Capital Markets: Debt & Equity (PRC Firms): The Reform and Prospect of Chinese Enterprises’ Offshore Listing Supervision System
The Reform and Prospect of Chinese Enterprises’ Offshore Listing Supervision System
The capital market serves as an important engine of China’s economic development. To provide a more transparent and predictable institutional environment for qualified Chinese enterprises to list and raise funds in offshore capital markets such as Hong Kong, China’s regulatory authorities, including CSRC, NDRC, MOFCOM and CAC, have successively promulgated several new regulations or draft rules involving offshore listing of Chinese enterprises since the second half of 2021. Chinese enterprises’ offshore listing supervision system is facing significant changes and a comprehensive reform in 2022.
I. Main Models and Regulatory Framework of Chinese Enterprises’ Offshore Listing
The offering and listing of securities in offshore capital markets by Chinese enterprises are mainly divided into direct listing model and indirect listing model. Indirect listing model is also known as “red-chip structure”, which is further classified into “big red-chip structure” and “small red-chip structure” according to the identity of the ultimate controlling shareholder of the listing applicant. Under China’s current supervision system, different regulatory mechanisms are applied to different listing models, the details of which are as follows:
1. Direct Listing. It refers to the listing structure where the listing applicant is a company limited by shares incorporated in the PRC, and the shares of the listing applicant would be directly listed on offshore stock exchanges (such as H-share structure). Chinese enterprises applying for offshore listings are subject to the dual supervision of the CSRC and offshore regulatory bodies. Such enterprises need to go through the approval procedures of the CSRC before listing and trading in offshore capital markets. Under the direct listing model, it is the most convenient way for the listed enterprises to conduct subsequent financing in China’s domestic capital markets, while such enterprises shall comply with the requirements of the PRC Company Law and other laws and regulations including the ones concerning foreign investment and share transfer.
2. Indirect Listing – Big Red-Chip Structure. It refers to the listing structure where the listing applicant holding domestic and overseas assets or interests is an offshore holding entity that is ultimately controlled by a Chinese enterprise, and the offshore investors would indirectly own the domestic assets or interests through their investment in the offshore holding entity. The big red-chip structure is mainly adopted by eligible state-owned enterprises and listed companies, and is also subject to the dual supervision of the CSRC and offshore regulatory agencies. In addition, the enterprises seeking offshore listing through big red-chip structure shall obtain prior consent from the provincial-level government or the State-owned Assets Supervision and Administration Commission of the State Council or the Ministry of Finance of China (as applicable), and obtain the approval from or complete the filing with the CSRC. Due to the complexity of approval procedures for the big red-chip structured offshore listing, there have been a limited number of successful cases of offshore listing through this model.
3. Indirect Listing – Small Red-Chip Structure. It refers to the listing structure where the listing applicant, whose assets or interests are mainly located in China, is an offshore holding entity that is ultimately controlled by Chinese individuals, and the offshore investors would indirectly own the domestic assets or interests through their investment in the offshore holding entity. Small red-chip structure includes equity control structure and variable interest entity (“VIE”) structure. Since the abolition of the requirement for Chinese enterprises pursuing offshore listing through red-chip structure to obtain a non-objection letter from the CSRC in 2003, the offshore listing of Chinese enterprises through the small red-chip structure, as a matter of practice, no longer requires the prior approval of the CSRC. Small red-chip structure is the most widely adopted structure for Chinese enterprises seeking offshore listings. However, the Chinese enterprises listed in offshore capital markets through the small red-chip structure may have more restrictions imposed when such enterprises intend to raise funds in China’s domestic capital markets, for example, a higher threshold for market value requirement.
