China firms can directly list in Singapore from tomorrow

[weijian]

I have a different view. Those companies listed via this route, have less incentive to make fraud. Bear in mind that, they are also listed in China, and the first thing they will do is "don't play-play" with the China Securities Regulatory Commission (CSRC)

FYI, almost all of China companies listed in Singapore, are not incorporated in China, but offshore from China.

Furthermore, the CSRC has pretty strict requirements for listing in China.

It seems I am an odd one having the view here. Any supporters?

hi CityFarmer, thanks for your alternate view.

When i read the article, i did not get the impression that it was going to be a 'double listing' on BOTH China and S'pore. It is well known that there is a long backlog of companies waiting to get approval to list on Shanghai/Shenzhen but i am not sure whether this is a result of (1) strict requirements, or (2) reflective of actual demand.

Furthermore, operators may not have had bad intentions in the early days of listing. But as previously described by d.o.g once, we cannot rule out succumbing to the temptation of getting rich via dishonest means and getting away easily. The flesh, is indeed always weak.

[CityFarmer]

hi CityFarmer, thanks for your alternate view.

When i read the article, i did not get the impression that it was going to be a 'double listing' on BOTH China and S'pore. It is well known that there is a long backlog of companies waiting to get approval to list on Shanghai/Shenzhen but i am not sure whether this is a result of (1) strict requirements, or (2) reflective of actual demand.

Furthermore, operators may not have had bad intentions in the early days of listing. But as previously described by d.o.g once, we cannot rule out succumbing to the temptation of getting rich via dishonest means and getting away easily. The flesh, is indeed always weak.

First of all, I didn't read the official document of the new framework, but base on info from the news article. An excerpt of the news article below, which make me assume that it is the case.

"Under the new direct listing framework, which will take effect tomorrow, companies incorporated in China will be able to list on SGX directly, provided their applications have been approved by both CSRC and SGX."

Secondly, I didn't have objection on the Mr. d.o.g views, but I do have different view on his following-up action.

I wouldn't say the new framework will ensure "fraud-free" S-Chips for investors, but it might improve the odd among them.

[Some-one]

Does not seem to be a good new with all the lousy s-chips listing here. Would more people gets burnt instead? China should talk about strengthening their governance first before considering listing.

[weijian]

First of all, I didn't read the official document of the new framework, but base on info from the news article. An excerpt of the news article below, which make me assume that it is the case.

"Under the new direct listing framework, which will take effect tomorrow, companies incorporated in China will be able to list on SGX directly, provided their applications have been approved by both CSRC and SGX."

Secondly, I didn't have objection on the Mr. d.o.g views, but I do have different view on his following-up action.

I wouldn't say the new framework will ensure "fraud-free" S-Chips for investors, but it might improve the odd among them.

Here is the link to the full document:
http://infopub.sgx.com/FileOpen/20131125...eID=265655

Potential issuers to file their applications with the CSRC and SGX. CSRC will review these applications before granting administrative licensing approval for the issuer’s listing in Singapore. Subject to satisfactory review, SGX will then issue an eligibility-to-list.

Seems like just 2 watchdogs to me.

[minimax]

After the mid-1990’s, Chinese enterprises have gradually developed two models for overseas listing, i.e. direct overseas listing and indirect overseas listing, and the regulatory frameworks have been established respectively.

In practice, direct overseas listing refers to the overseas issuance and listing of securities by a joint-stock limited company incorporated in the PRC Mainland, while indirect overseas listing refers to the issuance and listing of securities by a company incorporated outside the PRC Mainland after the acquisition of the stakes, assets or revenue of one or more domestic enterprises in the PRC Mainland（popularly known as red-chip listing）。

As of the end of May 2010, 165 domestic enterprises are directly listed abroad （including 6 enterprises that have been delisted） and the cumulative capital raised exceeded USD 120 billion. With regard to the target markets, enterprises that are directly listed abroad are mainly listed on the HKEX.

Among the existing 159 enterprises that are directly listed abroad, 156 enterprises are listed in Hong Kong, three are listed on the Singapore Stock Exchange. Among the companies listed in Hong Kong, 15 are also listed on the New York Stock Exchange （NYSE）， the London Stock Exchange （LSE） or the Singapore Stock Exchange （SGX）。

