Core view
Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) became the first listed company to be forced to delist in 2022. On March 22, 2022, Shanghai Stock Exchange issued the decision on terminating the listing of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) shares. When the financial fraud of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) touches on major illegal compulsory delisting, the listing of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) shares is terminated.
China’s delisting system has been revised for 20 years and gradually improved. In February 2001, the CSRC issued the measures for the implementation of suspension and termination of listing of loss making listed companies, marking the formal introduction of the delisting mechanism in China’s securities market. After four subsequent revisions, the delisting system has been improved day by day.
1) in 2006 and 2012, the delisting system of small and medium-sized board and gem was released and a diversified delisting system was constructed. The delisting system is diversified and improved for the capital market at all levels, so as to more specifically meet the delisting needs of the capital market at all levels.
2) in October 2014, the compulsory delisting system of major illegal companies was added. In October 2014, the CSRC issued several opinions on reforming, improving and strictly implementing the delisting system of listed companies, adding the compulsory delisting system for major illegal companies such as fraudulent issuance and illegal disclosure of major information.
3) in July 2018, improve the index system of active delisting and compulsory delisting. In July 2018, the CSRC issued a decision on Amending the opinions on reforming, improving and strictly implementing the delisting system of listed companies. In March 2020, the new securities law came into force, and the Shanghai and Shenzhen stock exchanges revised the relevant contents of the and delisting system accordingly, and established four types of compulsory delisting index systems, including finance, trading, standardization and major violations.
4) in February 2022, improve the supervision of listed companies after delisting. In February 2022, the Shanghai and Shenzhen Stock Exchange, the Beijing stock exchange, the national stock transfer Corporation and China Clearing issued the implementation measures on the listing and transfer of delisted companies into the delisting sector, clarifying the scope of application and the responsibilities of all parties, institutionalizing the undertaking mechanism of the host securities firm, further strengthening the “gatekeeper” responsibility of intermediaries and improving the supervision of listed companies after delisting.
On the whole, delisting companies in the past three years have mainly presented three characteristics.
1) the number of delisting has increased significantly since 2018. PT Narcissus is the first listed company in China to be delisted. From 2001 to 2021, 111 listed companies were delisted. Among them, the number of delisting in each year from 2008 to 2018 did not exceed 4. Since the CSRC issued the notice on modifying the delisting system in 2018, the delisting speed has been significantly accelerated, with 10, 19 and 20 respectively from 2019 to 2021.
2) the reasons for delisting are mainly continuous losses and other situations that do not meet the listing requirements. The number of listed companies delisting due to losses for three and four consecutive years reached 8 and 27 respectively, with a total of 35 delisting due to financial indicators.
3) 8 companies were delisted due to trading indicators. After improving the trading indicators, Huaxin became the first listed company to delist because its share price was lower than the par value in 2019, with 7 in 2021.
The conditions for a comprehensive registration system are gradually met, and China’s capital market is stable and far-reaching.
1) at present, the registration system has achieved full coverage of the three major exchanges. The proportion of registration system listing has been increasing, and the proportion has been as high as 82% since 2022. From the opening of the technology innovation board to March 23, 2022, a total of 702 listed companies were issued and listed through the registration system, accounting for 60% of all listed companies in the same period.
2) while the registration system accelerates the speed of listing, the delisting system can ensure the survival of the fittest of Listed Companies in the capital market, so as to ensure the stability and long-term development of the capital market. The number of delisting in the capital markets of developed countries and the United States has remained high all year round, with more than 200 since 2013. As of March 23, 2022, there were 4761 listed companies in China and 6906 listed companies in the United States. Based on the number of delisting households in 2021, the delisting rate of the United States is 5.86%, while that of China is only 0.42%, which is still a gap compared with the United States.
3) improve the delisting system and pay attention to the protection mechanism of minority shareholders’ rights and interests. The current delisting consolidation period and the implementation measures on listing and transfer of delisted companies into the delisting sector provide time for minority shareholders to deal with it, and also guarantee the subsequent share transfer. At the same time, in the case of compulsory delisting of listed companies due to major violations, investors can seek civil relief or compensation through judicial channels.
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