Red Chips Listed Chinese Enterprises Overseas Legal Analysis

Economic globalization gradually became mainstream trend since 1990's, and more and more Chinese excellent enterprise seek for the capital market, which is the best choice for Chinese enterprises to realize the leaping development after the primitive accumulation, but due to the domestic market capacity and the number limits for enterprises, many companies attempt to go out for overseas listing. In which, the red chip with indirect listing model is the most popular way. The Red Chip Listing Model is that some shareholders of inside enterprise register some shell companies in famous financial centers, one of which M&A the domestic enterprise; at last this shell company list in the foreign Stock Exchanges. The concept of red chip was born in Hong Kong stock market, at that time the mainland was called red China by overseas media, to represent the Chinese-invested background, and their mainly business is also in the mainland. The earliest red chip listing referred to the large state-owned enterprises with governmental background listed in Hong Kong, and then this way is imitated by some small and medium-sized private enterprises, which called small red-chip company.This classification is due to the different range of the domestic legislation supervision.Whether the large state-owned enterprises or private enterprises, the red chip listing model was very active in the capital market during the last ten years, and the relevant legislation changed several times. This paper will focus on the legal relationships and the legal supervision of the Red Chip listing and provided some opinions and suggestions.There are four chapters in this paper as follows:Chapter one is the theoretical analysis of the Red Chip Listing Model. Firstly, the author distinguishes the concept between red ship listing and overseas listing, big red ship and small red ship. Then the author nalyses the reason of the formation of the Red Chip Listing Model from domestic and international level. The third part introduces the steps of red chip listing for the state-owned and private enterprises separately.Chapter two is the introduction of our legal supervisory situation of red chip listing model and the listing standards in relevant international stock markets. The domestic legal supervision is also divided into two sides to introduce state-owned enterprises and private enterprises respectively involved applicable law, the examination and approval departments, and the present legislation. In recent years, few of state-owned company chose red ship listing due to the strict approval procedures. On the other hand, the private enterprises presented a rapid development state and the related legal supervision was in up and downs. The legal supervision for private companies was divided into three periods including strict period and loose period emphatically analyzed the influence on red ship listing and then indicated our existing supervisory system.Chapter Three provides more details about the legal relationships of red ship listing model including special purpose company (SPV), round-tripping capital and M&A. Specifically, the author described the role of the special purpose company, how to control domestic rights, the legal characteristics and different ways of round-tripping capital, the payment on M&A and legal regulatory issues and so on.Chapter four provides few possible suggestions to improve our existing supervisory regulations of red chip listing model from legal observation and from marketing observation perspective.