SHANGHAI, March 20 (Reuters) - China’s stock exchanges should make it easier for companies to be de-listed and crack down on the use of shell companies for “backdoor” listings, a Shanghai Stock Exchange official wrote in an article published in official media on Tuesday.
Exchanges should move away from their current over-reliance on a single criterion for delisting - three straight years of operating losses - and develop multiple new criteria for de-listing, Shang Zheng wrote in the official China Securities Journal as part of its ongoing investor education and protection series. Shang’s title was not identified.
New rules on de-listing appear to be part of a broader campaign by Guo Shuqing, the new head of China’s securities regulator, to clean up the country’s exchanges
Shang added that new de-listing criteria should be based on indicators such as the transaction volume of company shares; the market value of the company based on its share value; net assets; and income from the company’s main business.
Different boards should develop differentiated de-listing standards, he added.
The article pointed out that only 70 companies had been delisted since 2001, of which 49 were de-listed for negative profits and 21 due to mergers and acquisitions.
Shanghai’s exchanges should also crack down on “backdoor” listings involving the acquisition of a listed shell company by an unlisted firm.
If a listed company has its name changed and is re-structured beyond all recognition, it should not be considered the same company, the article said. And if an unlisted company wants to list, it must go through the standard approval process.
The practice is also a main reason why so few companies have actually been de-listed, Shang said. The practice of backdoor listings has led to speculation on the stocks of weak companies, based on the expectation that the company may be acquired and re-structured by an unlisted company.
The China Securities Regulatory Commission (CSRC), which governs the exchanges, has revealed plans to tighten regulations on insider trading, IPO pricing, and temporary suspensions of share trading based on unusual price movements.
In January, CSRC’s Guo established a new “investor protection bureau” within the commission. (Reporting by Gabriel Wildau; Editing by Jacqueline Wong)