Opinions of the State Council on Further Improving the Quality of Listed Companies
Opinions of the State Council on Further Improving the Quality of Listed Companies
Opinions of the State Council on Further Improving the Quality of Listed Companies
Guo Fa [2020] No.14
October 5, 2020
People's governments of all provinces, autonomous regions and municipalities directly under the Central Government, all ministries and commissions under and all institutions directly affiliated to the State Council,
The capital market plays a far-reaching role in financial operation, in which listed companies are cornerstones. Improving the quality of listed companies is an intrinsic requirement for promoting the sound development of the capital market while also important content to accelerate the refinement of the socialist market economy system in the new era. Since the issuance of the Circular of the State Council on Approving and Forwarding the Opinions of the China Securities Regulatory Commission on Improving the Quality of Listed Companies (Guo Fa [2005] No.34), listed companies in China have seen a dramatic increase in terms of quantity and an on-going improvement in terms of quality, thus playing an increasingly prominent role in promoting the development of the national economy. However, attention shall be paid to the fact that there are still such prominent problems with listed companies as ill-formed operation and governance as well as low development quality, and there is still a gap compared with the requirements for constructing a modern economic system and promoting the high-quality development of the economy. Meanwhile, due to the impact of the COVID-19 epidemic, listed companies face new challenges in terms of production, operation and high-quality development. With a view to further improving the quality of listed companies, the following opinions are hereby put forward.
I. General Requirements
We shall take Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as the guide, fully implement the guiding principles of the 19th National Congress of the Communist Party of China ("CPC") and the second, third and fourth plenary sessions of the 19th CPC Central Committee, conscientiously carry out the major policies and plans made by the CPC Central Committee and the State Council, apply the new development philosophy, adhere to the market-oriented and law-based direction, strengthen the construction of a basic system for the capital market in light of the requirements for deepening financial supply-side structural reform, and vigorously improve the quality of listed companies; and adhere to placing equal emphasis on stock and increment, combining palliative and root governance, give play to the joint forces of all sectors, strengthen on-going regulation, optimize the structure and development environment of listed companies, and achieve significant improvement of listed companies' operation in a regulated manner, constant refinement of information disclosure quality, effective solutions to prominent issues, and dramatic elevation of their sustainable development capacity and overall quality, thus providing a strong support for the construction of a standardized, transparent, open, dynamic and resilient capital market and the promotion of high-quality economic development.
II. Elevating the Governance Level of Listed Companies
1. Regulating corporate governance and internal control. We shall refine corporate governance systems and rules and clarify the role boundaries and legal liabilities of controlling shareholders, actual controllers, directors, supervisors and senior executives; ensure that controlling shareholders and actual controllers fulfill the obligation of good faith, safeguard the independence of listed companies and effectively protect the legitimate rights and interests of listed companies and investors; ensure that the shareholders' meeting, board of directors, board of supervisors and the management carry out operations in accordance with laws and regulations, directors, supervisors and senior executives faithfully and diligently perform their duties, and give full play to the role of independent directors and the board of supervisors; establish a good communication mechanism between the board of directors and investors, improve the channels and ways for institutional investors to participate in corporate governance; scientifically define the rights and responsibilities of the parties concerned in the governance of state-controlled listed companies, improve the mechanism for the governance of state-controlled listed companies with Chinese characteristics; strictly implement the system for internal control of listed companies, accelerate the implementation of internal control standards and systems, improve the effectiveness of internal control; enhance the requirements for a bottom line of listed companies' governance, advocate best practices, strengthen governance status information disclosure, and promote the improvement of scientific decision-making management; and carry out special actions on corporate governance, and through self-inspection, on-site inspection, supervision and rectification of companies, effectively improve the level of corporate governance. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Finance and the China Banking and Insurance Regulatory Commission)
