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Peggy Sito

The China Securities Regulatory Commission (CSRC) will announce soon guidelines for corporate governance of listed companies.

The guidelines had been drafted and the formal regulations would be promulgated once the public consultation ended, said Tong Daochi, vice-director of the regulation department on listed companies under the CSRC.

He did not say when the consultation period would end.

The guidelines were aimed at improving the quality of companies and discouraging malpractice by industry players, according to a report in China's Securities Times.

They will be directed at listed companies and listing candidates.

Mr Tong said the main agenda was to protect shareholder interests.

The CSRC wanted to make sure minority shareholder and foreign investors were treated fairly. Mr Tong said that if minority shareholder interests were damaged by directors failing to disclose enough information, they would be able to take legal action against directors and related parties and seek compensation.

China has been trying to improve the quality of information available to investors and to strengthen the regulatory mechanism in a market plagued by abuse.

The Shanghai and Shenzhen stock exchanges this week ordered listed companies to issue warnings to investors if they expected substantial falls in earnings.

Mr Tong said improving the structure of boards of directors by introducing independent directors, establishing decision-making systems and enhancing transparency were vital in upgrading corporate-governance standards.

China's domestic share markets had failed to establish a high level of corporate governance partly because of a lack of separation between ownership and management in firms, according to the Securities Times.

Most of the companies were controlled by 'internal people', the newspaper said.

Of the 1,104 companies listed on the Shenzhen and Shanghai exchanges, 44.86 per cent of their shares, on average, were controlled by their largest shareholder.

The three biggest shareholders, on average, owned almost 60 per cent of shareholding, according to the Securities Times.

Mr Tong said that while the CSRC would not get involved in companies' decision-making procedures, it would upgrade corporate governance by tightening regulations.

As of May, mainland-listed companies had raised more than 730 billion yuan (about HK$684 billion) through new share issues.

Of this, 320 billion yuan was raised from the issue of A shares, 32 billion yuan from B shares and 14.02 billion yuan from H shares and N shares.

The remainder was raised through share placements.



Tougher governance stance on horizon