The extent to which domestic family trusts can participate in the IPO market is a hot topic among all parties in the market.
In recent years, Shanghai Rightongene Biotechnology Co.Ltd(688217) , Guizhou Zhenhua E-Chem Inc(688707) , shengmei Co., Ltd., Xinyuan Co., Ltd., Cathay Biotech Inc(688065) , Jingke energy and other enterprises have explored the shareholding of family trust. Some of them are listed smoothly, while others need to clean up the trust structure before listing.
brokerage Chinese reporters interviewed insiders and learned that IPO cases recognized by regulators are generally reflected in “small proportion and indirect shareholding of family trust”
The reporter learned from the verification of securities companies and investment bankers that recently, the exchange conducted a case analysis on the trust shareholding under the control line, which made it clear that it could not affect the clarity and stability of the control. In principle, if there is a trust shareholding in the equity related to the control right, it shall be cleared up before reporting. There are differences between trust and control rights in practice, which need to be considered.
At present, family trust welcomes the “blowout” development. By the end of the third quarter of last year, the survival scale of family trust was about 310 billion yuan; In January this year, the scale of family trust increased by 12.899 billion yuan, an increase of 33.54% month on month, and the monthly growth rate reached a new high in recent one year.
family trust shareholding cannot affect the stability of control
It is understood that the regulators have been strictly supervising the IPO enterprises held by “three types of shareholders” (asset management plan, contractual fund or trust product). In practice, intermediaries are often required to demonstrate the problems of three types of shareholders and clean them up if necessary.
A lawyer in the field of family wealth management in Shenzhen told the Chinese reporter of the brokerage that the sensitivity of the IPO held by the family trust lies in whether the ownership of the shares controlled by the actual controller is stable and clear, which is the focus of the regulators. He said that several cases of the science and Innovation Board showed that at the level of non actual controllers of IPO enterprises, indirect small shareholding by family trusts was recognized by regulators.
However, there has been no case breakthrough of family trust holding IPO enterprises at the level of actual controllers. Although some cases show that the actual controllers hold us listed companies through overseas trusts, and then spin off their subsidiaries to go to A-Shares to finally achieve listing, industry insiders believe that this is because the penetration verification of IPO shareholders only needs to penetrate natural persons or listed companies. The success of such cases cannot be interpreted as the deregulation of supervision at the actual controller level. (for details, please refer to milestone event? Breaking the listing of family trust holding enterprises! IPO penetration verification provides timely help, and securities companies have already begun to layout.)
Recently, the Chinese reporter of securities companies learned from the investment bankers of securities companies that the latest issue of the review dynamics of issuance and listing of gem registration system of Shenzhen stock exchange conducted a case analysis on the trust shareholding under the control line and clarified the regulatory attitude.
The exchange said that in the audit practice, the stability of ownership usually needs to meet a number of conditions. From the perspective of legal requirements, the ownership should be clear, truly determined, legal and compliant and complete; From the perspective of policy requirements, there shall be no disorderly expansion of capital, wealth creation in violation of laws and regulations, benefit transfer and other situations; From the perspective of regulatory requirements, we should prevent major shareholders from abusing their dominant position, protect the legitimate rights and interests of public investors, maintain the order of the stock market and clarify the expectations of market subjects.
exchange pointed out that the trust shareholding will have multiple adverse effects on the equity related to control:
First, trust property rights are independent and special. The right relationship mainly depends on the agreement of trust agreement, which is easy to lead to unclear ownership of shares, which is obviously different from equity and real right;
Second, the trust legislation and practice of various countries generally grant the trustee great trust authority and have the decision-making power of management, income distribution and investment. Therefore, the scope of authority and decision-making mechanism of the trustee are related to the control power of the trust, which may affect the control power of the issuer;
Third, although the trustee’s right to manage and dispose of the trust property is similar to the real right, the purpose of enjoying these rights is for the interests of others and beneficiaries. This “ownership for the interests of others” relationship determines that the rights and obligations between the relevant subjects of the trust relationship are complex, there are many check and balance mechanisms, and it is easy to produce disputes and contradictions;
Fourth, the relevant rules and systems of the domestic A-share market have high requirements on the identification of actual controllers and the assumption of responsibilities. The bankruptcy isolation mechanism of trust property may lead to the avoidance of the responsibilities of actual controllers stipulated in the current rules, which is not conducive to the implementation of regulatory responsibilities;
Fifthly, according to whether the trustor retains the cancellation right and change right when establishing the trust, the trust can be divided into revocable / changeable, irrevocable trust / irrevocable trust. Among them, the revocation and change of revocable trust are arbitrary, which affects the stability of equity. Even for an irrevocable and unchangeable trust, its legal relationship is not stable compared with equity.
Sixth, there are still foreign exchange regulatory requirements for offshore family trusts.
Therefore, if there is a trust shareholding in the equity related to the control right, in principle, it should be cleared up before reporting. The reason why the issuer and intermediary institutions advocate to retain the trust shareholding structure on the grounds that the share of equity related to a certain part of the control right is small and does not affect the stability or clarity of the control right is not sufficient.
For the situation of trust shareholding in non control related equity, there have been cases in which the trust structure has not been removed during the pilot period. The exchange believes that this does not mean that the trust shareholding of all non control lines can be applied by reference. This is because under the registration system, considerable inclusiveness and flexibility have been given to shareholders, equity structure and other equity arrangements, but at the same time, the trust shareholding structure is complex and secretive, there is room for avoiding regulatory requirements, which has a great impact on the clarity of share ownership and the stability of control. Comprehensive consideration and differential treatment are needed in the audit practice.
in this regard, a number of industry insiders said that the above statements of the exchange were in line with expectations. Looking forward to the change of regulatory policy trend in the future, it is very difficult for family trusts to break through in the short term if they want to hold shares at the level of actual controllers
family trust development accelerated
From “creating wealth” to “keeping wealth” and then to “spreading wealth”, family trust is becoming more and more popular with entrepreneurs.
According to the data of China’s trust industry in December 2021, the new scale of the trust industry reached 12.8 billion yuan, an increase of 54.99% over that of 2021.
China Xindeng said that as China’s per capita GDP approaches the threshold of high-income countries and reaches US $12500 in 2021, the demand for wealth management of Chinese residents continues to increase. In addition, affected by multiple factors such as the return of the trust industry to its origin and accelerating the transformation, family trust, as one of the service trust businesses with the characteristics of the origin of trust, has become an important direction of industry transformation.
At the end of 2021, CCB trust and Hurun Research Institute jointly issued the 2021 report on the sustainable development of family wealth in China, which said that by the end of September 2021, the survival scale of family trust was about 310 billion yuan, rising for six consecutive quarters; The number of surviving family trusts is about 15000; 59 of the 68 trust companies have carried out family trust business.
The report pointed out that the development of family trust in China presents the characteristics of “three increases and one manifestation”. The “three increases” refers to the increase in the survival scale of family trust, the number of surviving products and the number of trust companies carrying out family trust business. “Yixian” means that the head company with large scale and mature business of family trust begins to appear.
Although at present, the participation of family trust in the IPO market is relatively limited, industry insiders believe that the success of some cases indicates a good beginning. A lawyer told reporters that from the perspective of investment, in the past, some industrial funds did not accept family trust investment when looking for LP, or required family trust to dismantle the trust structure before investment. They were mainly worried that the trust structure would affect the A-share listing of enterprises in the future. It is expected that entrepreneurs will use family trust as an investment platform for foreign investment in the futurecenter>