II. Comprehensive Filing-based Offshore Listing System
1. Comprehensive Filing-based Offshore Listing System. The market environment has changed drastically since the 1990s when China introduced the Special Provisions of the State Council Concerning the Overseas Securities Floating and Listing by Limited Stock Companies, the Essential Clauses of Articles of Association of Companies Listed Abroad (both of which govern the H-share listing), the Notice of the State Council on Further Strengthening the Administration of Overseas Securities Offering and Listing (which governs the big red-chip structured offshore listing), and other relevant regulations and rules, and therefore the relevant legislations call for immediate change. In light of this, on December 24, 2021, the CSRC released for public comments the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Chinese Enterprises (Draft for Comments) (the “Administrative Provisions”) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Chinese Companies (Draft for Comments) (the “Filing Measures”, together with the Administrative Provisions, collectively, the “Draft Rules”). The core of the Draft Rules is the introduction and implementation of a comprehensive filing-based offshore listing supervision system. For the first time, the Draft Rules clearly stipulate that both direct and indirect offshore listing of Chinese enterprises should be administered by means of filing and information disclosure, which means that various forms of offshore offering and listing would fall within the scope of the CSRC’s supervision. More specifically, the regulatory framework for direct offshore listing and big red-chip-structured listing would be changed from the approval-based system to the filing-based system. In this way, the requirement for the listing applicant to obtain the notice of acceptance of listing application from the CSRC (i.e., the small road pass) before submitting the listing application to the offshore stock exchange under the direct listing model will be cancelled, which will expedite the listing review process. Meanwhile, the small red-chip structured listing will be subject to the CSRC’s supervision. Given the cost and expenses of reorganization under the small red-chip structure, it is expected that some Chinese enterprises would turn to direct listing structure from the small red-chip structure.
2. Security Review under the Comprehensive Filing-based Offshore Listing System. The Draft Rules require that the application materials submitted by the listing applicant to the CSRC shall include the security assessment and review opinions issued by relevant regulatory authorities (if applicable), including but not limited to: (i) foreign investment security review for direct listing model; and (ii) cybersecurity and data security review.
(1) Foreign investment security review. On December 27, 2021, the NDRC and MOFCOM jointly promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment Access in the Pilot Free Trade Zone (2021 Edition) (collectively, the “2021 Negative List”), which became effective on January 1, 2022. The 2021 Negative List clearly stipulates “if a domestic company engaged in business in the prohibited industries under the negative list for foreign investment access pursues offshore securities offering and listing, it shall be reviewed and approved by the relevant competent authorities. Foreign investors shall not participate in the operation and management of such companies, and its shareholding ratio shall refer to the relevant provisions on the administration of domestic securities investment by foreign investors.” The official of the NDRC further pointed out when answering the reporters’ questions that “it should be examined and approved by the relevant competent authorities of the PRC” means that the examination and approval of the requirement that the prohibitive provisions of the Negative List do not apply to Chinese enterprises pursuing offshore listing, rather than the examination and approval of the activities of Chinese enterprises for offshore listing. In other words, the restrictions imposed over Chinese enterprises engaged in business in the prohibited industries under the 2021 Negative List for foreign investment access seeking direct offshore listing have been loosened. The CSRC will solicit the opinions of the competent industry-specific regulators (as applicable) regarding the requirements of enterprise operation and management and foreign shareholding percentage. It remains unclear about the scope and extent of such examination in practice and needs further observation after the implementation of the final rules.
(2) Cybersecurity and data security review. The Measures of Cybersecurity Review jointly issued by 13 ministries including the CAC and effective on February 15, 2022 expressly provides that: “If any network platform operator processing personal information of over one million users intends to pursue overseas listing, it must apply to the Office of Cybersecurity Review for cybersecurity review.” It is commonly understood that the “overseas listing” mentioned in the Measures of Cybersecurity Review does not include listing in Hong Kong. Taking into consideration of the provisions on the cybersecurity review of offshore listing in the Measures, the supervision of listing in Hong Kong is moderately more relaxed. The cybersecurity review shall be made only when the proposed listing affects or may affect national security. It is foreseeable that it would be more prudent to consider domestic listing or Hong Kong listing for network platform operators or operators of key information infrastructure who have critical data or a large amount of personal information.
III. Where is the Future of VIE Structure?
The VIE structure is an unavoidable topic in China’s capital market since the early 2000s. On one hand, the VIE structure has contributed to the development and growth of China’s new economic industries, which has achieved a market value of trillions of dollars; on the other hand, the risks and challenges associated with the VIE structure have gradually emerged over the years. Though the Draft Rules do not directly define “VIE structure” or “contractual arrangements”, the official of the CSRC clearly replied in answering reporters’ questions: “On the premise of complying with domestic laws and regulations, the listing applicant with a VIE structure that meets the compliance requirements can be listed overseas after filing.”
