The Red-chip Listing Legal Regulatory Issues Research In China

In the80’s of20thcentury, the enterprises in mainland of China have a greatrequest of capital with the development of economic. But, our capital market was justbeginning. It cannot serve the need of the enterprises, the cost to get the capital ofdevelopments very high, if an enterprise wants to appear on the market, it will take along time. On the opposite, the international capital markets have a great development,in order to acquire the money, a lot of enterprises went out mainland of China andinvolved in the international markets.Red-chip Listing helped a lot of enterprises toresolve their trouble of capital in its20years of history and contributed to thedevelopment of economic of China. It also gave rise to much trouble without thescientific regulation. We cannot ignore them, from the late of90thcentury, theChinesegovernment began to study on the regulation of the Red-chip Listing. Becauseof the limitation of acknowledges, the history of regulation is very Long and fraughtwith difficulties. The rules of regulation changed often, the mode of the regulationchanged also for several times which led to the several time of Highs and lows of theRed-chip Listing.Although we have built up a structure of regulation of Red-chipListing under theguidance of the Document of No,10which was made by six departments of China,there are still a lot of problems of the regulation of Red-chip Listing throughout thehistory of the regulation. For example, the rules of the regulation, the level of the rulesis very low, among them, there is "Securities Act" of1999which is only one articleconcerning about the listing."Notice of the State Council of further strengthening IPOmanagement out of China"(called Red Chips guidelines), in2005ASFE promulgated"Domestic Residents through offshore Special purpose Companies Financing andReturn Investment Foreign exchange management issues"; in2006the Commerce Department, the Securities and FuturesCommission, the State Administration ofTaxation; Business AdministrationSASAC and SAFE jointly promulgatedthe"Provisions on Acquisition of Domestic Enterprises by Foreign Investors.Administration of Foreign Exchange, respectively, in2005,2007,2009and2011,promulgated by the General Affairs Department of the State Administration ofForeign Exchange on "improving the external debt management issues related to thenotice issued","domestic residents via overseas special purpose company financingand return investment foreign exchange management issues",the State Administrationof Foreign Exchange on the issuance of the State Administration of Foreign Exchangeby Domestic Residents through offshore special purpose companies financing andReturn Investment Foreign Exchange Managementissues" and so on. Judge from thecharacter of these documents, except the "Securities Act" having the comparativehigher level of the norms, the other documents of the Red-Chip listing is very low onthe level of legislation. So in our country there are some files of departments to adjustRed-Chip listing. The effectiveness of these files is not authoritative, the content is notcomplete, and the most important is the implementation of these documents and theimplementation of the lack of supervision.Lack of a systematic and forward-looking is another problem. The red-chiplisting of government regulationis a newthing.We need a certain stage ofunderstanding of this new phenomenon, the law-making process in our country for thered-chips listingare overall lack of systematic and forward-looking, now. This isreflected that in China we haven’t yet established a regulatory legal system onred-chips listing. View the development of the process of law-making from the redchips listed, many rules were repealed, some legal norms had just been enacted lessthan a year and then had to stop the implementation, such as the rule of No,11andNo,29promulgated by theSAFE. The attitude of different files for different periods ofred chips listed is not the same, for example, the SAFE "Notice on perfect of foreignmergers and acquisitions of foreign exchange management," and "the problems onregistration of foreign mergers and acquisitions of domestic resident individualoverseas investment foreign exchange". The road of the red chips listed is sealed bythese two documents, which were caused great repercussions in the market.Subsequently SAFE announced the failure of these two documents, issued anoticeon"Domestic Residents through offshore special purpose companies Financingand Return Investment foreign exchange management issues" the red-chip path hadbeen opened. And then within a year of practice, six ministries launched anotherdocument on mergers and acquisitions of domestic enterprises by foreign investors inturn close the road of red chips listing. This guiding ideology is not clear. It will leadto the frequent changes of law in the law-making process, and the law lack ofsystematic. In addition, China is in the process of development of adjust the red chipslisted on the legal norms, the lack of a forward-looking, most of the laws andregulations are forced to make adjustments for the practice, such as the