On The Legal System Of Supervision On Stocks Issuing And Listing Of Foreign Enterprises In Domestic Territories

Economic financialization and finance globalization phenomena have greatly improved the fast development of many countries'securities markets'internationalization. In the fierce international competition, China should speed up the development of domestic securities markets'internationalization aimed at pursing international financial power and improving capital market's international competition abilities. Just under this circumstance, ShangHai Stock Exchange decided to attract foreign enterprises to issue and list stocks in domestic capital markets, and has been actively preparing an"International Board"for foreign stocks'trading, which, to a great extent, will increase the international extent of China's securities markets, and is a great measure to realize the financial strategy of China's securities markets'internationalization, and is the great method for domestic exchanges to pursue international developments and increase international competition abilities, and meanwhile, is a key step for the establishment of China's international finance centre.Stocks issuing and listing of foreign enterprises in domestic will play great influences on the stockholder's rights of domestic investors, the domestic financial security, and the economic order. Not only do those cross-border stocks financing conducts need special supervision rules, but also will trigger many law conflicts between China's related legal institutions and foreign countries related ones. The dissertation is aimed at researching on the supervision rules establishment and the handling of conflicts of law and providing corresponding rule advices in China's securities financing market's opening. The whole dissertation is comprised of six chapters, and the main details of each chapter are as follows: Chapter One: the supervision theoretical base of stocks issuing and listing of foreign enterprises in domestic territoriesThe conducts of cross-border stocks issuing and listing implemented by enterprises are outcomes resulted from multi-targets. Except the sheer intention of financing, improving the liquidity of securities'trading, expanding stockholders'base, pursuing"Higher Reputation"of higher regulated exchanges, accepting"Self-Constraints"from higher regulated exchanges, and raising the popularities of enterprises and their products (or services) all can be the true intention to drive enterprises to issue and list their stocks in foreign territories.Because of the objective existing of"the border", the host country's investors are always under worse circumstances than foreign enterprise's mother country's investors be when it comes to the ability to get the information of foreign enterprises. And the cross-border stocks financing will lead to such alienation phenomenon as the further disperse of foreign enterprise's shareholders base, the accelerated concentration of management rights, and the gradual rise of trust- agency costs etc. Information serious asymmetry and the alienation of trust- agency relationship are the theoretical bases for the host countries to place supervision on the cross-border securities financing conducts.In supervisions on cross-border stocks issuing and listing, protecting benefits of the host country's investors and controlling financing costs of foreign enterprises are a pair of supervision targets that are either contradictive each other or tightly related. The former will influence the order of securities market and the state finance security in host country, and the latter refers to vigorous and lasting attractive power of securities market of host country. The supervising experiences and the market establishing condition of overseas securities markets show that paying undue attentions to benefit protection of investors will alleviate the international attractive power of host country's securities market, and paying due attentions to financing costs of foreign enterprises is the important source to maintain the vigorous of host country's securities market. Therefore, in supervisions of cross-border securities financing, Chinese securities supervising organizations should insist on the integrity of security and efficiency targets, and should always insist on the principal of moderate supervision in supervision fields, supervision method, and supervision extent, for a target to maintain a balance between protecting benefits of the host country's investors and controlling financing costs of foreign enterprises.Chapter Two: the legal system of supervision on stocks issuing of foreign enterprises in domestic territoriesSome people in theory and practice conceived that: part rules of China's present"Corporation Act"and"Securities Act"have set up legal obstacles for stocks issuing and listing of foreign enterprises in domestic territories. However, through an analysis in details on respective legal function of"Corporation Act"and"Securities Act", literary relationship of related rules, and contents of some rules, we can come a conclusion that there is no legal obstacle for stocks issuing and listing of foreign enterprises in domestic territories.At present, the financing cost gap between domestic enterprises and foreign enterprises in host country's securities market that originated from the difference of countries'legal institutions will baits domestic enterprises to change their nationalities, and then return to their own countries to finance for those financing favorites intended for foreign enterprises, which derivates from the host country's supervising target, and confuses the effect of information disclosure. Therefore, foreign enterprises should be rationally defined. Red Chip Enterprises in fact belong to domestic ones. In the legislation process to supervise cross-border financing, China should learn lessons from what U.S. securities laws define foreign enterprises and consider features of Red Chip Enterprises, and apply the synthetic standard that composed of"shares ratio substantial control","overall assets nationality","operating centre domicile", and"the place of major business profit"to define foreign enterprises.There are tow different supervision legislation models for supervision on cross-border stocks issuing in Taiwan area and the U.S.A, the former applying the unidirectional supervision legislation model, and the latter the bidirectional supervision legislation model. At the lower stage of China's securities market's internationalization extent, when it comes to the supervision