2. Improving the quality of information disclosure. We shall, aiming at elevating the transparency, optimize rules and systems, and procure the authentic, accurate, complete, prompt and impartial information disclosure by listed companies, shareholders and relevant information disclosure obligors; orient towards investor demands, refine the standards for information disclosure by industry, optimize disclosure contents, and enhance the pertinence and effectiveness of information disclosure; and strictly implement accounting standards for business enterprises, optimize preparation and reporting rules on information disclosure, and improve the quality of financial information. Listed companies and other information disclosure obligors shall fully disclose the information necessary for investors to make value judgments and investment decisions and ensure that such information is concise, clear and easy to understand. Relevant departments and institutions shall, in line with the rules of the capital market, support and cooperate with listed companies to fulfill their information disclosure obligation in accordance with laws and regulations. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Industry and Information Technology and the Ministry of Finance)
III. Promoting Listed Companies to Become Better and Stronger
3. Supporting the listing of high-quality enterprises. We shall fully implement and carry out step by step a registration-based IPO system for the issuance of securities; optimize issuance and listing standards and enhance inclusiveness; strengthen the cultivation and counseling of enterprises to be listed, and enhance their standardization levels; encourage and support the listing of pilot enterprises under the mixed ownership reform; give play to the positive role of equity investment institutions in promoting companies' optimization of governance, innovation and entrepreneurship, industrial upgrading and other aspects; vigorously develop venture capital, cultivate science and technology (“sci-tech”) and innovative enterprises, and support the development and growth of single champions as well as specialized, sophisticated, special and new "little giant" enterprises, etc., in the manufacturing industry; and give play to the positive role of the National Equities Exchange and Quotations ("NEEQ"), regional equity markets and property rights trading markets in cultivating the listing of enterprises. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Industry and Information Technology and all provincial-level people's governments)
4. Promoting market-oriented mergers and acquisitions (“M&A”) as well as restructuring. We shall give full play to the role of the capital market as the main channel for M&A and restructuring, encourage listed companies to revitalize their stock, improve quality and enhance efficiency, and achieve transformation and development; refine the systems for asset restructuring, acquisition and spin-off of listed companies and enrich the payment and financing instruments to boost market dynamism; give play to the role of securities market price, valuation, and asset assessment results in the pricing of state-owned asset transactions, and support state-owned enterprises to carry out mixed ownership reform relying on the capital market; support domestic listed companies to issue shares and purchase overseas high-quality assets, and allow more qualified foreign investors to make strategic investments in domestic listed companies, thus enhancing the international competitiveness of listed companies; and broaden after conducting research the channels for multiple sectors including private investors to participate in the M&A and restructuring of listed companies. (Under the responsibilities of such units as the China Securities Regulatory Commission, the Ministry of Industry and Information Technology, the State-owned Assets Supervision and Administration Commission of the State Council, the National Development and Reform Commission, the Ministry of Finance, the People's Bank of China, the Ministry of Commerce, the State Administration for Market Regulation and the State Administration of Foreign Exchange and all provincial-level people's governments)
5. Refining the system for the financing of listed companies. We shall strengthen the coordination and balance between the financing side and the investment side in the capital market, and guide listed companies to optimize financing arrangements by taking into concurrent consideration the development needs and market conditions; refine the conditions for the refinancing issuance by listed companies, and launch after conducting research a more convenient financing mode; support listed companies to carry out long-term debt financing through the issuance of bonds or by other means; steadily develop preferred shares and share-bond integrated products; vigorously develop equity funds; enrich risk management tools; and explore the establishment of a long-term appraisal mechanism for institutional investors to attract more medium- and long-term funds into the market. (Under the responsibilities of such units as the China Securities Regulatory Commission, the Ministry of Finance, the People's Bank of China, the National Development and Reform Commission and the China Banking and Insurance Regulatory Commission)
6. Improving the incentive and restraint mechanism. We shall refine listed companies' equity incentive and employee stock ownership systems, and make more flexible arrangements in terms of object, method and pricing, etc.; and optimize the policy environment, support various listed companies to establish a sound long-term incentive mechanism, enhance the benefit sharing between workers and owners to better attract and retain talents, and fully mobilize the enthusiasm of listed companies' employees.