red-chiplisting already exists10years after the State Council before issued a "red chipGuidelines to regulate such behavior. Issued a "no objection letter" after the rulesbroke by Yuxing, Qiao Xing Universal and Eagle Ceramics. Soon it was canceledbecause of the effects of Eurasian agriculture, Greencool and oversized agriculture inthe Hong Kong stock market Followed for a large number of red chips listed on thewave of capital flight, the loss of state assets to circumvent the law and other actsissued the text of the11th and the29th documents. Lack of operability of the twodocuments and the sealing off of the road red chips cannot be implemented in practicewill be abolished in less than a year. Since then, the SAFE’s documents of No.75temporary adjustment of the legal relationship of red chips listed. But just from thepoint of view of the SAFE adjustment is not enough for the entire red chips listed forthe special purpose company financing and Return Investment. Therefore, less than ayear of practice six ministries, the Ministry of Commerce issued the text of the10ththat the provisions of the Acquisition of Domestic Enterprises by Foreign Investors.View from the formulation process of the above-mentioned documents, on red chipslisted the lack of understanding of the system, the specified file is not forward-looking,most are cramming the results of the "headache medicine head, feet hurt, although theoriginal intention of the files is good, it could not escape the abolishment of doom.Which still continues, such as the documents promulgated by SAFE in order to implement the document No,75. This makes our country’s the red chips regulatorylegal system always running in the level of a lower quality.There are also a lot of problems about the authorities such as: permission settingsof regulatory authorities, the approval authority for the convergence and how toimplement regulatory responsibilities. There are many problems in specific regulatorymeasures. There are no provisions of the delisting.From January1st2013,"the Corporation issued outside the stock and listed filingsand audit procedures, regulatory guidelines "started to run.China SecuritiesRegulatory Commission issued in1999"for enterprises to apply for overseas listingrelevant issues notice" requiredthat the enterprise should be consistent with net assetsof400million yuan in overseas listing,$50million financing amount,60millionyuan net profit standard, also known as"456" conditions will never become a thing ofthe past.If listed overseas and red chips listed likened to the door of the two-channel,two channels of overseas listing of domestic company H shares this one had taken thelead to get dredge, one of the two doors opened smoothly.Another door onprivateenterprisesand small and medium-sized enterprisesmore meaningful, red chipslistedonthe roadis stillturned off.Another door was more meaningfulonprivateenterprisesand small and medium-sized enterprises, known as the road of red chips isstill turned off.Howtodeveloplaws and policiesin favor ofRed-chipListingfromthepoint of viewofthemacroeconomic developmentandlimittheadverseeffects of thependulumisa problemin front of us.Chapter1Introductionsectionintroducestheresearch background andmotivation, Chapter2, starts from red chips listed on the generation and development course, deeplyanalyses the far-reaching impact of the Red-chip Listing Chinese companies, and the result is that China’s economic development is inseparable from the Red-chip Listing, but this financial activities must be placed in a scientific and effective under supervision.Chapter3, startsfromRed-chip Listingthelegalregulationof economictheory andanalyses theregulatory objectivesand principlesestablishedRed-chip Listingontheinternational, established that Red-chip Listingshouldbethe subjectofsupervision; mentionscountries to takethered-chiplisting modes of regulation andscrutinyofall aspectsofthelegalsupervisionoftheRed-chip Listingon this basis.Chapter4, starts from redchipslistedregulated by the lawsof thehistoricalevolution, analysestoday’s redchipslisted onthelegalframework forthatchange, takes a profound discussionofthe red chipslisted onsupervisionof themoveduetostorage intheproblems,makes objective evaluation to ourredchipslisted onthelegalsupervision.Chapter5combinedred chipslisted onthe basic theory ofthedifferent approachesofthevarious countries, theinternationalconsensusandexperience, forourexistingredchipslisted onthelegal and regulatory system, raised proposal to red-chip Listingon China’slegal and regulatory system.In China, there are quite a lot of red-chip Listing operating guidelines, this ismostlybecause ofthered chipslistedbythepro-gazelikelawyers, accountantsandcorporate.But there are little writings of red chipslistedregulatorylegal systemconstruction andimprovefromthe perspectiveoflegislatorslook, anddoctoral thesis in thefielddoes not exist. This thesisstanding onthe perspectiveoflegislators, internationalperspective related theories put forwardtoimproveouridea ofred chipslisted onthelegal and regulatory system, so that we can make thered chipslisted onthisfinancingchannelsplayapositiverole, andlimititsnegative effects.