New rules for ChiNext delisting are about to be implemented: 'backdoor listings' may be banned

　　Following the public release of "Proposal on Improving the Delisting System of the ChiNext Board (Draft for Comments)" on November 28 last year and the subsequent public solicitation of opinions, the Shenzhen Stock Exchange (SZSE) released an "Explanation of the Solicitation of Opinions and Revisions on the Proposal on Improving the Delisting System of the ChiNext Board" on February 24th.
　　According to the explanation, the revision of the "ChiNext Stock Listing Rules" is expected to be completed in the first quarter of this year. After approval, the new ChiNext delisting system will be officially implemented.
　　It is noteworthy that the provision in the "Proposal on Improving the Delisting System of the ChiNext Board (Draft for Comments)" that does not support delisted companies resuming listing through backdoor listings received widespread approval, with some suggesting that "does not support" should be further clarified to "does not allow" delisted companies to resume listing through backdoor listings.
　　In response, the SZSE decided to adopt the relevant opinions and further improve other review standards for resuming listing when revising the "ChiNext Stock Listing Rules" in the next step.
　　Expected to complete revision in the first quarter
　　Following the investor protection bureau of the China Securities Regulatory Commission's (CSRC) response to reporters' questions on February 22nd, emphasizing the strict implementation of the delisting system and the protection of investor interests, the SZSE officially released the "Explanation of the Solicitation of Opinions and Revisions on the Proposal on Improving the Delisting System of the ChiNext Board" through its official website. It also revealed for the first time that the revision of the "ChiNext Stock Listing Rules" is expected to be completed in the first quarter of this year. On November 28, 2011, the SZSE officially released the "Proposal on Improving the Delisting System of the ChiNext Board (Draft for Comments)" and solicited public opinions. The SZSE revealed that during the solicitation period, it received over 170 feedback emails and 950 online questionnaires. Three meetings were held on December 5th, 19th, and 21st to solicit opinions on the delisting system, inviting representatives from various parties, including financial offices, CSRC branches, listed companies, sponsors, venture capital institutions, individual investors, institutional investors, market analysts, and experts and scholars. The SZSE carefully studied and considered the feedback, incorporating reasonable suggestions and improving the "Proposal on Improving the Delisting System of the ChiNext Board".
　　The SZSE stated that it will revise the "ChiNext Stock Listing Rules" based on the relevant content of the ChiNext delisting system proposal. After approval, the new ChiNext delisting system will be officially implemented.
　　In addition, regarding the content related to the delisting adjustment period and the delisting adjustment board, the SZSE will draft relevant notices, formulate specific operational clauses, and make relevant technical preparations to ensure the smooth implementation of the ChiNext delisting system.
　　Backdoor listings on ChiNext may not be allowed
　　Previously, as an important reform measure distinct from the current main board delisting system, the ChiNext delisting system has been revised, improved, and supplemented in six major aspects.
　　First, if a company receives three public reprimands from the exchange within the past 36 months or if its stock price is below its face value for 20 consecutive trading days, its stock will be delisted.
　　Second, for the financial standards for resuming listing for suspended companies, referring to the calculation methods for initial public offerings and refinancing, the lower of the net profit before and after deducting non-recurring gains and losses will be used as the profit judgment standard. Simultaneously, backdoor listings for suspended companies are not supported.
　　Third, if the condition of negative net assets is triggered, once the audited annual financial accounting report shows that the company's net assets are negative, its stock will be suspended from trading; if the net assets are negative for two consecutive years or the cumulative trading volume of the stock is less than 1 million shares for 120 consecutive trading days, the stock will be delisted.
　　Fourth, the current "delisting risk warning handling" method will no longer be implemented on the ChiNext board.
　　Fifth, a "delisting adjustment period" system will be implemented, and a "delisting adjustment board" will be established.
　　Sixth, after ChiNext companies are delisted, they will be uniformly transferred to the National Equities Exchange and Quotations (NEEQ) for trading, providing investors with a channel and platform for share transfers.
　　Now, in order to better implement the above system, the following supporting measures will also be adopted: 1. In the "ChiNext Stock Listing Rules," specific delisting risk disclosure time points and frequencies will be stipulated for each delisting condition, requiring listed companies to strictly comply; 2. A "delisting risk information disclosure and member customer reminder linkage mechanism" will be established. Once a listed company issues a delisting risk warning announcement, the SZSE will promptly inform all members through the member area, quotation system, etc., and members should promptly notify their investors holding ChiNext stocks through SMS or email.
　　It is worth mentioning that, regarding the review standards for resuming listing, in addition to opinions suggesting that the specific circumstances of "deducting non-recurring gains and losses" should be clarified, there are also opinions suggesting that "does not support" should be further clarified to "does not allow" suspended companies to resume listing through backdoor listings.
　　In response, the SZSE decided to adopt the relevant opinions. When revising the "ChiNext Stock Listing Rules" in the next step, for companies that have been suspended from listing due to three consecutive years of losses, the lower of the net profit before and after deducting non-recurring gains and losses will be used as the profit judgment standard in the conditions for resuming listing. At the same time, other review standards for resuming listing will be further improved.