Research On The Delisting Of Listed Companies Due To Material Illegal Acts Involving Public Safety

Both Shanghai Stock Exchange and Shenzhen Stock Exchange(collectively,the“SSE”)are entitled to delist listed companies' stocks where such companies commit material illegal acts involving national security,public safety,ecological safety,production safety and public health safety.This rule may be named as the Delisting Rule Regarding Material Illegal Acts Involving Public Safety.Such Delisting Rule is of great significance to maintaining the order of Chinese securities market.Nevertheless,there are some legal issues in such Delisting Rule.First,the applicable standards of the Delisting Rule are obscure.Second,where such delisting events occur,the protection for small and medium-sized investors(“SMI”)who suffered severe damages therefrom is inadequate due to the lack of relevant stipulations regarding the right for SMI to claim compensations against the delisted companies.Furthermore,it is difficult to obtain compensation even if SMI win a lawsuit against the delisted companies.Besides,the advanced compensation system in securities market does nothing for this issue.Third,IPO system and Delisting Rule should jointly select superior companies and eliminate inferior companies.The inferior listed companies involved material illegal acts in relation to public safety should be swept out of the securities market by enforcing the Delisting Rule.In the meantime,during the IPO processing,inferior companies should be not allowed to become listed companies.However,the IPO system does not correspond with the Delisting Rule because there are some cracks and insufficiencies in IPO conditions,application and examination in relation to aforesaid requirements.Therefore,in order to address aforesaid issues,making the extension of each kind of material illegal act under the Delisting Rule,the word “materiality” and the phrase “main subsidiaries” more specific are key steps to specify the applying standards of the Delisting Rule.Besides,the right with respect to SMI may claim compensations against the delisted companies shall be stipulated in law.Moreover,perfecting Securities Investor Protection Fund is considerable to address the issue related to that SMI are hard to obtain compensations from delisted companies.Finally,the requirements for the issuers' legality regardingpublic safety shall be improved during the IPO processing.For example,issuers who committed material illegal acts involving public safety shall be unqualified to IPO,issuers shall fully and completely disclose its information refer to illegal acts involving public safety,and SSE shall clarify its standards of examining the aforesaid information and enhance its capabilities to examine the aforesaid information.