Report On IPO Related Transactions Legal Issues

Related transactions is the inevitable product of capital market development. InChina, the related transactions is widespread in the business activities of IPOcompanies. Fair related transactions can reduce transaction costs, optimize resourceallocation and maximize profits. Unfair transactions, however, will bring thecontinuing risk of listed companies’ financial ability and erosion the minorityshareholders, investors and other subjects of interest, which not only affacts theconfidence of investors, but hinders the healthy development of China’s securitiesmarket.The unfair transactions massively exist in market because of low violation cost,lax oversight of the regulatory authorities, investors poor awareness of right and so on.Typical forms are related funds used, the reorganization of assets, associated purchaseand sale, and associated guarantees as well as more hidden related transactions, and soon.The event of unfair related transactions will cause a huge adverse impact to thelisted companies. By perfecting the law system and the information disclosure system,strengthening the supervision of stock exchanges and establishing a sound moderncorporate management structure, the unfair related transactions will be effectivelycontrolled.