Let me give you a report to enlighten you:
Morning News (correspondent Wang Jianxin reporter Jiang Haiping) Yesterday, Liu Hongru, former chairman of the China Securities Regulatory Commission, accompanied by President Yu Xiaoyang of Shanghai Jingpingguo Investment Consulting Company, came to Jinjiang to start a dialogue with the bosses of more than 11 enterprises in Jinjiang on how to list private enterprises. Using the power of capital to develop enterprises, the bosses of Jinjiang enterprises are still confused. They want to know about the support measures for private enterprises to go public, whether wholly foreign-owned enterprises can go public and how to maintain them after listing.
Mr. Liu Hongru, who worked in securities in 2111, said, why should private enterprises go public? The thing to be solved is to "pass the customs" to a higher level. He does not advocate that all enterprises should be restructured and listed. He believes that the purpose of listing enterprises is to make them bigger, enter the big market and enter the international market. If you make up your mind, you have to pass the exam.
Liu Hongru also said, don't take listing as a simple thing, but once listed, there are many benefits. He believes that once an enterprise goes public, its management transparency will be high, and its reputation will be good. Naturally, people in the industry will like to deal with you and do business. He said that he will also investigate the listing of private enterprises.
It is understood that Hengan Group and Huayi Company in Jinjiang City are listed in Hong Kong. In the future, the idea of Jinjiang City is to further guide enterprises to improve their core competitiveness, make the industry bigger, make enterprises stronger and start their brands. At the same time, guide enterprises to jump out of product management and move towards capital management. It is reported that Jinjiang City is making great efforts to promote enterprises to carry out capital management, and strive to have 3-5 enterprises listed in five years.
How do domestic enterprises restructure and go public overseas
The US securities market is the largest and most influential capital market in the world. In recent years, with the listing of SNDA, CTRP, LTON and LONG on NASDAQ, the enthusiasm of domestic private enterprises to go public in the United States is increasing. Since 2115, Dexin Wireless (CNTF), Baidu (BIDU), Focus Media (FMCN) and Zhongxing Micro (VIMC) have successively landed on Nasdaq, while "Suntech Holdings" (STP), with Wuxi Suntech Solar Power Co., Ltd. as its main business, has successively completed international private placement and IPO in a short period of one year, and became the China on February 4, 2115.
However, according to the author's experience as a China legal adviser for many non-state-owned enterprises, including Suntech Holdings, to go public in the United States, due to the specific living conditions and legal environment, China private enterprises are facing a series of practical problems in the process of going public in the United States, which are mainly reflected in the process of overseas restructuring. If these problems can't be solved well, enterprises will face many difficulties or even failures when they go public in the United States.
why did you choose red-chip listing and overseas restructuring?
Non-state-owned enterprises (hereinafter referred to as "enterprises") are generally listed overseas by means of overseas red chips, that is, the investors (or actual controllers) of the enterprises register an overseas holding company (usually a tax-exempt company or a Hong Kong company established in the British Virgin Islands, Cayman Islands and Bermuda) for the purpose of listing overseas, and through overseas reorganization, all or substantial parts of the rights and interests (including equity or assets) of the enterprises will be transferred.
Red-chip listing is different from domestic joint-stock companies issuing shares in overseas securities markets and listing overseas ("overseas listing"). From a practical point of view, red-chip listing has more advantages than overseas listing.
Applicable law is more acceptable to all parties
Because the main body of red chip listing is an overseas holding company, the company itself should apply the law of the place where the offshore company is registered, that is, the personal law with the offshore law as the main body of listing. The offshore places usually selected in the operation are all former British colonies (such as the above four famous offshore places), and their laws originally belong to the Anglo-American legal system, which are of the same origin as the American company law. Compared with the laws of China, they are more easily understood and accepted by international investors, American regulatory agencies and exchanges. Among the above-mentioned offshore locations, Cayman Islands is considered as the best overseas holding company domain because of its perfect judicial system, stable legal environment, good corporate governance standards and convenient company operation procedures, which is generally accepted by American listed regulators and exchanges. At present, most of China's non-state-owned enterprises listed in the United States through red chips are overseas holding companies incorporated in the Cayman Islands as the main body of listing. Therefore, the Cayman Islands is the first choice for China enterprises to issue shares in the US securities market through red chips.
for international investors, if the listed entities can apply the offshore laws belonging to the common law system and be under the jurisdiction of the relevant courts under the common law system, their concerns about investment security will be eliminated, which will be conducive to the financing and listing of enterprises abroad. For companies listed overseas, after the overseas listing, they are still legal persons in China, and must unconditionally apply the laws of China, especially the laws of foreign-invested enterprises. Because there is still a gap between China's foreign investment laws and Anglo-American company laws, the consideration of the investment security of company laws and even China's legal system often affects the judgment of international investors on enterprise investment. This point is particularly prominent in the process of international private placement.
