Equities private placement regime in China

Equities Private Placement 2 Under Article 9 of the PRC Securities Law (revised in 2019), a public issuance of securities is deemed an “Offer to Public” if: (a) Securities are offered to unspecific/unidentified investors; (b) Securities are offered to a total of more than 200 specific investors, excluding those under an issuer’s employee stock ownership plan; or (c) any other issuance as stipulated by law or administrative regulations. Regime

1. Prospectus requirement

  • Offer to the public, by Chinese listed companies within the PRC.
  • Admission to trading of securities on a regulated market in the PRC.

2. Prospectus exemptions

  • The China Securities Regulatory Commission is responsible for the review of any private placements by listed companies.
  • This guidance relates to offers or issues of shares by Chinese listed companies within the PRC.
    • There are no prospectus exemptions as such for offers to the public and admission to trading of securities on a regulated market, however a prospectus will not be required if: shares are offered to less than 200 specific investors; and
    • the issuer does not breach the restrictions on advertisement, public inducement or disguised publicity campaigns.
  • A report of the private placement by a Chinese company shall be made available for public consultation.
  • There is no established practice in the PRC regarding offers or issues of shares by overseas listed companies to investors in the PRC. There are no equivalent prospectus requirements or indeed exemptions in relation to overseas listed companies offering shares to the public in the PRC or applying for admission of shares to trading on a regulated market and PRC law does not therefore currently permit overseas companies to place shares with Chinese investors other than institutional investors such as securities companies, fund management companies or commercial banks.
  • Chinese investors may invest in an overseas listed companies shares through a Qualified Domestic Institutional Investor, eg securities companies, fund management companies or commercial banks who are qualified to invest in overseas securities or via stock connect arrangements such as Shanghai-London Stock Connect or Shenzhen-Hongkong Stock Connect.

3. Ability to offer shares to

3.1 Institutional/professional/authorised investors (for example investment funds, insurers, pension funds)

Yes.

If a specific investor is an overseas strategic investor, it shall comply with the relevant provisions of the State.

3.2 High net worth individuals 

Yes.

3.3 Retail/public/others

No.

4. Can the issuer approach potential investors on their own?

Yes, but subject to the restrictions on advertisement, public inducement or disguised publicity campaigns.

  • When the listed company makes a recommendation for the private placement of shares or provides an investment value research report to potential investors, it shall not do so through any public means and not earlier than the date on which the resolution of the board of directors on the private placement of shares is announced.
  • A listed company and its controlling shareholders, actual controllers and major shareholders shall neither promise guaranteed principal and guaranteed income to potential investors or make such promise in a disguised form, nor provide potential investors with financial assistance or compensation directly or through the relevant interested parties.

5. Can the issuer's financial adviser/ placement agent approach potential investors on their own?

Yes, but subject to the restrictions on advertisement, public inducement or disguised publicity campaigns.

  • A sponsor is required for the private placement of new stocks/shares
  • An underwriter is required for a private placement unless all the investors are the top 10 shareholders from amongst the original shareholders of the listed company, in which case the shares may be sold/placed with them by the listed company itself.

6. Are there any other exemptions which may be relied on?

No.