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Singapore – The New Route For PRC Firms Seeking Direct Overseas Listings.

13 January, 2014

 

Legal News & Analysis – Asia Pacific – Singapore  Capital Markets

 

Singapore Exchange (“SGX”) announced on 25 November 2013 that it will, together with the China Securities Regulatory Commission (“CSRC”) launch a Direct Listing Framework for companies registered in the PRC to list directly in Singapore. Based on the announcement, the key points of the listing framework include the following:


1. A potential issuer is required to file its application with the CSRC and SGX;
2. CSRC will review the application and the relevant documents before granting administrative licensing approval for the issuer’s listing in Singapore;
3. Subject to SGX’s review, an eligibility-to-list will then be granted to the potential issuer;
4. The potential issuer must comply with all relevant laws and regulations in the PRC, as well as all requirements and regulatory standards of Singapore and SGX; and
5. The financial statements of the potential issuer must be prepared and audited by certified public accountants in accordance with the Singapore Standards on Auditing, International Standards on Auditing, or US’ Generally Accepted Auditing Standards.


SGX and CSRC will further discuss the detailed rules of implementation for the Direct Listing Framework. This framework is expected to provide PRC firms with better accessibility to the Singapore capital market as well as a good opportunity for international investors to participate in PRC’s economic development.


Even though the detailed rules of implementation of the Direct Listing Framework have yet to be promulgated, it is expected that, once finalised, the Direct Listing Framework will provide a more straightforward route for PRC firms to seek a listing in Singapore. This mirrors the coming into force of the “Regulations and Guidance on Submission Documents and Approval Proceedings for Overseas Issue of Shares of Limited Stock Companies” (“Regulations and Guidance”), published by CSRC on 20 December 2012 (implemented on 1 January 2013), which resulted in growing numbers of PRC firms seeking direct listings in Hong Kong.


A PRC firm must first complete its restructuring and evaluation in the PRC and incorporate and register a stock company while complying with regulations relating to taxation and environmental protection that are required under the Regulations and Guidance. After completing the requisite due diligence and obtaining a legal opinion, the listing application will be submitted to CSRC and thereafter, to SGX. Listing will only take place after approval by both CSRC and SGX is given.


Other than setting up a framework for direct listing procedures, professionals hope that the Direct Listing Framework will provide solutions for some key issues, such as the circulation of shares of PRC firms that are directly listed, as well as issues that are subject to different requirements under the two exchanges, for example, related party transactions and conflicts of interest.


In the long run, the Direct Listing Framework will provide a standardised process for PRC firms, especially small and medium-sized firms, to obtain overseas finance. Consequently, this will provide a platform for Singapore to become an important venue for this purpose.

 

Shook Lin Bok LLP

 

For further information, please contact:

 

Robson Lee, Shook Lin & Bok
robson.lee@shooklin.com


Wong Gang, Partner, Shook Lin & Bok
gang.wong@shooklin.com


Guo Xiaofei, Shook Lin & Bok
xiaofei.guo@shooklin.com

 

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