The approval procedure is simpler
Since the China Securities Regulatory Commission cancelled the supervision of no objection letter on red-chip listing in early 2113, China enterprises have listed overseas through red-chip listing, and there is no problem of approval in China. According to the State Council's "Special Provisions on Overseas Offering and Listing of Limited by Share Ltd" and China Securities Regulatory Commission's "Notice on Relevant Issues Concerning Enterprises' Application for Overseas Listing", overseas issuance and listing must be approved by China Securities Regulatory Commission before listing. Because China Securities Regulatory Commission generally takes a long time to approve overseas issuance and listing, it is not easy to predict and grasp. Therefore, listing through red chips is simpler in procedure and controllable in time.
The range of tradable shares is wide
In the process of red-chip listing, all the shares of overseas holding companies can be circulated on the exchange through legal registration procedures stipulated in the Securities Act of 1933 and the Securities Exchange Act of 1934 of the United States or limited sales according to the Rules of 144 of the Securities and Exchange Commission of the United States. In the process of overseas issuance and listing, except for the tradable shares listed on the stock exchange, the rest of the shares generally cannot be directly listed and circulated on the stock exchange.
Convenient operation of equity
According to the author's practical experience, the most prominent advantage of red-chip listing in practice is the convenience of equity operation. Since the equity operation is completed at the level of overseas holding companies, the equity operation of overseas holding companies is subject to the authorized capital system. A large number of equity operation matters, including the issuance of common shares and all kinds of preferred shares whose rights and obligations are determined by the company itself, capitalization, equity transfer, share exchange, etc., can be handled by the company itself and can be authorized by the directors or board of directors of overseas holding companies to decide, so it has great flexibility. At the same time, the registered capital of an overseas holding company only needs to be subscribed at the time of establishment, so that the cost of capital operation of the company is greatly reduced, which is especially suitable for China enterprises whose foreign exchange receipts and payments under capital account have not been fully liberalized.
at the level of overseas holding companies, the capital contributions of shareholders and private investors, as well as the corresponding rights and obligations of shareholders, can be freely determined by all parties through consultation, which is very flexible in attracting and introducing overseas capital, and is of great significance to flexibly meet the requirements of all parties including shareholders and private investors in the process of corporate financing.
tax exemption
the most widely known and controversial thing about overseas holding companies is that the offshore government does not levy any tax on overseas holding companies except for the fees related to registration and annual inspection, which greatly reduces the cost of various flexible capital operations for listed entities in the future. Tax exemption is also one of the important reasons for the operation of red chip listing.
overseas reorganization is the basic step of red chip listing. The purpose of overseas reorganization is to reorganize the rights and interests of enterprises through legal channels and inject the rights and interests of enterprises into overseas companies, the upcoming listed entities. In the case of Suntech's listing, —Power Solar System Co., Ltd, a British Virgin Islands company controlled by Mr. Shi Zhengrong, was established, and through this BVI company, all the shares of the original shareholders of Wuxi Suntech Solar Power Co., Ltd., a Sino-foreign joint venture, were directly or indirectly acquired, so that this BVI company became the shareholder who actually held 11% interests of Wuxi Suntech. Later, in the process of listing, Suntech Holdings was established in Cayman Islands. By exchanging the shares of Suntech Holdings with the shares of the shareholders of this BVI company, Suntech Holdings indirectly held 111% of the rights and interests of Wuxi Suntech, thus achieving the goal of domestic enterprises' rights and interests entering overseas listing entities.
the overseas restructuring plan depends on industrial policies
overseas restructuring is not a simple change of shareholders. Since overseas holding companies belong to the category of "foreign investors", the result of overseas reorganization will lead to foreign investors holding all or substantially the rights and interests of domestic enterprises. Therefore, overseas reorganization must conform to China's industrial policy on foreign investment, and overseas holding companies should conduct overseas reorganization in accordance with the Interim Provisions on Guiding Foreign Investment and the Catalogue for Guiding Foreign Investment Industries (revised in 2114) to enter the industries where domestic enterprises are located, and make foreign investments according to the industries where enterprises are located.
the issue of foreign access directly affects the company's overseas restructuring plan. In the case that the industry where the enterprise is located allows wholly foreign-owned holding, the restructuring plan is relatively simple. Generally, overseas holding companies make return investment to acquire all the shares of domestic enterprises, and the enterprises will be changed into wholly foreign-owned enterprises, so as to realize the effective merger of the financial statements of enterprises by overseas holding companies. Wuxi Suntech, whose main business is the production of photovoltaic cell products, belongs to this type.
