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Peggy Sito

China has issued a new set of guidelines on corporate governance to improve the quality of listed companies.

The guidelines, published by the China Securities Regulatory Commission (CSRC) and the State Economic and Trade Commission, prohibit controlling shareholders from intervening in the operations and decision-making of listed companies.

'Controlling shareholders are not allowed to directly or indirectly intervene in listed companies' policy-making and production operations,' the CSRC said in an announcement on its Web site.

They are also not allowed to intervene in the companies' finance and accounting exercises.

The guidelines were promulgated following last year's public consultation for the draft version.

They come after a series of tightened requirements made by the regulators in the past year in a bid to help promote sound operations of listed companies and ensure fair treatment of minority shareholders and foreign investors.

Of the more than 1,100 companies listed on the Shenzhen and Shanghai exchanges, more than 40 per cent of their shares on average are estimated to be held by their largest shareholder.

Last year, the market watchdog tightened reporting rules, requiring listed companies to make quarterly financial reports from this year.

It also required listed companies to impose a system of independent directors and issued provisional rules requiring businesses applying for A-share initial public offerings after April 1 to have their annual reports and interim results audited by international accounting firms.

Controlling shareholders were not allowed to take advantage of asset-restructuring to damage the interests of the companies and their shareholders, the regulators said.

If minority shareholders' interests were damaged over directors' failure to disclose enough information or because they breached rules, they could take legal action against the directors and related parties and seek compensation.

The CSRC said the new guidelines were the main agenda to protect shareholders' interests.

'The guidelines are the major barometer to gauge listed companies' corporate governance standards,' the announcement said.

Companies with poor corporate governance standards would be required to improve, according to the guidelines.

To protect minority shareholders' interests, the guidelines also banned listed companies from providing guarantees for shareholders and their associates in any transactions between the two.



Guidelines aim to keep tabs on controlling shareholders