A GUIDE TO
CAPITAL MARKETS
IN CHINA AND HONG KONG

Deadline looms on governance reforms for Sino-foreign JVs

Previously, foreign-invested enterprises (FIEs) in China found legal basis for their establishment and operations chiefly in the Law on Joint Ventures Using Chinese and Foreign Investment, the Law on Wholly Foreign-owned Enterprises, and the Law on Chinese-Foreign Contractual Joint Ventures … (Read more >)

29 August 2024

Legal compliance obligations under National Nine Articles

One of the hottest topics in the contemporary capital market is the promulgation of Several Opinions of the State Council on Strengthening Regulation, Preventing Risks and Promoting the High-Quality Development of the Capital Market, known otherwise as the new National Nine Articles … (Read more >)

29 August 2024

Protecting creditor interests by disregarding corporate personality

Disregard of corporate personality, also known as piercing the corporate veil, is a system designed to prevent shareholders from abusing the independent corporate personality of a company in order to escape their responsibilities to creditors and the … (Read more >)

28 August 2024

Obstacles and risk control in executing share buyback agreements

Share buyback agreements are common in equity investment in target companies. However, investors often encounter challenges in enforcing these agreements during disputes. Proactive planning during the investment phase can help mitigate future risks … (Read more >)

28 August 2024

Confrontations and strategies in equity dispute resolution

In recent years, continual development of the market economy has led to a surge in shareholder disputes, significantly impacting company growth. Consequently, it is crucial for legal counsel to effectively manage these disputes … (Read more >)

28 August 2024

Tighter listing rules on main boards fuel favour for fledgling BSE

As a crucial component of China’s multi-tiered capital market, the Beijing Stock Exchange (BSE), established in September 2021, is approaching its third anniversary. According to official data, 239 companies with a total market value … (Read more >)

20 August 2024

Bond issuance regulations for Chinese companies listed overseas

The year 2023 marked the beginning of China’s systematic and regular oversight of overseas listings of Chinese enterprises, and those already listed abroad. With relevant policies in place for more than a year, … (Read more >)

19 August 2024

SEHK revises Corporate Governance Code

The Stock Exchange of Hong Kong (SEHK) proposed enhancing corporate governance of its 2,600 listed issuers on the Main Board and GEM in a mid-summer consultation paper titled Review … (Read more >)

16 August 2024

Reviews of share purchases under registration-based IPO system

China’s comprehensive registration-based IPO reform has enshrined information disclosure in new listing criteria under the approval-based system to information disclosure requirements. … (Read more >)

16 August 2024

DSO diligence and disclosure in listed companies

On 1 June 2024, Jinzhou Port issued an announcement reporting that it had received a notice of administrative penalty and a market ban from the China Securities Regulatory Commission and included the full content of the notice. … (Read more >)

7 August 2024

Company Law brings new classified share system to M&A

China’s newly revised Company Law will be in effect from 1 July 2024. This law introduces a classified share system for the first time, with articles 144 to 146 detailing the issuance of classified shares. … (Read more >)

6 August 2024

Evidentiary standards in securities fraud administrative penalties

With increasing regulatory scrutiny in the securities market, the legal risks for issuers and intermediaries involved in securities offerings have significantly risen. Drawing from the first … (Read more >)

1 July 2024

New judicial interpretation of false invoicing

On 15 March 2024, the Supreme People’s Court (SPC) and the Supreme People’s Procuratorate released the Interpretation of Several Issues Concerning the Application of Law … (Read more >)

24 June 2024

Liabilities and compliance tips for information disclosure

The securities regulatory field has established a new norm of cracking down on and preventing information disclosure violations. The China Securities Regulatory Commission … (Read more >)

4 June 2024

Determining horizontal competition and defining relevant markets

Determining horizontal competition is a key consideration for enterprises; relevant to issues ranging from IPO eligibility and qualification for refinancing or major asset restructuring … (Read more >)

22 May 2024

SEHK’s guidance on sufficiency of operations

A company must showcase its business operations at the time of an IPO, but even after a successful listing it is still required to maintain sufficient operations. The Stock Exchange … (Read more >)

08 May 2024

Avoiding securities violations as law tightens

In the past decade, there has been an increase in the incidence of illegal and criminal cases in the securities industry in China. Regulatory and judicial authorities have been increasingly strict … (Read more >)

30 April 2024

Strategies to tackle non-compliant overseas investment procedures

During IPO processes, regulatory bodies scrutinise whether companies have completed the requisite registrations and forex procedures for their overseas subsidiaries. … (Read more >)

29 April 2024

Legal relationships and defences for directed financing instruments

A wave of financial products known as “directed financing instruments”, “directed debt financing instruments”, or “directed financing plans” flooded the market around 2018, … (Read more >)

18 April 2024

IPO registration: how system reviews big numbers of shareholders

Disclosure of information has been at the core of China’s shift to the current across-the-board registration-based IPO system, which replaced the more cumbersome and inefficient … (Read more >)

2 April 2024

Hong Kong consultation on regulatory regime for stablecoin issuers

The Financial Services and the Treasury Bureau of the Hong Kong government and the Hong Kong Monetary Authority (HKMA) conducted public consultations in December 2023 … (Read more >)

1 April 2024

Challenges in reducing subscribed registered capital

The new Company Law has enhanced the system of registered capital subscription and registration, stipulating that limited liability companies must fully pay up their registered capital … (Read more >)

26 March 2024

Early management of legal risks in startup equity financing

Equity financing is vital to the development of startups, usually making a difference in their survival. Therefore, investors are often praised as “white knights” of investee businesses. … (Read more >)

20 March 2024

Retroactive voiding of VAM clauses in IPO process

When a company intends to go public, it will bring investors in for capital increase. In the transaction documents, a valuation adjustment mechanism (VAM, also known as a “bet-on agreement” in China) … (Read more >)

