Non-listed Public Companies In The Information Disclosure System

Unlisted public companies are important participants in the financial market. There exists a sharp distinction in disclosure regime between unlisted public companies and listed companies. The disclosure regime for unlisted public companies must be designed to accord with the practical needs of OTC markets and the unique features of unlisted public companies. The disclosure regime for unlisted public companies in our country fails to reflect a clear orientation, and fails to show enough distinction compared with the disclosure regime for listed companies. It is in high demand to constitute a suitable disclosure regime for unlisted public companies while constructing the China OTC markets.This article, by using economic and comparative analysis methods, discusses how to reach a state of equilibrium between investors'protection and cost-efficiency consideration under the condition of existing information costs, in order to make the OTC markets reach their maximum market efficiency, and the disclosure regime reach its maximum regulative efficiency. Meanwhile, this article gives inspection into the framework of disclosure regime for unlisted public companies in the typical U.S. and U.K. capital markets. By comparing it with the disclosure regime of the Stock Transfer Agent System in China, the article provides several propositions on how to constitute a suitable disclosure regime for unlisted public companies.This article comprises the introduction, the text, and the conclusion.The introduction proposes the legislative issue of disclosure regime for unlisted public companies.The text consists of four chapters.Chapter one defines several relative terms in respect of unlisted public company and disclosure regime. Part one analyzes the concept of unlisted public company. The article tries to distinguish the confusing concepts of exchange and OTC markets which appear to be quite distinct. The article then discusses the nature of a public company, and argues there exist two ways by which a company can turn from private to public. On the base of that discussion, part one ends by defining the core concept of unlisted public company. Part two confines the person disclosing information subject to disclosure regime in respect of this research to unlisted public companies and discusses the Materiality standard in measuring what information in general should be disclosed. This part then divides the information disclosure into Information Disclosure in Issuance and Continuous Information Disclosure, which is the basic classification by this article while discussing the disclosure regime.Chapter two, from a law and economics perspective, analyzes the necessity and uniqueness of the disclosure regime for unlisted public companies. In accordance with the methodology of from general to particular, this chapter consists of three parts. Part one discusses the Information Asymmetry and its consequences: Adverse Selection, Moral Hazard and Market Failure. Part two, by weighing the two opposing notions of liberalism and interventionism with respect of regulating the securities markets, proposes the law's function of providing a kind of supervision mechanism. Part three points out further that, subject to the unique characteristics of OTC markets, the disclosure burden on the unlisted public companies should be lighter than that on the listed companies.Chapter three uses comparative analysis method to give inspection into the disclosure regime for unlisted public companies in the typical U.S. and U.K. OTC markets. Part one and two introduce the U.S. and U.K. OTC markets respectively and their related disclosure regime in issuance and continuous disclosure regime. Part three concludes with some important features of disclosure regime for unlisted public companies in the two countries.Chapter four reviews and rethinks the framework of the disclosure regime in our country. Part one briefly introduces the China OTC markets and their development. Part two argues that there lacks a disclosure standard for the IPO of unlisted securities and Secondary Public Offerings by unlisted public companies, then gives comments on the continuous disclosure regime of the Stock Transfer Agent System, which is the principle OTC market in China. Part three proposes several suggestions on the legislative issue of how to constitute the disclosure regime for unlisted public companies in China.The conclusion summarizes the main standpoints of this article.