in the case that the industries where domestic enterprises are located do not allow wholly foreign-owned enterprises, different restructuring plans are needed. The general practice is to set up wholly foreign-owned enterprises in China through overseas holding companies according to the requirements of "Variable Interests Entity (VIE)" under American accounting standards, acquire part of the assets of domestic enterprises, and obtain all or most of the income of domestic enterprises by providing monopolistic consulting, management and services and/or monopolizing trade for domestic enterprises. At the same time, the wholly foreign-owned enterprise should also obtain the preemptive right, mortgage right and voting right of all the shares of the domestic enterprise through the contract. Through the above arrangements, the enterprise will become a variable interest entity of overseas holding companies and realize the effective merger of overseas holding companies' financial statements. Under this scheme, the reorganization should be carried out under the guidance of financial advisers with practical experience in GAAP in the United States. At present, many Internet companies in China listed in the United States, including Baidu, Shanda and Sohu, have reorganized overseas through the above similar schemes because the telecom value-added services involved have not been opened to foreign investors.
it is feasible for state-owned shares to withdraw through transfer
there may be state-owned shares in the ownership structure of domestic companies. Can state-owned shares enter overseas holding companies through overseas restructuring? We often encounter this problem in practice. When domestic enterprises prepare for overseas red-chip listing, state-owned shareholders often hope to participate in overseas restructuring together with other non-state-owned shareholders, and inject their equity into overseas holding companies to hold the equity of overseas holding companies.
the State Council's "Notice on Further Strengthening the Management of Overseas Stock Issuance and Listing" stipulates that the transfer of state-owned shares to overseas companies for overseas listing, domestic enterprises or domestic equity holders shall obtain the consent of the provincial people's government or the relevant competent authorities in the State Council in advance according to their affiliation, report to the China Securities Regulatory Commission for examination and approval, and the State Council shall examine and approve them according to the national industrial policy, relevant regulations and annual total scale. Therefore, from the perspective of rules, it is possible to inject state-owned shares into overseas holding companies, but from the perspective of practical operation, the biggest problem of this scheme is that the examination and approval procedures are complicated, take a long time and the results are uncontrollable. The above problems directly affect the process and timing of red chip listing of enterprises. Therefore, in practice, the above scheme is generally not feasible. A more feasible scheme is that in the process of overseas restructuring, the state-owned shares will be withdrawn through transfer.
if the state-owned equity of a domestic enterprise is transferred to an overseas holding company and withdraws, it must entrust an asset appraisal institution with corresponding qualifications to conduct asset appraisal according to the Measures for the Administration of State-owned Assets Appraisal and the Provisions on Several Issues in the Administration of State-owned Assets Appraisal, and after approval or filing, it will be used as the basis for determining the state-owned property rights and asset prices. Therefore, in the process of overseas reorganization, the acquisition of state-owned shares of domestic enterprises by overseas holding companies should follow the principles of evaluation and filing, and the principle that the transfer price should not be lower than the evaluation value.
the purchase price of foreign-invested enterprises is more flexible
the process of overseas reorganization involves the acquisition of the rights and interests of domestic enterprises by overseas holding companies, thus involving the determination and payment of the price. In this regard, due to the different nature of domestic enterprises, the determination and payment of their prices are different.
when an overseas holding company acquires a domestic enterprise for overseas reorganization, the Interim Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (the "Regulations on Merger and Acquisition") shall apply. This regulation applies to the merger and acquisition of domestic non-foreign-funded enterprises (including equity merger and asset merger) by foreign investors.
in terms of pricing, according to the regulations on mergers and acquisitions, overseas holding companies and domestic enterprises apply for asset appraisal institutions to adopt internationally accepted appraisal methods to evaluate the value of the equity to be transferred or the assets to be sold, and the appraisal results are used as the basis for determining the transaction price. Both parties are not allowed to transfer equity or sell assets at a price significantly lower than the appraisal results, and transfer capital to overseas in disguise. There is no exception to the principle of evaluation and pricing in the Regulations on Mergers and Acquisitions. With regard to the time limit for payment of the price, according to the Regulations on Mergers and Acquisitions, the overseas holding company shall pay the transferor in a lump sum within three months from the date of issuing the business license of the foreign-invested enterprise after the merger. If it is necessary to extend the period due to special circumstances, it shall, after being approved by the examination and approval authority, pay more than 61% of the total consideration to the transferor within 6 months from the date of issuing the business license of the foreign-invested enterprise, and pay off the total consideration within 1 years ("deferred payment"). Therefore, the above-mentioned mergers and acquisitions of overseas holding companies should actually pay the price according to the provisions of the contract. In terms of the effective period of the transferred rights and interests, according to the Regulations on Mergers and Acquisitions, in the case of deferred payment, foreign investors shall distribute the benefits to the rights and interests of the merged enterprise according to the proportion of their actual contribution.
in the case that a domestic enterprise belongs to a foreign-invested enterprise, the equity reorganization of the foreign-invested enterprise by an overseas holding company belongs to the change of the equity of the investors of the foreign-invested enterprise, and the relevant laws, regulations and provisions of the foreign-invested enterprise, especially the Provisions on the Change of the Equity of the Investors of Foreign-invested Enterprises ("Provisions on the Change of the Equity of Foreign-invested Enterprises") shall be applied. <