Research Of The Legal Issues On Overseas Backdoor Listing Of Chinese Companies

As a model of domestic companies indirectly overseas listing, backdoor listing refers to that a domestic company acquires a listed company overseas, and then the listed company buys the domestic company in return to move the domestic assets into the listed company overseas, in other words, into the shell company. By overseas backdoor listing, the domestic company can achieve the purpose of financing.In China, more than one hundred famous companies is listed overseas by this way so far from red-chip listing in the late1980s.By overseas backdoor listing, it is not only help companies to get financing and a broader space for development, but also to promote the companies’international image. Although it is convenient for companies by overseas backdoor listing, it also leads to a series of legal issues because it sacrifices domestic legal supervision.For examples, capital flight caused by related party transactions; return investment caused by the ongoing of " Fraud Foreign Capital" as well as massive accounting scandals caused by dishonest information disclosure.Therefore, the writer tries to research and analysis on the advantages and disadvantages of overseas backdoor listing from a legal perspective, and offers proposals of how to improve the current status of legal supervision.In the first chapter, the writer puts forward related concepts of overseas listing and compares backdoor listing with IPO, which comes the object of this paper is that backdoor listing is the main model of indirectly overseas listing. Legal motivation of overseas backdoor Listing is emphasized by analyzing legal requirements, procedures and supervision of domestic or overseas listing.In the second chapter, the writer focuses on the basic issues of overseas backdoor listing:shell resources of backdoor, cost and benefit of shell resources and how to acquire control power of domestic enterprise. Take Gome’s backdoor listing in Hong Kong for instance, it provides detailed description of the steps of backdoor listing and in combination with the vivid frame graph.The third part is to do an in depth analysis of the legal problems caused by overseas backdoor listing in three disadvantages. They are related party transactions, fraud foreign capital and dishonest information disclosure.Chapter IV of this paper firstly discusses the basic theory and the necessity of Chinese government’s legal supervision on overseas backdoor listing. It states and evaluates the status of Chinese policies towards overseas backdoor listing in three different stages, followed by analysis on the three key areas of legal supervision on overseas backdoor listing. They are the establishment of offshore companies, reverse takeover and the entry and exit of capital.This paper relates systematically and makes a comprehensive analysis of current situation on Chinese companies’overseas backdoor listing, and reveals the essential of overseas backdoor listing, finally finds the problems of legal supervision on it. Based on this, in Chapter five the writer comes up with suggestions or countermeasures of legal supervision on overseas backdoor listing from aspects of legal supervisory subjects, principles of the legislation of legal supervision, reformation of the supervisory system and reinforcement of international cooperation.