Shanghai Stock Exchange, Answers on Questions Concerning Reviews for the Offering and Listing of Shares on the Science and Technology Innovation Board (2)
上海证券交易所科创板股票发行上市审核问答 (二)
May 08, 2019 | BY
Susan MokFull disclosure of VIE structure is required for listing on the Science and Technology Innovation Board
Issued: March 24, 2019
Effective: as of date of issuance
Main contents: Where the issuer's core trademarks, patents, major technologies and other such intangible assets are licensed from its controlling shareholder or de facto controller, the intermediary firms shall, in light of the specific purposes of the relevant assets, the degree of importance of such assets to the issuer, the reason the same have not been injected into the issuer, the fairness of the leasing fee or royalties therefor, whether the long-term use thereof by the issuer is assured, any future plan for the disposal thereof, etc., conduct ample discussion on the supporting facts to determine whether such circumstances have a material adverse impact on the integrity and independence of the issuer's assets, procure due information disclosure and risk warning by the issuer and prudently express their opinions on whether the issuer satisfies the conditions for listing on the Science and Technology Innovation Board (Answer 7).
Where a PE, VC or other such firm provided for a value adjustment mechanism at the time of making its investment, the issuer is in principle required to have taken care of such mechanism before filing, although a value adjustment mechanism that satisfies all of the following conditions may be exempted from such handling: (1) the issuer is not a party to the value adjustment mechanism; (2) the value adjustment mechanism does not contain any provisions that could result in a change in the control of the company; (3) the value adjustment mechanism is not linked to the market valuation; and (4) there is nothing in the value adjustment mechanism that materially impacts the issuer's continuation as a going concern or the investors' rights and interests.
An issuer shall disclose the specific content of a value adjustment mechanism, the impact it could have on the issuer, etc. in its prospectus, and provide a risk warning (Answer 10).
If a red chip enterprise applying to offer and list shares on the Science and Technology Innovation Board in accordance with relevant regulations has a VIE structure or similar special arrangement, and includes entities without a shareholding relationship (a Consolidated Entity) within the scope of consolidation on its consolidated financial statements, the issuer shall:
1 . fully disclose the specific arrangement for its VIE structure, including the basic particulars of the legal entities of each party involved in the VIE structure, the core terms of the master contract, etc.;
2 . analyze and disclose the objective of establishing the Consolidated Entity, the Consolidated Entity's relevant activities and how decisions are made on the relevant activities, whether the rights enjoyed by the issuer currently gives it the power to guide the relevant activities of the Consolidated Entity, whether the issuer enjoys variable returns by virtue of its participation in the relevant activities of the Consolidated Entity, whether the issuer has the power to affect the amount of returns it derives by exercising its rights in the Consolidated Entity, the relationship between the investors and other parties;
3 . in light of the foregoing circumstances and the accounting guidelines, analyze and disclose whether the issuer's basis for consolidation are sufficient and disclose in detail the method of preparing the consolidated statements.
The sponsor and reporting accountant shall verify the foregoing information and express a clear opinion on whether the preparation of the consolidated statements is compliant (Answer 11).
Related legislation: Implementing Opinions on Establishing a Science and Technology Innovation Board on the Shanghai Stock Exchange and Launching a Pilot Registration System
clp reference: 3700/19.03.24/SH issued:2019-03-24 effective:2019-03-24This premium content is reserved for
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