At the early stage, the legal basis governing direct overseas listing was clarified. （i） The relevant regulations stipulate explicitly that direct overseas listing has to be approved by the competent department. Article 6 of the Provisional Regulations on the Administration of Share Issuance and Trading （hereinafter the ‘Provisional Regulations’） stipulates that: “……A domestic enterprise must obtain approval from the Securities Commission of the PRC State Council （SCSC） before it directly or indirectly issue shares abroad or has its shares to be traded abroad. The specific measures with respect thereto shall be formulated separately.” The PRC Securities Law （1998） and the PRC Securities Law （2004 Revision） have similar provisions. （ii） The corresponding regulatory review and approval basis was clarified. Article 85 of the PRC Company Law （1993） stipulates that: “A joint-stock limited company may make a public offer of shares abroad upon the approval of the securities regulatory department of the PRC State Council. The specific measures shall be specially prescribed by the PRC State Council.” The PRC Company Law （1999 Revision） and the PRC Company Law （2004 Revision） have similar provisions. However, it is important to note that Article 238 of the PRC Securities Law （2005 Revision） stipulates that: “Any domestic enterprise that directly or indirectly issues any securities abroad or lists its securities abroad for trading shall be subject to the approval of the securities regulatory authority under the PRC State Council according to the relevant provisions of the PRC State Council. ”

As such, the legal basis for the domestic review and approval of DIRECT OVERSEAS LISTING is no longer the “special provisions”， but the “provisions” of the PRC State Council. （iii） The legislative model for the above legal basis was adjusted. Before 2006, the legal basis for the regulation over direct overseas listing was concurrently embodied in China’s company law and securities law, i.e. the PRC Company Law （1993）， the PRC Company Law （1999 Revision）， the PRC Company Law （2004 Revision） the PRC Securities Law （1998） and the PRC Securities Law （2004 Revision）。 However, the PRC Company Law （2005 Revision） does not prescribe any rule relating to direct overseas listing. In addition, Chapter II （Securities Issuance） of the main text of the PRC Securities Law （1998） as well as the PRC Securities Law （2004 Revision） contains provisions governing direct overseas listing, but the PRC Securities Law （2005 Revision） moves the above clause from the main text to Chapter XII （Supplementary Provisions）。 This implicitly reflects the attitude of the Chinese legislative authority on the applicable law of direct overseas listing, which means that direct overseas listing does not belong to the scope to be adjusted by the company law of the PRC Mainland, and in principle, the securities law of the PRC Mainland shall not apply.

Secondly, in accordance with the provisions of Article 85 of the PRC Company Law （1993）， the PRC State Council enacted the Special Provisions which lay down a series of special provisions or provisions inconsistent with those in the PRC Company Law （1993） with respect to the minimum number of promoters of H-share companies, qualification of H shares investors, law application and dispute resolution.

Thirdly, in order to regulate the corporate governance and the organizational behaviour of H-share companies, the SCSC and the original State Commission for Restructuring the Economic System（SCRES） jointly promulgated the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas （hereinafter the “Mandatory Provisions”） in accordance with the relevant provisions of the PRC Company Law （1993） and the Special Provisions. The Mandatory Provisions lay down uniform provisions on the important content in the Articles of Association of H-share companies.

[minimax]

Under Article 238 of the PRC Securities Law （2005 Revision）， the CSRC is only mandated to approve applications for overseas listing, but is not authorized to supervise direct overseas listing companies on an ongoing basis.

[valueinvestor]

They cam come here and list but we can ignore.

[pianist]

This is a give and take. Sg govt takes the rmb clearing centre pride, in return it gives based on past experience scandalous s-chips to 'rob' sg retirees? Pl open eyes wide wide before jumping into them.

[specuvestor]

Nothing pretty much stands out to protect retail investors better with this latest move. It simply implies that there is now a 2nd watch dog (rather than just SGX) to blame when things go wrong. Critical issues like geographical mismatch between assets and listing status, and inability of law enforcement continue to make fraud to be more attractive as a short-cut to riches, than operating an honest business.

The better way to regulate is to monitor the 'promoters' ie stockbrokers, inv banks & corporate finance boutiques. Junk companies cannot list if brokers dont bring them in. Make these guys accountable.

Under Article 238 of the PRC Securities Law （2005 Revision）， the CSRC is only mandated to approve applications for overseas listing, but is not authorized to supervise direct overseas listing companies on an ongoing basis.

I think the main framework should be to go after the promoters and give more regulatory co operation between SGX and CSRC. CSRC cannot say it is not their business if they list overseas. Authority to charge them under PRC laws will be a start.

In short give more teeth to SGX to pursue frauds. Extradition treaties would help a lot.

[morten]

The same old issue remains. Good Chinese companies will choose to list in HK.... and China (they ve just announced opening up the IPO market for private enterprise).

Singapore remains a distant third choice.

I tell you the solution. Get a bilateral agreement between Singapore and China such that the Chinese authorities fully cooperate with Singapore to investigate figureheads charged with corporate frauds involving listcos in SGX. That way, the managements are liable for any hanky business. At this moment Singapore has no recourse over fraudulent S chip management.