The National People’s Congress Standing Committee of China approved a revised version of the securities law end of December 2019. The major amendment concerns the implementation of a registration-based IPO system, which simplifies and shortens the process compared to the one currently in force. Also, as from now, IPO’s will be led by companies and investors, who will determine the process and timing, rather than by the regulator as in the past.
Secondly, when preparing documentation for an IPO, companies will have to comply with stricter information disclosures to improve investors’ protection and fight market manipulation. Companies are now required to disclose all information in their IPO application necessary to ensure that investors can make accurate decisions when participating to an IPO.
Finally, penalties that can be imposed by the CSRC (China Securities Regulatory Commission) in case of fraud during the IPO process have been increased to 20 million yuan (§2.9 million).
This is a major evolution for the Chinese market as the last revision was made in 2006. The new law will come into effect on 1st March 2020 and is in line with the willingness of China to modernize its fast growing capital markets.
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Written on Jan 7, 2020 by
Olivia de Patoul
Senior legal counsel at Deminor responsible for the Asia Pacific Region.