Complexity of legal structure may be hindering international board launch
December 14, 2010 | BY
Virna ChungForeign companies preparing to list in Shanghai
There are still legal hurdles to be overcome before cross-border products can be listed and traded on the long-awaited international board of the Shanghai Stock Exchange (SSE), say counsel.
Although authorities have yet to issue official listing rules for the international board, there are reports of bourse officials speaking again of the board launching in 2011. The inauguration of the new platform will be marked by the formal release of the rules.
Shanghai-based Chen & Co partner Zhong Lin says that “coordination” is the core problem of the legal structure of the international board. There are differences between China and other jurisdictions in legal areas such as company law, securities law, foreign exchange regime and accounting standards.
“It is impossible to adapt Chinese legal structure to the legal structures of all the other countries and regions,” said Lin. “So a set of regulations to deal with the differences between China and other countries and regions is necessary.”
Large enterprises planning a listing on the Shanghai international board should start making preparations as soon as possible if they want to be among the first to be listed successfully, advised Lin. They should speak with legal and financial advisors, and become familiar with the existing framework of China's capital markets.
“It is also important to learn about the relevant rules of main overseas markets, such as the US and Hong Kong, which are important references for China's construction of the international board,” said Lin.
Commentators noted that the international board might be opened to large-scale cross-border enterprises with operations in China before small- and medium-sized overseas companies, as the former are more stable and less risky to investors.
In March earlier this year, the SSE announced that the draft rules for the trading and listing of foreign-registered companies on the international board were completed.
Lawyers contacted by CLP say they are already helping clients on their planned initial public offerings on the international board once it commences. VC
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