Analysis On The Legal Issues Of Stock Cross-listing Of Foreign Companies In Domestic Territories

Today, there are estimated280securities exchanges trading stocks around theglobe. Some securities exchanges have attracted a number of oversea issuers. With thedevelopment of global economy, it is likely that, within the foreseeable future, somesecurities exchange will either consolidate or simply shut down. The cross-listingmarket is always a main part of the main market like NYSE and LSE. To keep pacewith the economic development and to join the competition of cross-listing market,China is planning to set up international board at Shanghai Stock Exchange. Thisarticle aims to analyze several issues regarding the legal system of cross listing inShanghai stock market. The main idea of each chapter is as follows:Chapter Ⅰ constitutes of two parts. The first part defines the overseas companyand its coverage. Only red chip companies and foreign companies who have businessentities and have business operation in China can be foreign issuers of internationalboard. The second part discusses the independent position of international board.Chapter Ⅱdiscusses the theory basis of the overseas listing. The first part focuseson the beginning of oversea listing and the reasons and motivation that push overseaissuers to cross listing. The second part discuss the main purpose of the legal systemregulating the cross listing. The author analyzes the core interest of participants of thecross listing activities. Then this part indicates the two approaches proposed byforeign scholars, i.e. the demand side approach and the supply side approach.International board’s legal system should aims to let the supply side achieve its coreinterest.Chapter Ⅲ discusses the regulatory competition of global cross listing market. The current regulatory mode can be divided into three categories, i.e. the low mode,the medium mode and the high mode. This chapter analyzes each mode and theregulatory choice by foreign issuers. Finally the author suggests that the internationalboard in China should choose the medium mode.Chapter Ⅳ focuses on the system for examining and verifying the issuance ofsecurities. There are two main types of this system, the registration system andexamination and authorization system. Each of the two systems has pros and cons.When it comes to the situation of Chinese market, the article suggests that currentsystem should gradually be transferred to registration system.Chapter Ⅴ discusses the modes that are available to foreign issuers to issue stocks,including IPO in Shanghai market and issue CDR and cross board ETF. The first partof this chapter analyzes the possible legal issues concerning IPO mode, including theconflict of law in the field of corporate governance, information disclosure andaccounting standards. The current securities law and corporation law of China are notbarriers to open international market. However, the detailed rules should be modifiedto regulate the foreign issuers. Part two discusses the indirect mode, the ETF andCDR. This part analyzes the pros and cons. The author suggests that at the beginningof open international board, China should combine the IPO mode and indirect modetogether.