on the cross-border securities issuing conducts, China should not adapt the bidirectional supervision legislation model of the U.S., and should adapt the unidirectional supervision legislation model of Taiwan area.The register system and the approval system in securities issuing audit in worldwide respectively has its'own advantages and disadvantages. There are many factors to influence the selection between the discrete supervision model and the uniform supervision model that related to securities issuing and listing. The current securities issuing audit system of China is too strict for foreign enterprises, which is difficulty for the open of domestic financing markets. Thus, China should learn from the supervision experiences of overseas matured capital markets, and take some corresponding innovations on the securities issuing audit system and the supervision model that related to securities issuing and listing for stocks issuing and listing of foreign enterprises in domestic territories.Chapter Three: the legal system of supervision on stocks listing of foreign enterprises in domestic territoriesAt present, in the supervision on the listing of cross-border securities, the overseas securities exchanges have mainly adapted such three supervision rules establishing forms as"listing standards focus model","continuous listing requirements focus model", and"compound model"etc. Securities issuing supervision system of a country and the country's different supervision attitude toward foreign issuers have placed great influence on the securities exchange's rules establishing forms. According to the actual situation of China's securities markets, the domestic securities exchanges should adapt the dual focus model of rules establishing that comprised of"listing standards focus model"and"continuous listing requirements focus model". In the mean time, when it comes to the listing supervision of cross-border securities, the overseas matured capital markets have mainly adapted such two different supervision methods as"Higher Entry Thresholds, Lighter Obligations", and"Lower Entry Thresholds, Heaver Obligations"etc. Two supervision methods respectively have their own advantages and disadvantages. The former is more suitable to the listing supervision of main board, and the latter is more appropriate for GEM board. When China's securities markets are open to foreign countries, the domestic securities exchanges can adapt different listing supervision methods for cross-border securities considering the actual development situation of securities markets and securities trading board.Such factors as the development situation of territorial economic, the qualities of host countries'investors, the internationalization extent and the supervision quality of host countries'securities markets, and the competition concept of securities exchange will play great influences on the listing supervision on cross-border stocks. From the views of supervision practices of overseas capital markets, AIM of London Stock Exchange, New York Stock Exchange, the Neuer Market of Deutsche B?rse Group, and the Novo Mercado Market of the Sao Paulo Stock Exchange has respectively represented such three different supervision extent of cross-border stocks'listing as"lower supervision","middle supervision", and"higher supervision". The success and the fail of those three different supervision extents all have their own courses. In the listing requirements of cross-border stocks, the lowest number of public holding shares and the lowest number of public stockholders generally comprise of shares issuing terms of cross-border stocks listing, and profit requirement, market capitalization requirement, cash flow requirement, and assets requirement generally independently or synthetic comprise of financial terms of cross-border stocks listing. On the other hand, overseas matured capital markets usually require the pre-listing term for cross-border stocks listing. When it comes to the open of domestic financing markets, considering the actual situation of China's securities markets, the domestic exchanges should fully learn from corresponding supervision experiences of overseas matured capital markets, and lay down scientific and rational listing supervision extent and listing access terms for stocks listing of foreign enterprises in domestic territories.Such factors as the pluralism of overseas listing resources, the rational distribution of securities supervision resources, and the elevation of internationalization competition ability of host countries'securities markets all drive the host countries'securities exchanges to make differentiation supervision on the listing of cross-border securities. Overseas securities exchanges make differentiation supervision on cross-border securities depending on such standards as the place of incorporation (or registering) of enterprises, the primary listing and the secondary listing, and the quality of the place of the primary listing. The differentiation supervision on the listing of cross-border stocks of domestic exchanges should have hierarchy, and domestic exchanges should establish corresponding evaluating system, which will be convenient for the implement of China's differentiation supervision measures.In information disclosure supervision on cross-border stocks financing, the U.S. has established in details the registering forms of securities issuing and the form system of continuous information disclosure. Furthermore, the information disclosure supervision on cross-border stocks financing in U.S. has in content paid more attentions to non-business and non-financial information of foreign enterprises, which, to a certain extent, has ridded the tide of the information disclosure supervision on cross-border stocks financing. China's supervision rules on information disclosure for foreign enterprises should also learn and absorb the good experiences from the information disclosure supervision in the U.S.Chapter Four: the conflicts of laws from stocks issuing and listing of foreign enterprises in domestic territoriesThe conflicts of laws from cross-border stocks'issuing and listing cradles from the conflict between"the personality laws"and"the territorial laws"of foreign issuers which will happened when the mother country of foreign issuers insist on nationality jurisdiction principle, whereas the host country persist in territory jurisdiction principle. There is a great difference between the conflict of laws from cross-border securities financing conducts and the conflict of laws in international