The Eighth Phase Of Shenzhen Supervision Regulation: "Trial" And "No Trial" Of Exemption From Tender Offer

According to the latest progress of the merger and reorganization review announced by the SFC, 7 companies that have applied for exemption from tender offer have been refreshed to "terminate the review".

Take Hongli Zhihui as an example, this week (March 31st) issued a notice on the controlling shareholder's receipt of the notice of termination of the administrative licensing application of the SFC. According to the latest legal rules, the controlling shareholder's investment in passive holdings had no need to apply to the SFC for exemption from the offer obligation.

The above market changes are due to the abolition of the administrative licensing provisions of the obligation to exempt an offer from the new securities law.

In March 20th, the SFC issued the decision on amending some securities and futures regulations, adjusted and revised the management measures of listed companies' acquisition, abolished the administrative license for the obligation to exempt from takeover offer, and added "supervision after the event" mechanism.

Offer exemption: a collision between fairness and efficiency

As an important part of the takeover system of the listed company, the tender offer system aims to give the small shareholders the right to choose freely (to transfer or continue to hold shares), and to grant the equal rights between the minority shareholders and the large shareholders to the right to purchase premium (that is, the premium of control). Like most foreign markets, the 30% is that the shareholders of A share listed companies need to take the "critical line" of the tender offer, with a shareholding of 30%. If the purchaser intends to continue to increase their holdings, it is usually necessary to take an offer to acquire the right to protect the rights and interests of minority shareholders.

The modern capital market has become the main channel of mergers and acquisitions. Because of the principle of equal opportunity in compulsory tender offer, the buyer's forced purchase obligation increases, which makes the buyer face enormous financing pressure and prevent the purchaser from acquiring. Therefore, on the basis of mandatory offer purchase system, taking into account the efficiency and fairness of the acquisition of listed companies, appropriately reducing the acquisition cost and optimizing the allocation of market resources, a compulsory offer offer exemption system arrangement is created.

After nearly thirty years of development and practice, before the revision, the five A exemption and seven automatic exemption arrangements were gradually formed in the tender offer system of the A-share market, with a view to achieving the best balance between safeguarding the interests of minority shareholders, jointly controlling the cost of takeover bid and improving the efficiency of mergers and acquisitions. The "automatic exemption" tender offer involves more than 30% of shareholders, such as "crawling increase", the resumption of voting rights and inheritance of preferred stock, and so on. The relative lack of subjective desire to change the status of controlling shareholders of listed companies; and the types of "exemption" mainly include the transfer of shares under the same control, the transfer of shares for the purpose of saving serious financial difficulties, the transfer of state-owned shares, and the repurchase of shares to specific shareholders. There are five kinds of other issues, such as reducing total capital stock and other circumstances identified by the SFC to meet the needs of the development of the securities market and the protection of investors' legitimate rights and interests.

According to statistics, since 2017, the total number of exemption items for A share listed companies has been 273. Among them, there are 150 odd cases involving "application exemption". Finally, about 130 documents have been approved by the securities and Futures Commission, which mainly involves the transfer of shares under the same control and the free transfer of state-owned shares.

In the latest revision, the system of Exempting the tender offer has been optimized and upgraded once again. The CSRC will abolish administrative licensing in the five cases of share transfer under the same control, which is expected to further stimulate the vitality of the M & a market.

A simple data comparison can be explained. Taking Qinchuan machine tool as an example, the shareholders of the company touched the obligation of exemption from the offer offer due to the change of rights and interests. They belong to the five part of the above mentioned cases of "free transfer of state-owned shares". The company's controlling shareholder, the group, disclosed the summary of the acquisition report in March 20th, which was applicable to the new regulation from administrative examination and approval. In March 28th, the full text of the acquisition report and the professional advice of the financial advisor and the lawyer's issued were disclosed. Legal opinion.

If compared with the previous case of "state owned free transfer", administrative approval must fulfill certain procedures, so the purchaser may have to wait for one to two months. The new regulation "speed up effect" is visible to the naked eye.

The concept of regulation is consistent.

The efficiency and fairness in the regulatory balance are indispensable. Speed raising and efficiency increase do not mean letting go. In fact, in 2006, after the introduction of the administrative measures for the acquisition of listed companies, three administrative licensing matters for exemption from offer acquisitions were adjusted from the initial common procedure and summary procedure to the automatic exemption procedure, and the gradual extension of the scope of automatic exemption. In other words, under the established standard, the automatic exemption arrangements for takeover offer are already in practice.

To look closely at this amendment, we will reintegrate the scope of the original "five application exemption" and "seven automatic exemption" and cancel the application exemption procedure. The established judgment standard has not fundamentally changed, transferring the right of prior judgement to the market, and adding "supervision after the event" regulatory mechanism to make up any position at any time to prevent abuse of the system. This is not only the key measure to implement the new securities law, but also comes from the 12 key tasks of comprehensively deepening the reform of the capital market.

In the process, the exchange will further strengthen the supervision of information disclosure. After the announcement of the summary of the purchase report, the information disclosure examination shall be carried out in time when the purchaser is in compliance with the provisions such as exemption from the offer. It is the implementation of this concept and design intention, for the reform of escort, the Shenzhen stock exchange around the information disclosure as the center, made a series of landing convergence arrangements: on the one hand, clear market expectations, in the "purchase report summary" and other announcements category to increase the list of required documents, to achieve the acquirer information disclosure examination material reception; on the other hand, timely start system transformation. Carding out the main points of information disclosure of tender offer, making it easier for the information disclosure obligor to accurately grasp the core links and key points of disclosure, and enhance the convenience of disclosure.

Further, in addition to the major changes in the exemption situation, the previous regulatory concerns are consistent. Whether it is in line with the conditions of the offer to buy an exemption, whether it is timely to fulfill the obligation of information disclosure and the corresponding procedures, whether it is in line with the interests of the listed companies and small and medium shareholders is related to whether the offer waiver is in line with the market logic, rather than deliberately circumvent the offer. Harming investors' interests. Taking Hongli Zhi Hui as an example, the receipt of the notice of termination of the review does not mean that it is clear that the issue is free from the issue of the offer. The exchange has urged the company and its controlling shareholder to disclose whether the supplementary disclosure of the offer has been carried out in time, and whether the relevant exemption is in line with the provisions of the securities law and the administrative measures for the acquisition of listed companies. 。

The above changes are also a new challenge to front-line regulation. With the change of the system, the regulatory supporting mechanism should keep pace with each other in order to prevent "letting go". At present, the reporter has learned that the Shenzhen Stock Exchange has been studying relevant regulatory measures, unified regulatory standards, improved regulatory efficiency, and timely conducting regulatory inquiries and even disciplinary actions against the non compliant situation. Among them, not only will the buyer's illegal disclosure behavior be pursued, but also the intermediary organization that has not played the duty of "gatekeeper" will be seriously accountable.

If we put it in the perspective of greater market reform and development, the whole process of the reform of the exemption system of the proposed takeover will take effect from the new securities law, to the SFC to amend the relevant supporting rules, and then to the exchanges and other regulatory bodies, with information disclosure as the core, plus the supervision after the event, which is precisely a regulatory test under the registration system reform. In order to rationalize the relationship between market and regulation, and adhere to market orientation and combination of management and discharge, we must establish a market with high efficiency, such as market orientation, responsibility, disclosure, expectation and regulation.

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