......
Guo Fa [2020] No.14
October 5, 2020
People's governments of all provinces, autonomous regions and municipalities directly under the Central Government, all ministries and commissions under and all institutions directly affiliated to the State Council,
The capital market plays a far-reaching role in financial operation, in which listed companies are cornerstones. Improving the quality of listed companies is an intrinsic requirement for promoting the sound development of the capital market while also important content to accelerate the refinement of the socialist market economy system in the new era. Since the issuance of the Circular of the State Council on Approving and Forwarding the Opinions of the China Securities Regulatory Commission on Improving the Quality of Listed Companies (Guo Fa [2005] No.34), listed companies in China have seen a dramatic increase in terms of quantity and an on-going improvement in terms of quality, thus playing an increasingly prominent role in promoting the development of the national economy. However, attention shall be paid to the fact that there are still such prominent problems with listed companies as ill-formed operation and governance as well as low development quality, and there is still a gap compared with the requirements for constructing a modern economic system and promoting the high-quality development of the economy. Meanwhile, due to the impact of the COVID-19 epidemic, listed companies face new challenges in terms of production, operation and high-quality development. With a view to further improving the quality of listed companies, the following opinions are hereby put forward.
I. General Requirements
We shall take Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as the guide, fully implement the guiding principles of the 19th National Congress of the Communist Party of China ("CPC") and the second, third and fourth plenary sessions of the 19th CPC Central Committee, conscientiously carry out the major policies and plans made by the CPC Central Committee and the State Council, apply the new development philosophy, adhere to the market-oriented and law-based direction, strengthen the construction of a basic system for the capital market in light of the requirements for deepening financial supply-side structural reform, and vigorously improve the quality of listed companies; and adhere to placing equal emphasis on stock and increment, combining palliative and root governance, give play to the joint forces of all sectors, strengthen on-going regulation, optimize the structure and development environment of listed companies, and achieve significant improvement of listed companies' operation in a regulated manner, constant refinement of information disclosure quality, effective solutions to prominent issues, and dramatic elevation of their sustainable development capacity and overall quality, thus providing a strong support for the construction of a standardized, transparent, open, dynamic and resilient capital market and the promotion of high-quality economic development.
II. Elevating the Governance Level of Listed Companies
1. Regulating corporate governance and internal control. We shall refine corporate governance systems and rules and clarify the role boundaries and legal liabilities of controlling shareholders, actual controllers, directors, supervisors and senior executives; ensure that controlling shareholders and actual controllers fulfill the obligation of good faith, safeguard the independence of listed companies and effectively protect the legitimate rights and interests of listed companies and investors; ensure that the shareholders' meeting, board of directors, board of supervisors and the management carry out operations in accordance with laws and regulations, directors, supervisors and senior executives faithfully and diligently perform their duties, and give full play to the role of independent directors and the board of supervisors; establish a good communication mechanism between the board of directors and investors, improve the channels and ways for institutional investors to participate in corporate governance; scientifically define the rights and responsibilities of the parties concerned in the governance of state-controlled listed companies, improve the mechanism for the governance of state-controlled listed companies with Chinese characteristics; strictly implement the system for internal control of listed companies, accelerate the implementation of internal control standards and systems, improve the effectiveness of internal control; enhance the requirements for a bottom line of listed companies' governance, advocate best practices, strengthen governance status information disclosure, and promote the improvement of scientific decision-making management; and carry out special actions on corporate governance, and through self-inspection, on-site inspection, supervision and rectification of companies, effectively improve the level of corporate governance. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Finance and the China Banking and Insurance Regulatory Commission)
