A Research On Legal Issues Of Non-listed Public Corporations

This article anatomized the basic principle and system of non-listed publiccompanies, from the aspect of the comparison method and economic analysis.Trying to discover the pros and cons of the different regulatory path of securities andcapital market regulations in different countries, and review the supervisionregulations of the current regulatory rules of non-listed public companies, and putforward a sound and reform programs. This article is divided into five chapters,except the introduction and conclusion, the main contents are as follows:The first chapter,” The Basic Principle of Non-listed Public Corporations”.This chapter begins with reason of legislating of non-listed public corporation, andanalyze the logic shortcoming of capital market regulating and securities supervision,and try to elaborate system value of non-listed public corporation; Secondly, beginswith commenting Section2of “Supervision and Management Regulation ofNon-listed Public Corporations”, compares the different systems of publiccorporations in Anglo-American and civil law countries, explore the system areas ofnon-listed public corporations; Finally, as we had explored the system areas ofnon-listed public corporations, this chapter tries to explore what regulatoryphilosophy should non-listed public corporations apply. This chapter attempts toexpress such a view: logical bias and the absence of the basic systems of publiccorporation has hindered procedures of establishing multi-level capital market of ourcountry.“Supervision and Management Regulation of Non-listed PublicCorporations” established public corporation system in our country，played animportant role in promoting securities regulation revolution as well as small andmedium enterprises development. Non-listed public corporations should applydifferent regulatory rules in accordance with their different capital demands.The second chapter,“Corporate Governance of Non-listed Public Corporations”.This article is divided into five section which includes,“the governance structure”, “the entering rules”,“the election mechanism”,“the trust mechanism”, and “thedecision-making mechanism”. This chapter attempts to elaborate on such a view:non-listed public corporation is provided with the features of both closely heldcorporation and public corporation, which makes it has a different economicstructure from either closely held corporation or public corporation. The uniqu eeconomic structure deices that it must follow a governance path of corporateautonomy-based, and taking the external capital market operating rules into account.Therefore, referring to “Corporate Governance Guidelines of Listed Corporations”,regulators should deregulate requirements, expand the limits of the autonomy of theArticles of Association of the Corporation, absorb the system of cumulative votingand independent director, in the process of drawing up the follow-up regulations,such as "Prospectus Directive of Non-listed Public Corporation","GovernanceGuidelines of Non-listed Public Corporation".The third chapter,“Financing Rules of Non-listed Public Corporations”. Thefinancing is one of the most important features of non-listed public corporation, aswell as an important way in solving the funding difficulty of SME and meetinginvestment needs of sophisticated investors. This chapter follows a main thought ofaccess, run, and exit, and respectively discusses issues of non-listed publiccorporation financing rules, such as "investors access rules","special rules ofnon-public offering” and “resale rules”. For investors access rules, the core problemis that the establishment of the system of qualified investors. Chinese securitiesregulation system has taken the opinion that takes the assets and the size of thetransaction as the basic standard of distinguishing qualified investors can’t achievereasonable to distinguish between the role of investor sophistication. China shouldlearn from foreign experience, takes the introduction of qualitative plus quantitativecriteria, and cancel the number restrictions in distinguishing non-public offering. Forthe special rules of non-public offering, the existing sections of “Supervision andManagement Regulation of Non-listed Public Corporations” reflects the concern ofthe legislators on the special financing needs of the non-listed public corporations, but still need to further intensify reform: the limit of IPO percent should be abolished,the approval valid should be extended in shelf offering system; small issueexemption system should change the standard from “net assets ratio” to “specificamount”, and ease the limitation of the conditions for exemption; secondardistribution system should be absorbed. For resale rules, the key point lies inbalancing the circulation needs of stock and the regulatory demand of OTC. Thisarticle advocates referring to the experience of the United States to establish theresale rules in China. The follow-up rules should expand the associated people scope,limit the quantity and price of resale, limit the qualifications of purchasers.The forth chapter,“Exchanging Rules of Non-listed Public Corporations”.Financing and exchanging are the two basic functions of the capital market.Non-listed public corporations stock exchanging regulatory relying on the OTCmarket. In order to improve the capital market supervision system, enrich thestructure and layout of multi-level capital market, we must accelerate the expansionof China’s OTC market with the integration process. Expansion and integration ofthe OTC market is mainly reflected in several aspects: expansion of market capacitywith directed transactions, sporadic transactions into OTC market; adoption ofmixed-maker system; establishment of stock depository institutions, reduction ofstock registration custody threshold.The fifth chapter,“Board Transfer Rules of Non-listed Public Corporations”.Board transfer rules works as the exiting mechanism of non-listed publiccorporations. There are two ways of exiting of non-listed public corporation: listing,which means enter into a high-level capital market; delisting, which means take backto non-listed non-public corporations. At present, China’s securities regulatorysystem, lacks "bottom-up" Transfer Rules. We believe that China should establishdual-channel Transfer Rules that confirms a principle of “voluntary lift-slab,mandatory drop plate”. The rules should includes two important part: on the onehand, to simplify listing process of non-listed public corporations; on the other hand,refer to Delisting Rules and Relisting Rules of the main board, easing the appropriate criteria, establishing Non-listed Public Corporations Delisting Rules, Non-listedPublic Corporations Delisting Finishing Rules, and Non-listed Public CorporationsRelisting Rules.