The CSRC answered the 30 questions of refinancing： fundraising cannot be invested in restricted elimination projects.
On the evening of July 5, there was another heavy news in the securities industry. The issuance supervision department of the CSRC issued the "Answers to Some Questions about Refinancing Business", which clarified the details of the auditing standards, legal and accounting issues of refinancing business.
The CSRC said that the "Answer" was issued to further promote the market-oriented and rule-based reform of securities issuance, enhance the transparency of audit work, guide and standardize the financing behavior of listed companies, facilitate intermediaries to perform their duties, and better play the role of refinancing in supporting the real economy.
From the content point of view, there are 30 questions and answers published this time, including horizontal competition, related party transactions, major illegal acts, litigation or arbitration matters, share pledge,
Previously, there were rumors in the market that the regulatory authorities planned to substantially relax the refinancing policy, including relaxing the validity period of the CSRC approval from 6 months to 12 months; The size limit of the issued share capital will be raised from 20% of the total share capital before this issuance to 50%. However, these rumors have not been reflected in this Answer.
Reporter The Paper sorted out the 10 questions and answers that the market is more concerned about in the Answer as follows.
1, how to identify horizontal competition?
"Horizontal competition" means that competitors engage in the same or similar business as the issuer’s main business. When verifying and identifying "competition", it should be combined with the historical evolution, assets, personnel, main business and other aspects of the relationship with the issuer, as well as whether the business is substitutive, competitive, whether there is a conflict of interest, etc., to judge whether it constitutes competition for the issuer.
We can’t simply say that it doesn’t constitute "horizontal competition" just because the products are sold in different regions and the grades of products are different.
In the process of judging that relatives are involved in horizontal competition, the CSRC has drawn up three types of situations divided according to the degree of closeness.
If the controlling shareholder or actual controller of the issuer is a natural person, and the enterprise controlled by the immediate family members of both husband and wife (including spouse, parents and children) has a competitive relationship with the issuer, it shall be deemed to constitute horizontal competition. Other close relatives (that is, brothers and sisters, grandparents, grandparents, grandchildren, grandchildren) are recognized as constituting horizontal competition in principle. Other relatives are generally not considered as constituting horizontal competition.
2. What are the information disclosure requirements for related party transactions?
In the case of public offering of securities, the issuer shall disclose related parties and related relationships in the prospectus, and disclose related transactions in the last three years and the first period according to regular related transactions and occasional related transactions, the impact of related transactions on the company’s main business, and measures to reduce and standardize related transactions.
3. If the issuer and its controlling shareholder or actual controller have issued public commitments, what precautions should be taken when applying for refinancing?
The issuer and its controlling shareholder or actual controller have failed to fulfill their public commitments to investors in the last 12 months, which constitutes a legal obstacle for the issuer of the main board (small and medium-sized board) to publicly issue shares (convertible bonds) and the issuer to publicly issue preferred shares.
Growth enterprise market (gem) is a legal obstacle to the issuance of gem if the issuer fails to fulfill its public commitments to investors in the last 12 months; If it is the controlling shareholder or actual controller of the issuer, it shall not participate in the subscription of securities issued by the listed company.
If the matter causes serious damage to the rights and interests of listed companies by controlling shareholders or actual controllers, or seriously damages the legitimate rights and interests of investors, it also constitutes a legal obstacle for the issuer of the main board (small and medium-sized board) to issue shares privately and the issuer to issue preferred shares privately.
4. In the process of refinancing, how should information disclosure or verification be carried out on the litigation or arbitration matters of the issuer?
Where securities are publicly issued or preferred shares are issued, the issuer shall disclose the litigation or arbitration matters that have a great impact on the production and operation, financial status and future development, including the acceptance and basic facts of the case, the request for litigation or arbitration, the results and implementation of judgments and rulings, and the impact of litigation or arbitration matters on the issuer, such as the impact of the issuer’s loss or unfavorable arbitration on the issuer.
It is worth mentioning that even if it is a lawsuit that occurs outside the reporting period, the CSRC also requires brokers to pay attention.
It is stipulated in the document that the sponsor institution and the issuer’s lawyer should comprehensively check the relevant situation of litigation or arbitration that occurred during the reporting period or occurred outside the reporting period but still had a great impact on the issuer.
5. Does the use of raised funds conform to the national industrial policy, and what precautions do issuers and intermediaries have?
On the one hand, in principle, it is not allowed to add excess capacity or invest in restricted or eliminated projects. The identification of industries with excess capacity shall be subject to the regulations of the competent department of the State Council, while the restricted and eliminated industries are stipulated in the Guidance Catalogue for Industrial Structure Adjustment.