Overall, the Draft Rules do not adopt a “one-size-fits-all” negative attitude towards the VIE-structured offshore listing by Chinese enterprises. However, once the Draft Rules are finalised and come into effect, the VIE-structured offshore listing may face more difficulties and challenges due to the implementation of the new filing-based offshore listing system.
IV. Summary
With the uncertainties in the post-pandemic era, the global economy is still in recovering and developing. The trend that Chinese enterprises take the initiative to raise funds in offshore capital markets will not fundamentally change, and the Chinese regulatory authorities remain open to Chinese enterprises’ offshore listing activities. Therefore, offshore listing will continue to be a key channel for Chinese enterprises to raise funds in capital markets. At present, it remains to be seen how the Chinese authorities will address the major concerns of the market and implement the policies after the promulgation of the final rules. The Chinese enterprises pursuing offshore listing need to consider their development plans and restructuring costs, and then choose an appropriate listing path under the coming new supervision system.
中国企业境外上市监管体制之变革与展望
资本市场一直是中国经济发展的重要“助推器”。为符合条件的中国企业到香港等境外资本市场融资提供更加透明、可预期的制度环境，包括中国证券监督管理委员会(“中国证监会”) 、国家发展和改革委员会(“国家发改委”)、商务部以及国家互联网信息办公室（“网信办”）在内的相关监管部门自2021年下半年起陆续出台了涉及境外上市监管事宜的多项新规或新规草案。中国企业境外上市的监管体制在2022年将面临重大调整和全面变革。
一、 中国企业境外上市的主要模式与监管现状
中国企业在境外发行股票并上市主要分为直接上市模式和间接上市模式。间接上市模式亦被称为“红筹模式”，根据最终控制股东的身份，分为“大红筹”和“小红筹”两种架构。在现行监管体制下，不同架构适用的监管机制亦有所不同，具体而言：
1. 直接上市模式：指境内注册的股份有限公司直接作为上市主体在境外上市(如常见的H股，也包括基于H股的存托凭证)。该模式受到中国证监会以及境外监管机构的双重监管，境外上市以取得中国证监会的批准为前提。直接上市模式下，上市主体在境内资本市场进行后续融资最为便捷，但上市主体应遵守包括外商投资以及股份转让在内的中国公司法以及其他法律法规的限制。
2. 间接上市之大红筹架构：指最终由中国企业控制的、持有境内外资产或权益的境外控股实体作为上市主体在境外上市。大红筹架构主要适用于符合条件的国有企业和上市公司，境外上市同样受到境内外监管机构的双重监管，须取得省级人民政府(适用于地方企业)或国资委/财政部的事前同意，以及中国证监会的批准或备案。由于大红筹架构的审批难度较高，通过大红筹架构完成境外上市的中国企业数量有限。