private law. The former mainly refers to the conflict of laws effect, and mainly refers to accommodations of laws, generally should be resolved through the host countries'exemption or the co-operation between the conflicting party countries. However, the latter mainly refers to the conflict of laws'application, mainly refers to the problem of laws'choice, and generally should be resolved through conflict rules or universe substantial rules. According to different standards, the conflict of laws from cross-border securities financing conducts can be fallen to different categories, generally speaking, the conflict of laws from cross-border securities financing conducts can be classified in details into conflict of organization laws and conflict of conduct laws, reconcilable laws conflict and irreconcilable laws conflict, laws conflict and the facts conflict related to laws.At present, overseas matured capital markets resolve the conflicts of laws from supervision on cross-border stocks financing trough such two accommodation methods as"super-national treatment"and"exemption". However, there is no answer now to reply to the question whether the application of those accommodation methods, when it comes to the application target, is to resolve conflict of laws or to cultivate the international competition ability for host countries'securities markets. And the application of those accommodation methods, to a certain extent, when it comes to the legal effect, will initiate"the excluding effect"for domestic enterprises'financing in host countries. And most important is that, the application of those accommodation methods, to a great extent, will ignore the rights of domestic investors in host countries. Therefore, such two accommodation methods as"super-national treatment"and"exemption"have usually experienced disputes in host countries. And meanwhile, when an accommodation method made up by host countries is unduly favorable for foreign issuers and exceeds the bearing scope of the mother country of foreign issuers, the application of the accommodation method should consider the interests of the mother country, and keep due respects on the laws of the mother country, otherwise, the mother country will be placed under a dilemma and passive conditions. In international supervision practices, the accommodation methods of conflict of laws are rarely directly applied, generally, the accommodation methods of conflict of laws are applied to foreign issuers after host countries are satisfied with some legal effects with some terms. During the long period of supervision practicing, overseas matured capital markets have, in the application of accommodation methods, formed such applying principles as substantial effect principal, concession principal with some terms, and the principal of respecting facts and traditions. The application of those applying principles will play directing and regulating effect on the implement of accommodation methods of legal conflicts.In handling the legal conflicts of corporation governance in cross-border stocks issuing and listing, many countries have tried through any ways to legally apply their local corporation governance rules or standards to foreign enterprises. In this field, the ways of Hong Kong area and the U.S. have typical representative ness. The HKEx strictly confines the places of registering or establishing of foreign issuers to such internationally famous offshore places of corporation registering or establishing that applying Common Law System as Bermuda Islands, Cayman Islands, and Cook Islands. Through the restriction on the places of registering or establishing, the HKEx has arrived at following targets: firstly, all foreign issuers can be successfully transferred to apply the corporation governance standards of Common Law System; secondly, corporations'registering cost in offshore places of corporation registering or establishing is so low that foreign issuers can get a new legal status from those places at least cost. Through the restriction on the places of registering or establishing, the HKEx has successfully applied the local corporation governance standards to foreign issuers. When applying the local corporation governance standards to foreign issuers, the U.S. creatively makes the securities laws, instead of corporation laws, to regulate and adjust corporations'internal affairs, which actively allows the action laws to"rationally infringe on"the traditional territory that regulated formerly by the organization laws through bringing the social and economic relationship that regulated formerly by the organization laws into the action laws, and makes the action laws that featured by applying territorial laws and included rules aimed at regulating organization affairs can be perfectly justifiable to be applied to foreign issuers. Therefore, the U.S. applies the local corporation governance standards to foreign issuers by the way of being in replace of corporation laws with securities laws. At present, China isn't objectively fully satisfied with the terms that the HKEx's way to apply local corporation governance standards to foreign issuers. On the contrary, the U.S. way has its'own full jurisdiction evidence, and also fit China's legislation habitations. Thus, China may use the U.S. way of securities laws replacement for reference when resolving laws conflict of corporation governance.Because of the phenomena of"serious information asymmetry"in cross-border securities financing, when supervising the information disclosure conducts of foreign issuers, the host countries should pay more attentions to"fairness supervision"except the general"truth supervision","accuracy supervision", and"completeness supervision". In handling the legal conflicts of information disclosure in cross-border stocks issuing and listing, overseas matured capital markets usually make supervisions on the content and the quality of information disclosure of foreign enterprises in host countries through such principles as"prefer for more not prefer for less, prefer for stricter not prefer for loser","associated information disclosure","differentiation information disclosure", and"host countries mandatory disclosure"etc. And when it comes to the time, the information disclosure of foreign enterprises in host countries will be paid more attentions to synchronism and timeliness. The convenient ness will be played emphasis on the forms of information disclosure. The locality will be emphasized on the language of information disclosure. International Accounting Standards is a universe