15 March 2024

Practical points for compulsory execution of listed company stocks

During compulsory execution, the people’s court may legally inquire, freeze and sell stock assets held by the subject person, pursuant to article 249 of China’s Civil Procedure Law. … (Read more >)

11 March 2024

Defending top execs against securities misrepresentation claims

Information disclosure is the cornerstone of the securities market’s existence and development, and an important safeguard for investor interests. Securities misrepresentation … (Read more >)

26 February 2024

Unlocking power of equity governance for listing companies

Equity governance is the key to corporate governance. According to the Company Law, except for one-person limited liability companies and wholly state-owned companies, … (Read more >)

25 January 2024

Property attribution disclosure in contractual PE funds

Private equity (PE) funds come in three organisational types: corporate, partnership and contractual. Unlike the first two, contractual PE funds do not establish a company or … (Read more >)

19 January 2024

Proposed reforms of Hong Kong’s GEM board

The Stock Exchange of Hong Kong (SEHK) began consulting the public in September 2023 on proposals to reform the board of the Growth Enterprise Market (GEM) after observing a … (Read more >)

19 January 2024

Main risk scenarios and prevention tips for investor directors

In investment and financing projects, investors often seek to appoint directors to the investee company to ensure a certain degree of voice. Given that directors have such specific legal obligations as duty of loyalty and duty … (Read more >)

09 January 2024

Legal risk: a three-step compliance strategy for listed companies

Amid the backdrop of ongoing regulatory reforms and an expanding capital market, the signals for stricter oversight continue to grow stronger. In this high-pressure environment, participants in the securities market are … (Read more >)

23 November 2023

HK updates Securities and Futures Ordinance

In August 2023, Hong Kong’s Securities and Future Commission (SFC) announced it would proceed with amendments to the insider dealing provisions of the Securities and Futures Ordinance. … (Read more >)

21 November 2023

Proposal review: When shareholders and directors collide

Growing discontent with corporate governance and subsequent demands for the removal of directors have become increasingly common in listing companies. In practice, the review of such proposals by entities … (Read more >)

21 November 2023

Impact of foreign semiconductor export restrictions on domestic listing

Four years have elapsed since the launch of the Star Market, in which semiconductor enterprises account for nearly 20% of the lineup, raising nearly 50% of the total proceeds in the first half of this year. … (Read more >)

25 October 2023

Causality and civil compensation in info-based market manipulation

Stock market manipulation can be broadly divided into trading-based manipulation and information-based manipulation. The former requires significant advantages in funds and securities holdings … (Read more >)

25 October 2023

Opportunities, focus areas for Chinese companies listing in US

As members of the first group of Chinese lawyers to visit the US after the end of the pandemic, the authors had the opportunity to exchange information with experts, scholars and senior executives of top … (Read more >)

19 September 2023

New HK regulatory regime for virtual asset trading platform operators

From 1 June, Hong Kong’s Securities and Futures Commission (SFC) has adopted a regulatory regime applying to all centralised trading platforms for virtual assets (VAs), whether or not such assets are non-security tokens. … (Read more >)

23 August 2023

Hong Kong type 9 licence (asset management) applications

As China’s financial reform and global engagement deepens, accompanied by an increasing demand for cross-border investment and financing, domestic asset management institutions are actively expanding. … (Read more >)

22 August 2023

Securities service institutions’ duties under comprehensive registration

Guided by the gatekeeper theory in China’s capital market, the Securities Law underwent revisions in 2005, holding all securities service institutions fully jointly liable for misrepresentations made by securities issuers … (Read more >)

08 August 2023

The 1997 publication of the Red Chip Guidelines may be a relic of the past century, but the concept and terminology surrounding the red-chip structure persist. Since Sina’s historic debut on the Nasdaq … (Read more >)

08 August 2023

Selecting the right listing for technology specialists

Specialist technology companies (STCs) have been afforded a path to listing on the Stock Exchange of Hong Kong (SEHK). The exchange published the conclusions of its consultation on the matter on 24 March 2023 … (Read more >)

07 August 2023

Data compliance in domestic listings

With the rapid development of technology, the scale of data processed by enterprises has been growing exponentially. Consequently, data compliance has garnered increasing attention from … (Read more >)

04 August 2023

Responding to IPO scrutiny over medical device distribution

A recent Chinese TV drama, The Youth Memories, tells the inspiring story of a group of Beijing youngsters in the 1970s finding strength from each other to overcome a multitude of challenges while growing up through gaokao national exams … (Read more >)

04 August 2023

SEHK lures new-economy industries with reforms

The Stock Exchange of Hong Kong (SEHK) has instituted reforms since 2018 to attract more diversified listing applicants, especially those from new-economy industries. It has formulated specific listing regimes … (Read more >)

01 August 2023

Registration-based IPO review brings new philosophy

On 17 February 2023, the main boards of the Shanghai and Shenzhen stock exchanges adopted the registration-based mechanism for reviewing IPOs, signalling completion of the reform across China’s capital market … (Read more >)

31 July 2023

Filing rules, main focuses for overseas listing

The Trial Measures for the Administration of the Overseas Offering and Listing of Securities by Domestic Enterprises and five supporting guidelines were implemented on 31 March … (Read more >)

31 July 2023

Power moves

Comprehensive implementation of the across-the-board, registration-based listing mechanism is overarching reform with far-reaching implications, leaving an indelible imprint on the development of China’s capital markets. The success of the universal registration-based system relies on the diligent performance of market players, while rigorous enforcement of the delisting regime for listed companies, and the improvement of due diligence standards of intermediaries, pose new challenges for the industry.

Read more >