China's Securities Regulator Encourages M&As, but Will Tighten Reigns on Non-Compliant Ones
Zhang Jingyi
/SOURCE : Yicai
China's Securities Regulator Encourages M&As, but Will Tighten Reigns on Non-Compliant Ones

(Yicai Global) Aug. 2 -- The China Securities Regulatory Commission (CSRC) will immediately crack down on non-compliant mergers and acquisitions (M&A) of listed companies and support those M&A deals that are worthy, strictly limiting non-compliant acts while encouraging M&A, industry insiders told Yicai Global.

The CSRC has recently reiterated in its window guidance that it wants to encourage M&A, while acting as a strict supervisor. The commission reviewed 52 M&A cases in the first five months of this year and nearly 50 more since June.

The CSRC said at a training conference for initial public offering sponsor representatives that listed companies cannot change their performance commitments if they partake in an M&A -- even with a shareholder meeting, an industry insider said.

"The guidance on prohibiting the change and adjustment of performance commitments has been implemented in practice," said a securities company insider from a larger brokerage firm.

The CSRC carefully pre-screens performance commitments and inquires about specific implementation, recovery and safeguarding measures.

"Arbitrary changes to performance commitments used to made, and far-fetched or unreasonable reasons were provided, and this gave a bad impression," an M&A business head from a brokerage firm said. "It is indeed necessary to restrict such unconvincing reorganization."

At the training event for IPO sponsor representative, the CSRC said it will clamp down on backdoor listings and de facto backdoor listings, in which companies change their controller in underhanded ways, an insider said.

"The determination of the control will be regulated in a more stringent and more standardized way in the future," the insider said.

"It is hard to regulate such behaviors in detailed rules and the CSRC is expected to constrain such behaviors in the form of window guidance," a source from a securities company said.

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Keywords: Financial Regulation , CSRC , Information Disclosure , M&A , Backdoor Listing , Financial Performance Commitments