2. Improving the quality of information disclosure. We shall, aiming at elevating the transparency, optimize rules and systems, and procure the authentic, accurate, complete, prompt and impartial information disclosure by listed companies, shareholders and relevant information disclosure obligors; orient towards investor demands, refine the standards for information disclosure by industry, optimize disclosure contents, and enhance the pertinence and effectiveness of information disclosure; and strictly implement accounting standards for business enterprises, optimize preparation and reporting rules on information disclosure, and improve the quality of financial information. Listed companies and other information disclosure obligors shall fully disclose the information necessary for investors to make value judgments and investment decisions and ensure that such information is concise, clear and easy to understand. Relevant departments and institutions shall, in line with the rules of the capital market, support and cooperate with listed companies to fulfill their information disclosure obligation in accordance with laws and regulations. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Industry and Information Technology and the Ministry of Finance)
III. Promoting Listed Companies to Become Better and Stronger
3. Supporting the listing of high-quality enterprises. We shall fully implement and carry out step by step a registration-based IPO system for the issuance of securities; optimize issuance and listing standards and enhance inclusiveness; strengthen the cultivation and counseling of enterprises to be listed, and enhance their standardization levels; encourage and support the listing of pilot enterprises under the mixed ownership reform; give play to the positive role of equity investment institutions in promoting companies' optimization of governance, innovation and entrepreneurship, industrial upgrading and other aspects; vigorously develop venture capital, cultivate science and technology (“sci-tech”) and innovative enterprises, and support the development and growth of single champions as well as specialized, sophisticated, special and new "little giant" enterprises, etc., in the manufacturing industry; and give play to the positive role of the National Equities Exchange and Quotations ("NEEQ"), regional equity markets and property rights trading markets in cultivating the listing of enterprises. (Under the responsibilities of such units as the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Industry and Information Technology and all provincial-level people's governments)
4. Promoting market-oriented mergers and acquisitions (“M&A”) as well as restructuring. We shall give full play to the role of the capital market as the main channel for M&A and restructuring, encourage listed companies to revitalize their stock, improve quality and enhance efficiency, and achieve transformation and development; refine the systems for asset restructuring, acquisition and spin-off of listed companies and enrich the payment and financing instruments to boost market dynamism; give play to the role of securities market price, valuation, and asset assessment results in the pricing of state-owned asset transactions, and support state-owned enterprises to carry out mixed ownership reform relying on the capital market; support domestic listed companies to issue shares and purchase overseas high-quality assets, and allow more qualified foreign investors to make strategic investments in domestic listed companies, thus enhancing the international competitiveness of listed companies; and broaden after conducting research the channels for multiple sectors including private investors to participate in the M&A and restructuring of listed companies. (Under the responsibilities of such units as the China Securities Regulatory Commission, the Ministry of Industry and Information Technology, the State-owned Assets Supervision and Administration Commission of the State Council, the National Development and Reform Commission, the Ministry of Finance, the People's Bank of China, the Ministry of Commerce, the State Administration for Market Regulation and the State Administration of Foreign Exchange and all provincial-level people's governments)
5. Refining the system for the financing of listed companies. We shall strengthen the coordination and balance between the financing side and the investment side in the capital market, and guide listed companies to optimize financing arrangements by taking into concurrent consideration the development needs and market conditions; refine the conditions for the refinancing issuance by listed companies, and launch after conducting research a more convenient financing mode; support listed companies to carry out long-term debt financing through the issuance of bonds or by other means; steadily develop preferred shares and share-bond integrated products; vigorously develop equity funds; enrich risk management tools; and explore the establishment of a long-term appraisal mechanism for institutional investors to attract more medium- and long-term funds into the market. (Under the responsibilities of such units as the China Securities Regulatory Commission, the Ministry of Finance, the People's Bank of China, the National Development and Reform Commission and the China Banking and Insurance Regulatory Commission)
6. Improving the incentive and restraint mechanism. We shall refine listed companies' equity incentive and employee stock ownership systems, and make more flexible arrangements in terms of object, method and pricing, etc.; and optimize the policy environment, support various listed companies to establish a sound long-term incentive mechanism, enhance the benefit sharing between workers and owners to better attract and retain talents, and fully mobilize the enthusiasm of listed companies' employees.
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