Legal outline to smooth way for listings

CHINA'S State Commission for Restructuring the Economy will issue a legal document within two months outlining how the mainland's nine listing hopefuls will comply with Hongkong company regulations.

Commission director Sun Shiyi said yesterday in Beijing the document aimed to protect shareholders' interests and could be applied to future mainland companies when listing in Hongkong.

''We're formulating the document jointly with the Hongkong stock exchange and related regulatory bodies in Hongkong,'' he said of the supplement to regulations governing the formation and management of stock-holding companies which was first issued in May last year.

But he fell short of specifying details of the latest guidelines.

The completely different sets of company regulations in China and Hongkong have posed problems for mainland listing candidates on the exchange.

At present, Hongkong companies are governed by the Companies Ordinance and the Memorandum of Articles of Association. But these do not apply to mainland firms.

The soon-to-be-issued guidelines are expected to spell out the legal entities of the nine, outlining how they will comply with the Hongkong regulations when seeking listings in the territory.

This in turn paves the way for the formulation of a standard practice note for mainland companies when applying in the future for listing in Hongkong.

Mr Sun said: ''The introduction of a stock-holding structure to companies is as new as the introduction of national market systems to China. Both take time and effort to formulate.'' ''With so many jobs on the list while developing these new frameworks, roles of different securities regulatory bodies are also in the process of being identified,'' he said.

But the newly-created Securities Committee and the Securities Supervision and Administration Committee, working with the State Commission for Restructuring the Economy, would shape a complete framework for China's securities industry, he said.

Exchange listing deputy head Kenneth Koo said the latest document was expected to be issued in a month or two and was one of a number of things that the exchange and the mainland regulatory bodies were working on.

''We fully expect to be able to put forward this framework with an aim to take into account the interests of shareholders, in spite of the technical difficulties associated with it,'' he said.

He would not specify details of the joint effort, though he said it would help bridge the gaps between regulations governing mainland enterprises and Hongkong companies.

Mr Edward Cheung Wing-yui, partner at Woo, Kwan, Lee & Lo, said a major problem facing the nine mainland enterprises when applying to list in Hongkong was the lack of companies laws and the concept of directors' responsibility towards shareholders.

But he said the most practical solution, as suggested by the stock exchange, would be to incorporate the existing rules of Hongkong into mainland firms' articles of associations as much as practicable.

Disputes between shareholders and between shareholders and mainland companies are sometimes difficult to resolve because of the lack of company laws.