Administrative Rules on Material Asset Restructuring of Listed Companies: New Rules on the China Capital Market

On December 10 2001, the China Securities Regulatory Commission (CSRC) announced the Notice on Several Issues Concerning Major Purchases, Sales and Exchange of Assets by Listed Companies, which came into force on January 1 2002. Although it provides several basic rules for major purchases, sales, and exchange of assets conducted by listed companies, the Notice itself was incomplete in some respects. For example, it failed to establish a complete system for regulating insider trading and information disclosure during restructuring, which has resulted in a loophole in protecting the interests of small investors fully and effectively.

In order to further regulate the material asset restructuring of listed companies, the CSRC promulgated the Administrative Rules on Material Asset Restructuring of Listed Companies (Exposure Draft) on September 17 2007. The CSRC concurrently issued the Circular on Standardization of Information Disclosure of Listed Companies and Behavior of Affiliated Parties and the Decision on Setting Up a Review Sub-Committee for Mergers, Acquisitions and Restructuring of Listed Companies within the Issuance Review Committee.

Upon consultation with the relevant parties engaging in the capital market, the CSRC promulgated the Administrative Rules on Material Asset Restructuring of Listed Companies (Administrative Rules) on April 18 2008. The Regulations on Some Issues Concerning Standardization of Material Asset Restructuring of Listed Companies and the Documents for Applying Material Asset Restructuring of Listed Companies were later promulgated by the CSRC to implement the Administrative Rules.