On 14 February 2012, the China Security Regulatory Commission (CSRC) issued a Decision on Amending Articles 62 and 63 of the Administrative Measures on the Takeover of Listed Companies (《中国证券监督管理委员会关于修改〈上市公司收购管理办法〉第六十二条及第六十三条的决定》) (Decision). The Decision will come into effect on 15 March 2012.
In 2006, CSRC issued new Administrative Measures on the Takeover of Listed Companies (Takeover Measures), which came into effect on 1 September 2006 and replaced existing takeover measures. The Takeover Measures were revised on 27 August 2008.
The Decision amends provisions relating to the waiver of general offer requirements under the Takeover Measures. The major points of the Decision are summarised below.
Exemption from general offer requirements
According to the Takeover Measures, if an investor acquires more than 30 percent of the issued shares of a listed company, a partial or total general offer is required unless the investor obtains a waiver from CSRC. Grounds for general offer waivers include where:
(a) the shares of a listed company held by the investor reach 30 percent or more of the issued shares of the company, and after a one-year period, the increase of shares in the company held by the investor within each 12 months thereafter does not exceed 2 percent of the issued shares of the company (30 percent Shareholder);
(b) the shares of a listed company held by the investor reach 50 percent or more of the issued shares of the company, and the investor's continuing to increase its shares will not affect the status of the company as a listed company (50 percent Shareholder); or
(c) the shares of the investor in a listed company exceed 30 percent of the issued shares of the company due to an inheritance.
To obtain a general offer waiver, the investor must file a waiver application with CSRC. If CSRC does not oppose to the waiver application within ten working days of receiving that waiver application, the investor may apply to the securities exchange and the securities registration and settlement institution to commence the share transfer and transfer registration process.
According to the Decision, under the above circumstances the investor may apply directly to the securities exchange and the securities registration and settlement institution to commence the share transfer and transfer registration process instead of filing a waiver application. However, the investor must make a public announcement in relation to the increase of its shareholding within three days of that increase. This streamlines and simplifies the process of obtaining the general offer waivers.
Disclosure of the shareholding increases
The Decision further provides that if a 30 percent Shareholder or a 50 percent Shareholder increases its shareholding by 1 percent of the issued shares of the listed company via an on-market bid (集中竞价), the 30 percent Shareholder or 50 percent Shareholder must notify the listed company of that increase of shareholding on the same day of the increase. The listed company must disclose the increased shareholding of that shareholder to the public on the next trading day.
If the increased shareholding of a 50 percent Shareholder reaches 2 percent of the issued shares of a listed company via an on-market bid, the 50 percent Shareholder must not increase its shareholding for the rest of that day and the next trading day.
Previously, under the Security Law of the People's Republic of China, the threshold for the above disclosure requirements was 5 percent.
Professional legal advice
The Decision has removed the burden of a CSRC review and approval under specific circumstances and instead requires the listed company to obtain and disclose to the public a professional legal opinion relating to compliance with Chinese laws and regulations.
According to CSRC, the Decision aims to simplify the formalities of takeovers of listed companies. By issuing the Decision, CSRC has tightened its supervision of shareholding increases in listed companies, with moves to make disclosures of transactions more transparent and professional advisers more accountable.