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Conflict Of Laws In Cross-board Issuance And Listing Of Red-chip Companies Under Registration System

Posted on:2022-07-01Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y HeFull Text:PDF
GTID:1486306725468344Subject:International law
Abstract/Summary:PDF Full Text Request
There are two models for a PRC company seeking oversea listing,one is direct listing,the other is indirect listing.The direct listing model is the way that a PRC registered company as the listing company directly offering its shares and listing on the oversea securities exchange.Red-chip listing is an indirect listing model,under which a foreign-registered company who controls domestic assets offering its shares and listing on the oversea securities exchange.Under the direct listing model,since the issuers are PRC companies,in addition to meeting the laws and regulations from oversea securities exchanges and securities regulatory agencies,it also needs to comply with the requirements of Chinese laws and regulations under the principle of personal jurisdiction.The Red-chip listing,commonly known as the indirect overseas listing of PRC companies,its core lies in the realization of listing with an overseas registered entity who controls the domestic registered company,thereby achieving the indirect listing of the domestic registered company.Prior to the implementation of the registration system,the PRC domestic capital market tended to encourage mature companies to go public and rejected companies that were still in the start-up phase.In comparison,the listing of red chips on overseas exchanges such as the United States and Hong Kong has become the choice of many companies.The listing locations as mature capital markets are mainly U.S.and Hong Kong,while the red-chip companies are registered preliminary in offshore islands such as Cayman Islands,Bermuda.Red-chip listing,as a cross-border stock issuance and listing act with Chinese characteristics,its sources of law includes laws in cross-border stock issuance and listing,such as the domestic laws of the country or region where the listing takes place,the personal laws of the company,and the international laws or “soft laws” in investment,cross-border supervision,etc.Furthermore,it also includes Chinese domestic laws in securities,foreign investment,foreign exchange,etc.,as well as those foreign laws related to red-chip companies and red-chip structure.However,as the China and U.S.trade war developed into a deepen stage,in particular,the approval of Holding Foreign Companies Accountable Act by U.S.Congress in Dec.2020,may impose stricter regulation on foreign companies listed in U.S.,and may even trigger a wide range of delisting of red-chip companies.In contrast,since 2018,in the reforms of the Hong Kong market and PRC domestic A share stock market,opened widely for the red-chip companies.In Hong Kong,it firstly allow the listing of dual class share structure and the secondary listing of qualified issuer.In A share stock market,in its the register system reform in STAR market and GEM market,also allow the red-chip companies issue shares or CDRs directly.The securities laws are one of public products provided by the government to protect investors and promote capital flow for the securities market.The methods include setting conditions for securities issuance,requiring mandatory information disclosure,cracking down on insider trading and price manipulation.Generally,securities laws are regarded as public laws since it has obvious regulatory attributes.However,the legislation of the US securities laws contains a large number of private legal norms and has begun to show a trend of "privatization".The primary reason is that,apart from the administrative supervision,the securities legal relationship contain more private elements among civil and commercial subjects.Compared to the United States,Chinese securities market is government-regulated since its birth;for instance,1999 Securities Law is a typical "public law".With the rapid increase of Chinese economy,there is an increasing call for rationalizing the relationship between the government and the market.The registration system emphasize on mandatory information disclosure could balance the relationship between protecting investors and supporting national economic development.Above all,as an alternative of the approval system,the registration system reflects the tendency of ‘private law' in stock issuance and listing and turns the legal relationship between the stock exchange and the enterprise into the equal civil and commercial relations,rather than administrative relations.In the development of the extraterritorial effect of the securities law,the number of private lawsuits that protect specific private interests is greater than the public lawsuits brought by the administrative agencies on behalf of national sovereignty.Therefore,the extraterritorial effect of the securities law is much less controversial in international law.This is mainly because of the extraterritorial application of securities law contains a large number of private law in civil and commercial relations,which are not restricted by international law.Under such background,the legal relationship of red-chip companies returning back to listing on A stock market has been clarified.The most important listing way is the direct listing of the foreign company in A stock market.However,its complexity of legal relationship and multi-jurisdiction caused problems of conflict in laws,in particular in the field of company laws and securities law.Such conflict in laws,is not only the traditional private law conflict,but also the conflict between public law and private law,or public law inter alien.The essential of the conflict of law in one red-chip company's qualification to issue and list,is the problem of which law(the law of its registered place,listing place,principal place of business,or its domicile)shall apply to its civil right to issuing securities.The key to solve this problem is to confirm the red-chip company's law of personality(lex personalis)and its nationality.As in the case of the red-chip company returning to A share stock market,the most important connecting factor of red-chip company's lex personalis is its