CSRC: Using high-quality leading companies as the "main force" to promote mergers and acquisitions between listed companies.

On February 28th, the China Securities Regulatory Commission (CSRC) issued a reply to Proposal No. 3472 of the Second Session of the Fourteenth National People's Congress. It mentioned that, next step, the CSRC will earnestly implement the "Opinions of the State Council on Strengthening Regulation, Preventing Risks, and Promoting the High-Quality Development of the Capital Market." It will continue to deepen the market-oriented reform of mergers and acquisitions, take multiple measures to activate the mergers and acquisitions market, effectively implement a "green channel" for mergers and acquisitions of technology-based enterprises with breakthrough core technologies, promote absorption and merger among listed companies with high-quality leading companies as the "main force," conduct research on installment payments of stock consideration, encourage listed companies to comprehensively utilize tools such as stocks, cash, and convertible bonds to implement mergers and acquisitions, inject high-quality assets, better serve major national strategies such as high-level technological self-reliance and the construction of a modern industrial system, and contribute to the development of new quality productive forces. The original text is as follows: Reply to Proposal No. 3472 of the Second Session of the Fourteenth National People's Congress The suggestion "Support for Mergers and Acquisitions of Listed Companies" has been received. After careful study, the relevant issues are answered as follows: Supporting high-quality mergers and acquisitions of listed companies is an important measure for the capital market to support the development of the real economy, support technological innovation, and help reform and upgrade state-owned enterprises and industries. In recent years, the CSRC has resolutely implemented the decisions and deployments of the Party Central Committee and the State Council, continuously promoted the market-oriented reform of mergers and acquisitions, stimulated market vitality, further played the main role of the capital market in mergers and acquisitions, and supported eligible listed companies to improve quality, efficiency, and competitiveness through mergers and acquisitions. Since 2023, the CSRC has mainly carried out the following work: First, comprehensively implement the restructuring registration system. In February 2023, on the basis of absorbing the trial experience of the Science and Technology Innovation Board and the Growth Enterprise Market registration system, the "Management Measures for Major Asset Restructuring of Listed Companies" and supporting normative documents were revised and issued to clarify the review and registration process, improve the restructuring identification standards and pricing mechanisms, and strengthen mid- and post-restructuring supervision. At the same time, the Shanghai and Shenzhen Stock Exchanges revised and issued supporting rules such as the Major Asset Restructuring Review Rules and the Management Measures of Mergers and Acquisitions Review Committee, extending the audit procedures, mechanisms, and information disclosure requirements of the "two innovation" sectors to the main board, and optimizing and improving them. Second, promulgated rules on convertible bonds for restructuring. As a restructuring payment tool, convertible bonds have both "equity" and "debt" characteristics, which can provide a more flexible mechanism for both parties to the transaction, helping to enhance the vitality and efficiency of the restructuring market. In November 2023, the CSRC formulated the "Rules on Listed Companies Issuing Convertible Corporate Bonds to Specific Objects to Purchase Assets", clarifying issuance conditions, pricing mechanisms, lock-up arrangements, investor suitability, and other regulatory requirements to encourage listed companies to use convertible bonds and other diversified payment tools effectively. Third, extend the validity period of financial data for stock-based restructuring. In October 2023, the CSRC amended the "Guidelines for the Disclosure of Information Content and Format of Companies Issuing Public Securities No. 26 - Major Asset Restructuring of Listed Companies", extending the validity period of financial data for stock-based restructuring projects from "6+1" to "6+3" to promote listed companies to reduce restructuring costs and accelerate the restructuring process. Fourth, optimize the rapid review mechanism for "small and quick" restructuring. In April 2024, the Shanghai and Shenzhen Stock Exchanges revised the rules for reviewing major asset restructurings, optimizing the "small and quick" restructuring review mechanism: on the one hand, expanding the scope of application of the "two innovation" sectors, lifting the limit on the use of matching financing for transaction consideration, and increasing the upper limit of matching financing from "not exceeding 50 million yuan" to "not exceeding 10% of the audited net assets of the listed company in the past year"; on the other hand, the review time limit of the exchange was reduced to 20 working days, effectively improving the efficiency of the review and clarifying market expectations. Fifth, appropriately increase the valuation tolerance of restructuring. In August 2023, the relevant person in charge of the CSRC answered questions from reporters about active capital markets and boosting investors' confidence, explicitly proposing to appropriately increase the valuation tolerance for restructuring of light-asset technology-based enterprises to support high-quality technology innovation enterprises to grow stronger through mergers and acquisitions. In March 2024, the CSRC issued the "Opinions on Strengthening the Supervision of Listed Companies (Trial)", further emphasizing guiding the parties to transactions to reasonably determine the transaction price based on market-based negotiations. Sixth, continue to strengthen research and services for the mergers and acquisitions market. Since the second half of 2023, the CSRC and the Shanghai and Shenzhen Stock Exchanges have held several research forums, widely solicited opinions and suggestions from market participants such as listed companies, central enterprise groups, investment institutions, and intermediary agencies, improved regulatory rules and policies targetedly. At the same time, the Shanghai and Shenzhen Stock Exchanges, the Listed Companies Association, and the Securities Industry Association have separately organized training on mergers and acquisitions, strengthened policy interpretation and market cultivation, and enhanced the endogenous motivation of listed companies for mergers and acquisitions. Next, the CSRC will conscientiously implement the "Opinions of the State Council on Strengthening Regulation, Preventing Risks, and Promoting the High-Quality Development of the Capital Market", continue to deepen the market-oriented reform of mergers and acquisitions, take multiple measures to activate the mergers and acquisitions market, effectively implement a "green channel" for mergers and acquisitions of technology-based enterprises with breakthrough core technologies, use high-quality leading companies as the "main force" to promote absorption and merger among listed companies, conduct research on installment payments of stock consideration, encourage listed companies to comprehensively use tools such as stocks, cash, convertible bonds, etc. to implement mergers and acquisitions, inject high-quality assets, better serve major national strategies such as high-level technological self-reliance and the construction of a modern industrial system, and contribute to the development of new quality productive forces. Thank you for your concern and support for the development of the capital market. We welcome your continued feedback and suggestions. This text is selected from the official website of the China Securities Regulatory Commission, Edited by GMTEight: Jiang Yuanhua.