the weakness of capital markets in the PRC. In an attempt to improve corporate governance, the CSRC has taken a step in the right direction with the recent promulgation of a new law that addresses the shortcomings of China's capital markets.

On March 28 2001, the China Securities Regulatory Commission (CSRC) promulgated the Administration of Offering New Shares by Listed Companies Procedures (Procedures). These Procedures represent another coherent step towards rationalizing the rules in Chinese capital markets and improving corporate governance. The Procedures supersede two previous legal notices, the Notice on Issues concerning Share Placement by Listed Companies (Zhen Jian Fa [1999] No.12) and the Supplementary Notice on Issues concerning Share Placement by Listed Companies (Zhen Jian Gong Si Zi [2000] No.21), and two provisional Procedures, the Provisional Procedures on Public Offering of Shares by a Listed Company (Zhen Jian Gong Si Zi [2000] No.42) and the Provisional Tentative Procedures concerning the Issue of foreign investment shares (B-Shares) by foreign companies listed inside China (Zhen Jian Fa [1998] No.5). These Procedures are also applicable to B-shares. 

The Procedures consist of four main sections that deal with some of the issues involved in the course of fund-raising by listed companies. These sections are:

a) conditions and issues to note for new offerings;

b) procedures for offerings and approval matters;

c) information disclosure; and

d) legal responsibilities.