CSRC issues guidelines on approval of IPO candidates/additional share issues

SHANGHAI (AFX-ASIA) - The China Securities Regulatory Commission has issued two sets of guidelines for the checking and approval of companies seeking to launch initial public offerings and additional share issues, the China Securities newspaper reported.

             The first document, dealing with the approval of IPO candidates, says the appraisal committee should check whether the companies have committed any major illegal acts in the previous three years, and whether any illegal activities more than three years ago could still have an impact on the company in the future.

             The committee should check whether companies have remained profitable in the previous three years, and whether their forecast return on net assets can match the one-year deposit interest rate.

             It should also make sure that the company's total investments do not exceed 50 pct of their net assets.

             At the year-end preceding the IPO, the company's net assets should be no less than 30 pct of total assets, and the proportion of intangible assets in net assets should not exceed 20 pct.

             The committee should also check whether the company is involved in important legal or arbitration cases, share disputes or potential disputes.

             It should also check whether the company's share and asset transactions are legal and have been carried out in accordance with the legal process.

             It should ensure that the management structure is good, the company's operations are separate from other companies, and there are no major, or frequent and unfair transactions with related companies.

             It should also ensure that the company is not in direct competition with its major shareholder or with subsidiaries of its major shareholder.

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