3. 间接上市之小红筹架构：是指以由中国境内自然人居民控制的、主要持有境内资产或权益的境外控股实体作为上市主体在境外上市，包括股权控制模式和VIE架构模式。自中国证监会2003年取消了关于境内权益的境外公司境外上市向其申请无异议函的要求之后，中国企业通过小红筹架构境外上市事实上处于无需中国证监会事前审批的状态。小红筹架构是中国企业境外上市的主要途径，但上市主体在境内资本市场进行后续融资受到更多的限制，如应满足更高的市值要求等。
二、 境外上市全面备案制
1. 全面备案制。由于适用于H股上市的《国务院关于股份有限公司境外募集股份及上市的特别规定》、《到境外上市公司章程必备条款》以及适用于大红筹架构的《国务院关于进一步加强在境外发行股票和上市管理的通知》等法律、法规均制定于上世纪九十年代，目前的市场环境较之当时已经发生了翻天覆地的变化，丞待更新；而小红筹架构的监管空白也引发了监管层对于境外上市活动对国家安全影响的关注。在此背景下，2021年12月24日，中国证监会公布《国务院关于中国企业境外发行证券和上市的管理规定(草案征求意见稿)》(“《管理规定》”)和《中国企业境外发行证券和上市备案管理办法(征求意见稿)》(“《备案办法》”，与《管理规定》合称为“境外上市新规”)，向社会公开征求意见。境外上市新规的核心是实施全面备案制，首次明确规定对中国企业直接和间接境外上市活动统一实施备案管理、报告有关信息。至此，各种形式的境外发行上市行为均将被纳入中国证监会监管体系。
在全面备案制下，直接上市模式和大红筹架构将由审批制改为备案制，取消了直接上市模式下向境外证券交易所提交上市申请前需要获取中国证监会的上市申请受理通知书（即小路条）的要求，未来在审查流程上将更为便利；而小红筹架构则被正式纳入备案监管体系内，考虑到小红筹架构下的重组成本因素，预期会有相当部分中国企业从小红筹架构转向直接上市模式。
2. 全面备案制下的安全审查。境外上市新规要求上市申请人向中国证监会提交的申请文件包括有关部门出具的安全评估审查意见(如适用)，包括但不限于：(i)直接上市项下的外商投资安全审查；以及(ii)网络和数据安全审查。
(1) 外商投资安全审查。国家发改委、商务部于2021年12月27日分别发布了《外商投资准入特别管理措施(负面清单)(2021年版)》和《自由贸易试验区外商投资准入特别管理措施(负面清单)(2021年版)》(合称为“2021年版负面清单”)，自2022年1月1日起施行。2021年版负面清单明确规定：“从事外资准入负面清单禁止投资领域业务的中国企业到境外发行股份并上市交易的，应当经国家有关主管部门审核同意，境外投资者不得参与企业经营管理，其持股比例参照境外投资者境内证券投资管理有关规定执行”。国家发改委有关负责人在答记者问中进一步指出，“应当经国家有关主管部门审核同意”系指审核同意中国企业赴境外上市不适用负面清单禁止性规定，而不是指审核中国企业赴境外上市的活动本身。换言之，放开了负面清单企业在境外直接上市的限制，但对于企业经营管理和外资持股比例的要求，将由中国证监会征求行业或相关领域主管部门的意见，实践中的审核尺度如何尚存不确定性，有待政策落地后进一步观望。
(2) 网络和数据安全审查。网信办等十三个部门联合发布并于2022年2月15日生效的《网络安全审查办法》明确规定“掌握超过100万用户个人信息的网络平台运营者赴国外上市，必须向网络安全审查办公室申报网络安全审查”。该办法中所述的“赴国外上市”普遍理解不包括中国香港，结合《管理规定》关于境外上市安全审查的规定 ，赴香港上市的监管适度更加宽松，仅在影响或者可能影响国家安全时，应当进行网络安全申报。可以预见，对于掌握核心数据或者大量个人信息的网络平台运营者或者运营关键信息基础设施运营者，考虑境内上市或者香港上市可能更为稳妥。
三、 VIE架构何去何从
VIE架构是中国资本市场绕不开的话题，一方面VIE架构对中国新经济产业的发展和壮大功不可没，成就了万亿美元市值的市场，但另一方面由于其常年游走于监管的“灰色地带”，面临的风险和挑战逐步凸显。境外上市新规并未直接定义“VIE架构”或“协议控制”，但中国证监会有关负责人在答记者问中明确回复：“在遵守境内法律法规的前提下，满足合规要求的VIE架构企业备案后可以赴境外上市。”
整体来看，境外上市新规对于采用VIE架构的中国企业境外上市并没有采取“一刀切”的否定态度，但境外上市新规实施后，采取VIE架构境外上市的难度将由于备案制的实施将大幅增加。
四、 结语
伴随着后疫情时代的种种不确定性，全球经济仍处于复苏与发展阶段，中国企业主动走向境外资本市场的趋势不会发生根本性的改变，中国监管部门对企业的境外上市持开放态度，因此境外上市依旧是中国企业通过资本市场融资的重要渠道。目前市场关注的重大问题以及政策的实际操作细节，仍有待最终法规颁布后再探究竟。对于考虑境外上市的中国企业而言，则需通盘考虑自身发展需求与重组成本，在新的监管体制下选择合适的上市路径。