accounting application standards that established by international community to resolve the difference between every country's accounting standard. At present, IAS has got a wide acceptance in worldwide. However, the history of attitude of the U.S. toward to IAS fully indicates that, competition of securities market is always the true course that decides whether or not the U.S. will accept IAS. And now, every country or area has formed such two models as the single application model and the selection application model for foreign enterprises to apply accounting standards in host countries, both models have their own advantages and disadvantages. The rights and duties of stockholders are belonged to the internal affairs of the corporations, according to traditional international private laws, which should apply the personality laws of foreign issuers. However, the application method of laws will incite the difference of stockholders'rights in the internal domain of host countries'investors. Most important is that, host countries'investors must pay attentions to the rules made by the mother country of foreign issuers that related to stockholders'rights, which, to a certain extent, will raise the investing cost of host countries'investors. Therefore, in the supervision on cross-border securities financing, the laws of the mother country should not completely be applied to the rights of host countries'investors; on the contrary, host countries should make sure that a certain parts of local laws and rules related to stockholders'rights will be applied to the local investors. And meanwhile, the chapter conceived that, if foreign issuers issuing common shares in host countries, the stockholders'rights of host countries are identical with ones of the mother country and other countries. The equity principle of shareholders can be applied to the investors of the same issuer in different countries on international level, which has set up a theoretical obstacle for host countries applying corresponding laws or standards that related to stockholders'rights to local investors who invested to the securities of foreign issuers. However, the equity principle of shareholders does not prohibit any unfair treatments between all stockholders. If the stockholders of foreign issuers in the mother country or other countries have made an unanimous or majority agreement in corporation by-laws that allow the exist of difference between their own stockholders'rights and the ones of host countries'investors, then the breakthrough of laws and rules of host countries to the equity principle of shareholders is also rational and effective. Thus, in resolving the laws'conflict of stockholders'rights of cross-border securities financing, when the domestic securities markets open to foreign countries, drawing lessons from the HKEx, China may require foreign issuers make corresponding amends in corporation by-laws to include some parts of local laws that related to stockholders'rights into the corporation by-laws, which will make sure that the local investors of foreign issuers fully enjoy the protection level of stockholders'rights mandated by China's laws.Chapter Five: Institution path choice of the supervision on stocks issuing and listing of foreign enterprises in domestic territoriesTo lasting raise the protection level of China's stockholders'rights is a fundamental path to safeguard the interests of local investors in supervision on cross-border stocks financing. At present, the protection level of stockholders'rights in China is comparative low, the domestic legislation department should further raise the protection level of stockholders'rights through the amendments of"Corporation Act","Securities Act", and"Civil Litigation Act", and then the rights of local investors will get better protection in supervision on cross-border stocks financing."Incomplete law theory"conceived that, incomplete law will reserve leaving legislating power and leaving executing power for the law's modification, explanation, and execution. Only if those leaving legislating power and leaving executing power can be rationally distributed between relating organizations, the incomplete law, in applying effect, will in fact regulate and adjust the social and economic relationship more rationally and more precisely. Thus, in practices, the legislators sometimes intentionally establish laws with somewhat incompleteness, and usually will draw up some wide and open rules rather than detail rules. In supervision on the cross-border stocks issuing and listing, due to the different original places that foreign enterprises come from, the mother countries of foreign enterprises have different rules about the corporation governance, the protection level of stockholder's rights, the standards of securities issuing and listing, which usually makes host countries difficult to take an"one size for all"supervision rules for all foreign enterprises. Therefore, the supervision rules for cross-border stocks issuing and listing should be kept somewhat elastic, which will keep a flexible supervision method for different foreign enterprises. In practices, China's legislation department and securities supervising organization can establish elastic supervision rules for cross-border stocks financing through such methods as"generalization legislation","empowering legislation"and"agreement relationship constraint".For the purpose of getting effective supervision on cross-border stocks issuing and listing in domestic territories, the legislating department and the securities supervising organization should establish many legal rules whose legal effect is coherent and with different simple and complicate extent to regulate such cross-border stocks financing conducts through such rule making levels as laws, administrative regulations, departmental rules, and the listing rules of domestic exchanges.The open of China's financing markets to foreign countries should have corresponding hierarchy. After the open of China's main board to foreign enterprises, China's growth enterprises markets should open to worldwide in time, just which will continuous keep the international competition abilities of China's securities markets. When some terms come matured, China may in time establish"mutual recognition system"in supervision on cross-border stocks financing with Hong Kong area, Taiwan area, Japan, and Korea, for the purpose of alleviating the cross-border financing costs of enterprises of those countries or areas, and further improving free flow of international capitals in regional.