Unlisted firms get new scope in M&As

The China Securities Regulatory Commission on Friday released rules covering unlisted public companies that it said will support the development of the nation's capital markets and help small and medium-sized enterprises.

The CSRC defines an unlisted public company as one with more than 200 shareholders, although the shares aren't currently traded on a stock exchange.

"The rules are market-oriented and give attention to the rights of shareholders," said Zhang Xiaojun, a CSRC spokesman,

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One rule involves mergers and acquisitions. It says that M&A deals involving these companies aren't included in the mandatory bid provision, which requires a general offer for all shares under certain conditions. Also, the offer prices and methods of payment can be more flexible to provide acquiring companies with more options.

The second rule involves major asset restructuring by unlisted public companies. It authorizes more diverse methods of financing when a company is conducting a major reorganization, and new share issues, preferred shares and convertible bonds can all be used.

"The rules can be good for unlisted public companies (wanting to list) on the National Equities Exchange and Quotations to optimize resource allocation," said Zhang. "They also provide delisted companies with operating paths."

The National Equities Exchange and Quotations, an over-the-counter market that is China's third national equity exchange, also called the third board, is popular among micro-sized, small and medium-sized companies.

As of June 6, the NEEQ had 776 companies listed with total market capitalization of 185.2 billion yuan ($29.7 billion), up 235 percent from Dec 31, 2013. More than 1,000 companies may be listed on the third board by the end of this year.

The State Council, China's cabinet, said in a wide-ranging policy statement in May that listed companies can delist on their own initiative through M&A deals or by moving to the NEEQ.

Initial public offerings, acquisitions and delisting will be promoted to stabilize and improve the market's conditions, said Xiao Gang, chairman of the CSRC.

Nanjing Tanker Corp was delisted from the Shanghai Stock Exchange last month following three years of consecutive net losses, becoming the first delisted State-owned enterprise in China.