nationality.Currently,the registered place is the main consideration to define one legal person's nationality,however,each countries have different standards in different substantial laws.If using the standard of principal place of business to define red-chip companies' nationality,it may result in confirming their Chinese nationality.Issuing CDRs by red-chip companies is also an important way to listing in A share stock market.However,depository receipt is still a new legal concept in PRC,and due to the legal system tradition,problems may occur in defining rights and obligations of depository receipts deriving from concepts or principals trust law.In addition,under current PRC CDRs regulations,it is a mandatory rule to apply Chinese law and Chinese jurisdiction.However,since the intermediary holding of securities is not a primarily way in PRC,it lacks substantial law to regulate depository receipts.It is wise to reference the PRIMA principal under Hugo Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Inter-mediary,tough of which PRC is not a contracting country yet.Under PRIMA principal,the applicable law is the law in the place where depository bank locate as the first inter-mediary institution to the investor.This may endow autonomy of will to the investor at some extent,as well as enhance the predictable of the law application.Furthermore,PRIMA principal may multiple the applicable laws in purpose of protect investor while remain keep its jurisdiction under Chinese courts.Another important conflict of laws is about the corporate governance and investor protection.Since securities law is the sister law of company law,the legislative model of securities law on corporate governance and investor protection can hardly divert from of which the company law.However,red-chip companies are registered mostly in common law community,of which company laws are typical common law,while PRC company law are more similar to civil law system,to which of Germany and Japan in particular.It is the reason causing the conflict in the corporate governance and investor protection.Further more,even the listing location such as US and HK,and the registering location such as Cayman Islands and Bermuda of red-chip companies are traditionally common law system,there are still differences among legislation on corporate governance and investor protection.Such differences exist in both company laws and securities laws on matters like dual-class share structure,distribution of profits,shareholder's right to be informed,the organizational structure of corporate,right and power of shareholder's meeting and board of directors,rules of convening and procedure,proposal and voting right and rights for dissent shareholders.In solving the problems of the conflict of laws in the foreign issuer listing,the US approach is apply the company law of registering location on corporate governance,while applying of domestic law on certain compulsory corporate governance issues through securities law(mostly Sarbans Oxely Act).The HK approach,however,defining the corporate governance as a ‘private law' issue and its application of law is under a traditional method,lex personalis,while imposing restrictions on the registered areas of the foreign issuers,which is known as‘Recognized Jurisdictions' and ‘Acceptable Jurisdiction'.Under such mechanism,only qualified foreign issuers registered in recognized or acceptable jurisdictions are eligible to list in HK,as well as in the secondary listing rules of HK,certain qualified issuers may apply to the HK regulator for the immunity of the application of HK listing rules on corporate organizing structure,corporate governance,etc.The legal conflicts in the issuance and listing of cross-border stocks origins from acts within the jurisdiction of a country's economic sovereignty.The application of domestic laws is a concrete manifestation of the principle of a country's sovereignty.In fact,there is generally a lack of binding international uniform rules in the international financial field.Specific to the securities market,an uniform international securities market has not been formed,it is the internationalization of a country's securities market which based on domestic law,not the international securities market established based on multilateral rules of international law.However,in the context of economic globalization,the flow of capital between the world is governed merely by a domestic law,which is neither impractical nor comply with the principle of economic sovereignty.Returning to the traditional conflict law based on the "private law" attribute of the securities law still has great value.The conflict of securities laws to some extent is similar to that of contract laws or tort laws.The public interest protected by securities law to some extent is a collective concept of private interests of investors as a group under contract law and tort law,and the protection of such private interest under contract law and tort law though traditional rule of conflict law method has a long history.More importantly,Even from the perspective of interest analysis,the traditional rule of conflict law neutralizes the choice and application of law in terms of value,in fact it satisfies the requirements of predictability by capital.Therefore,returning to traditional rule of conflict law on this issue,and try to develop a new rule of conflict law suit to securities filed,such as autonomy of the parties,the separation of the application of the law and the jurisdiction of the court,to break the rule that the foreign securities law cannot be applied in domestic court,may be a solution to this issue.In particular,under circumstances that lack of international law make it difficult to coordinate cross-border securities law conflicts,the concept of conflict law is used to solve this problem from the theoretical and practical perspective.The new conflict laws such as the economic conflict law formed by the development of traditional conflict laws have also made it possible to coordinate these conflicts.
Keywords/Search Tags:Red-chip Companies Return Domestic Capital Market, Cross-board Offering and Listing, Extraterritorial Effect of Public Laws, Personal Law of Red-chip Companies, Economic Conflict Law
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