A Brief Analysis Of The Legal Countermeasures Of Chinese Private Enterprises' Backdoor Listing

Back-door listing means a private corporation obtains a controlling interest of a listed corporation through buying a shell company or making a shell company,and then it pours its own business and assets into the listed corporation to achieve indirect listing.After being listed,the borrowing-shell company raises funds in the capital market based on the advantage of the listed corporation.With the constant development of Chinese economy,Chinese civilian enterprises pursue public offering in every capital market rather than just expanding the scale of their business. The Chinese securities market is still in the early stage of development. It is growing up fast but it is not mature enough. Its financing capacity is still limited. Thus,it is still difficult for Chinese civilian enterprises to directly issue their shares in Chinese securities market through initial public offering. The civilian enterprises cannot get the same financial treatment as state-owned enterprises in the indirect financing. Therefore, overseas back-door listing becomes a significant access for Chinese civilian enterprises to enter the international capital market. Overseas back-door listing has a lot of advantages,such as low cost,low risk,convenient and efficiently escaping the barriers of Initial Public Offering. It offers a new method for qualified Chinese civilian enterprises to fully use the overseas resources to accomplish raising funds in a securities market.This paper focus on the overseas back-door listing procedure of Chinese civilian enterprises. By analyzing the current problems with the Chinese system and learning from the US leading experience,author makes a proposal on how to establish a sound legal system for a Chinese civilian enterprise to successfully achieve overseas back-door listing. Related theoretical basis in the Chinese civilian enterprise’s back-door listing activity is discussed,while legal practices and statutes in U.S.A. and China are mentioned for comparison.Part I of this paper gives the reader a fundamental definition of back-door listing. Author also puts emphasis on the shell resources,and explain several kinds of essential shell company types.Part II of this paper introduces a current situation of Chinese civilian enterprises’ overseas back-door listing. The situation is divided into two types,one is the international financial background and the other is domestic financial background. According to the two different situations,the second half of this part discusses the present difficulty for a Chinese civilian enterprise to list in the Chinese securities market. These elements illustrate the reason for a Chinese civilian enterprise to take the overseas back-door listing. Author also explains the whole process of overseas back-door listing.In Part III,author offers the legal basis for a Chinese civilian enterprise to take overseas back-door listing process. Meanwhile, author addresses the problems that are caused by the back-door listing. Author illustrates the related laws and regulations for Chinese civilian enterprise to achieve the overseas back-door listing process.In Part IV,author makes a proposal to build up a complete and flexible Chinese legal security basis to regulate and develop the overseas back-door listing of Chinese civilian enterprises. Author suggests that the related laws and regulations should be improved.