On the other hand, if foreign investment is involved, it should be noted that overseas investments such as real estate, hotels, cinemas, entertainment and sports clubs, the establishment of equity investment funds or investment platforms without specific industrial projects abroad, the use of backward production equipment that does not meet the technical standards of the investment destination countries, gambling, pornography and other overseas investments are restricted or prohibited.
6. How should issuers and intermediaries disclose or verify information about the sources of subscription funds for each subscriber in non-public offering of shares?
The CSRC requires that if the board of directors decides to subscribe for the non-public offering of shares, the issuer shall disclose the source of subscription funds for each subscription object, and it is necessary to specify three "yes or no".
Namely: Is it self-owned? Is there any external offering, agency holding, structured arrangement or direct or indirect use of the funds of the issuer and its related parties for this subscription? Is there any situation where the issuer and its controlling shareholder or actual controller provide financial assistance, compensation, promised income or other agreement arrangements to the subscription object directly or through its stakeholders?
7. If there is a situation that the controlling shareholder and actual controller pledge the issuer’s shares in proportion, how should the issuer and intermediary institutions disclose or verify the information?
Where securities are publicly issued, the issuer shall disclose the pledge of the issuer’s shares held by the controlling shareholder or actual controller in the prospectus.
If there is a large proportion of pledge, it should be combined with the specific circumstances to disclose whether there is a greater risk of liquidation, whether it may lead to changes in the controlling shareholder and actual controller, and the relevant measures for the controlling shareholder and actual controller to maintain the stability of control rights.
If it is true that the control right is difficult to maintain stability, the time limit for possible changes in the control right and possible disposal schemes should be fully disclosed.
8. In February 2017, the CSRC issued the Question and Answer on Issuance Supervision — Regulatory Requirements on Guiding and Regulating the Financing Behavior of Listed Companies, it is clear that when a listed company applies for refinancing, except for financial enterprises, in principle, there should be no trading financial assets with large holding amount and long term, financial assets available for sale, loans to others, entrusted financing and other financial investments in the latest period. How to understand this?
Firstly, it is clearly defined that financial investment includes but is not limited to: establishing or investing in industrial funds and M&A funds; Borrowing funds; Entrusted loan; Capital contribution or capital increase to the group finance company in excess of the shareholding ratio of the group; Buying financial products with large fluctuations in income and high risks; Non-financial enterprises invest in financial business.
The issuer establishes or invests in industrial funds and M&A funds related to its main business for the purpose of strategic integration or acquisition; Entrusted loans for developing main business or expanding customers and channels, as well as investments formed for policy reasons and historical reasons that are difficult to be repaid in the short term, are not financial investments.
Secondly, the detailed requirements are clarified. The so-called "large amount" means that the amount of financial investment that the company has held and intends to hold exceeds 30% of the net assets attributable to the parent company in the consolidated statement of the company. "Long term" means that the investment period (or expected investment period) exceeds one year, and it has been accumulated for a long time although it has not exceeded one year.
9. What are the specific regulatory requirements for the estimated benefits of fundraising projects?
The CSRC said that the disclosure of expected benefits should be based on a reasonable basis.
What is a reasonable basis?
First of all, listed companies should disclose the assumptions, calculation basis and calculation process of benefit prediction in combination with the contents of feasibility study report, internal decision-making documents or other similar documents.
Secondly, if the benefit indicators disclosed by the issuer are internal rate of return or payback period of investment, the calculation process of internal rate of return or payback period of investment and the income data used should be clarified, and the expected impact on the company’s operation after the implementation of the fundraising project should be explained.
In addition, listed companies should make a vertical comparison with the operating conditions of existing businesses on the basis of the estimated benefits, so as to explain the rationality of income indicators such as growth rate, gross profit margin and predicted net interest rate, or make a horizontal comparison with the operating conditions of comparable companies in the same industry, so as to explain the rationality of income indicators such as growth rate and gross profit margin. Sponsoring brokers also need to check.
10. What is the impact of the issuer’s recent performance decline in the refinancing audit?
In the audit, the situation of declining performance should be classified and handled.
For the issuance application with profit requirements, if the performance of the latest issue declines, but the relevant profit indicators and profit forecast data still meet the basic issuance conditions, it will be promoted after fulfilling the full information disclosure procedures.
For the issuance application with profit requirements, if the recent decline in performance may affect the issuance conditions, the sponsor institution shall carefully express its opinions on whether the issuance conditions are met after the decline in performance.
When there is no profit requirement for the issuance application and the business performance drops sharply, it shall be promoted after the listed companies and intermediaries update the declaration documents or submit the post-meeting documents and fulfill the information disclosure procedures.
The above-mentioned "sharp decline" means that the company’s net profit has fallen by more than 30% year-on-year, which is higher than the decline ratio of net profit attributable to the parent company before and after deduction in the consolidated statements.
The Paper reporter Liu Yuyu