CSRC Issues Listing Rules for New Growth Enterprise Board

China's Nasdaq-style Growth Enterprise Board (GEB) is one step closer to reality with the release of draft regulations covering listing rules for the new market.

The latest in a series of regulations related to the establishement of China's long-awaited GEB were announced by Song Liping, president of Shenzhen Stock Exchange (SZSE), at a joint press conference with China's Securities Regulatory Commission (CSRC) on May 8.

The draft regulations outline the listing and delisting rules in relation to the GEB which is expected to start trading later this year.

According to the draft, majority shareholders, or those who have a controlling stake in a company, are prevented from trading in the shares of their company for three years after listing on the board.

Major shareholders in any company that plans to enlarge the size of its offering during the 6 months leading up to the acceptance of their IPO application by the CSRC, will be allowed to trade no more than 50% of their shares after 1 year and to trade freely after 2 years of being listed on the board.

Minor shareholders, in keeping with current corporate law, will be prevented from trading their shares for only one year after the initial public offering (IPO).

A source from the SZCE had previously revealed that due to the slightly greater risk involved in trading on the GEB, a lot of attention was being paid to the delisting mechanisms outlined in the draft regulations.

The regulations detail an express-delisting mechanism that is applicable in three sets of circumstances. The first is in relation to companies that receive a "negative" audit by an accredited accounting firm; the second situation is if a listed company registers negative net assets in its accounting report; the third involves a company whose turnover has dropped below 1,000,000 shares a day.

Despite the fact that a separate provisional regulation related to IPOs on the GEB already came into effect on May 1, domestic stock brokerage firms are still unable to submit IPO applications on behalf on their clients as many rules are yet to be finalised.

The EO learned that other supplementary rules concerning the IPO in the growth enterprises board were still under deliberation, with the CSRC close to approving some of the new regulations.