New Listing Rules Benefit Foreign Private Equity Investment in China

Xudong Tao
Jun He Law Offices
[email protected]

For foreign private equity investors seeking opportunities for pre-IPO investment (FPE Investors), structuring their investment at the onshore level in China would be a difficult decision as the waiting period (four years or more) imposed by the existing (2006) listing rules of the Shanghai and Shenzhen Stock Exchanges (Old Listing Rules) is too long for most private equity firms to live with.

However, with the implementation of the new Listing Rules of those Stock Exchanges (New Listing Rules) from October 1 2008, FPE Investors are able to cash out their investment in Chinese private companies by way of getting their investee companies listed on the Chinese domestic stock market and exit there from a year later. This change may seem simple and obvious at the first glance, but its impact on foreign private equity investors could be significant in both the deal structure and exit strategy.