China Securities Regulatory Commission, Guiding Opinions on Further Intensifying the Reform of the System for Offering of New Shares

中国证券监督管理委员会关于进一步深化新股发行体制改革的指导意见

July 12, 2012 | BY

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Transfer of existing shares to offline investors allowed in an IPO of new shares.

Clp Reference: 3710/12.04.28 Promulgated: 2012-04-28

Issued: April 28 2012

Main contents: The Opinions put forward:

(1) the expanding of the range of inquiry recipients. In addition to the seven types of institutions specified in current relevant measures, a lead underwriter may recommend at its own initiative five to 10 individual investors with relatively extensive experience to participate in the offline inquiry and private placement;

(2) the increasing of the percentage of shares offered to the offline investors in the private placement and establishing a mechanism for clawing back shares from offline to make them available online. In principle, the quantity of shares offered to inquiry recipients in the private placement shall not be less than 50% of the shares publicly offered and transferred (the Shares of the Contemplated Offering). If the offline lot winning rate is two- to four-times that of the online lot winning rate, the issuer and underwriters shall clawback 10% of the Shares of the Contemplated Offering from offline and make them available online; if the offline lot winning rate is more than four-times that of the online lot winning rate, 20% of the Shares of the Contemplated Offering shall be clawed back from offline and made available online (Article 2);

(3) the abolishment of the current three-month lockup period for shares offered offline in a private placement to enhance the liquidity of the shares of new listed companies. Any lockup period specified by the issuer, underwriters and investors of their own volition shall not be subject to the foregoing; and

(4) for initial public offerings of new shares, the promotion of the transfer of part of the existing shares to offline investors to increase the quantity of tradable shares of new listed companies. Once a shareholder has held shares for three years, it may transfer part of such existing shares to offline investors. The de facto controller of the issuer may not change after such a transfer of existing shares. If an existing shareholder opts to transfer existing shares, its name and the quantity of shares it is to transfer shall be disclosed in the prospectus (Article 4).

Related legislation: Guiding Opinion on Further Reform and Enhancement of the System for Offering of New Shares, Jun 10 2009, CLP 2009 No.6 p.53; Guiding Opinion on Intensifying Reform of the System for Offering of New Shares, Oct 11 2010, CLP 2010 No.9 p.38; and Measures for the Administration of Securities Offerings by Listed Companies (Revised), May 18 2012, CLP2012 No.6 p.25

clp reference:3710/12.04.28promulgated:2012-04-28

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