New IPO rules finalized for ChiNext board

China has finalized new rules for companies looking to list on Shenzhen's ChiNext board, streamlining the listing process.

China has finalized new rules for companies looking to list on Shenzhen’s ChiNext board, streamlining the listing process and allowing initial public offering pricing to be fully determined by the market.

The China Securities Regulatory Commission said measures to regulate IPO registration on ChiNext include stricter requirements for information disclosure and legal and financial compliance.

The application review process will be open and paperless in a bid to ease enterprises’ burdens and increase transparency, according to the CSRC.

Spurred on by the trade war with the United States, China has sought to make it easier for startups, particularly tech firms it sees as strategically important, to gain access to domestic capital and to be less reliant on other venues such as New York and Hong Kong.

The ChiNext reforms are modelled on rules used by Shanghai’s Nasdaq-style STAR Market launched last July. Companies wanting to go public will no longer need approval from the CSRC.

Instead, the Shenzhen Stock Exchange, located in the southern Guangdong Province tech hub, will vet applications based on disclosure rules.

There’ll be no price limits during the first five trading days of a newly listed stock, after which shares will be allowed to rise or fall up to 20 percent during a trading session, compared with 10 percent previously.

The new rules allow companies that have yet to turn a profit to list, but the exchange said pre-profit companies would only be allowed to apply after the first year of the reform. Firms with weighted voting rights can also now pursue a listing.

The CSRC said supervision will be strengthened and issuers, intermediaries and other market entities will be held accountable for violations of laws and regulations.

In addition, the CSRC also introduced measures in the areas of share issuances, convertible corporate bonds and depositary receipts, corporate governance, equity-based incentives, holding stock reductions, as well as sponsor businesses.

The measures came into effect on Friday after the CSRC solicited public feedback.

China decided in late April this year to pilot the registration-based IPO system at ChiNext to replace its approval-based one to better cultivate new industry startups and bolster the real economy.

Special Reports