On May 16, the China Securities Regulatory Commission (CSRC) issued the revised Administrative Measures for the Material Asset Restructuring of Listed Companies (hereinafter referred to as the "Restructuring Measures"), establishing an installment payment mechanism for the consideration of restructured shares, improving the tolerance of changes in financial status, intra-industry competition and supervision of related party transactions, implementing a "reverse linkage" between the investment period of private investment funds and the lock-up period of shares obtained through restructuring, and establishing simplified review procedures for restructuring, so as to further deepen the reform of the M&A and restructuring market of listed companies.

Specifically, what are the main notable changes in the Restructuring Measures? Jingtai interprets it for you.

|1 important change - restructuring of the installment payment mechanism for share consideration

What is the Restructuring Share Consideration Installment?

To put it simply, it is to give listed companies more flexibility and security when carrying out major asset restructuring.

How does it work? Here are a few things you need to know:

Extension of the validity period of the registration decision to 48 months: In the past, if a listed company wanted to purchase assets in batches of shares, the time limit after applying for a registration was relatively short. That deadline has now been extended to 48 months, giving the company more time to close the deal and less time crunch.

The lock-up period starts from the end of the first tranche of shares: when a listed company chooses to issue shares in instalments, the lock-up period will be calculated from the moment the first tranche of shares is issued, rather than waiting for all shares to be issued. This ensures that funds that come in early on also enjoy the protection period they deserve.

Consolidation of shares: All shares issued in installments are considered together when assessing whether a restructured listing (the so-called "backdoor listing") is constituted. This means that the shares of the bank will be counted together in the total regardless of the number of batches, preventing anyone from circumventing regulation by operating in batches.

Flexibility in handling performance commitments: If the transaction involves mandatory performance commitments, the listed company and the counterparty may choose different ways to meet the commitments. In addition to the traditional performance compensation, there is also the option of installment payment plus performance compensation, which provides more negotiation space and flexibility for both parties.

What does this mean for investors? For investors, these changes bring several important signals:

More flexible operating space: Listed companies can adjust the pace of restructuring according to the actual situation to avoid transaction failures due to market fluctuations or other factors.

Increased confidence: Changes to the lock-up period rules can help protect the interests of minority shareholders and also help attract long-term investors to participate in restructuring projects.

Enhancing Transparency and Compliance: The new rules improve the transparency and compliance of the entire restructuring process by clarifying the principles for the consolidation of shares issued in instalments and providing a variety of ways to meet performance commitments.

|5 important change points

The China Securities Regulatory Commission's latest revision of the "Measures for the Administration of Major Asset Restructuring of Listed Companies", this change has several very important points, Jingtai will explain to you in a relaxed way.

1. It is more flexible to issue shares in installments to pay for the purchase of assets

First of all, if a listed company chooses to issue shares in installments to pay for the purchase of assets, each issue must meet the prescribed conditions. However, the good news is that subsequent issuances do not need to go through the review and registration process, which can save a lot of time and effort. Of course, in order to ensure transparency and compliance, companies need to strengthen information disclosure, and intermediaries also need to conduct verification and accountability if problems are identified.

2. Looser supervision of financial status, intra-industry competition and related party transactions

In the past, when a listed company underwent a major asset restructuring, it had to explain that the transaction would "improve its financial position" and help "reduce related party transactions, avoid intra-industry competition, and enhance independence". The requirements are now more realistic: as long as the transaction does not lead to a deterioration in the financial situation, does not create a material adverse impact of peer competition, and does not have related party transactions that seriously affect independence or are manifestly unfair. In other words, standards become more flexible, giving businesses more room to operate.

3. Added a simplified review procedure

Next up is the big highlight – the new simplified review process. If your restructuring transaction is eligible, then it will not need to be reviewed by the stock exchange's merger and reorganization committee, and the CSRC will decide whether to register it within 5 working days. This greatly speeds up the approval process and improves efficiency!

4. Support mergers and acquisitions between listed companies

For mergers and acquisitions between listed companies, the New Rules clarify the requirements for a lock-up period: the controlling shareholder, actual controller or related person controlled by the merged party shall be locked up for 6 months; If it constitutes an acquisition, the 18-month lock-up period stipulated in the Administrative Measures for the Acquisition of Listed Companies shall be implemented; For other shareholders, there is no need to set a lock-up period. In this way, it not only protects the interests of small and medium-sized shareholders, but also provides a certain degree of flexibility for large shareholders.

5. Encourage private equity funds to participate in mergers and acquisitions

Finally, and an interesting change, the "reverse linkage" between the investment period of the private equity fund and the lock-up period of the shares acquired through the restructuring is implemented.

Specifically, if the investment period of a private equity fund reaches 48 months, the lock-up period in third-party transactions is shortened from 12 months to 6 months; In the restructuring and listing, the lock-up period for shareholders other than the controlling shareholder, the actual controller and the related persons controlled by them has also been shortened from 24 months to 12 months.

This means that long-term investors will enjoy a shorter lock-up period, which will encourage more private equity funds to participate in the mergers and acquisitions of listed companies.

The "Six Mergers and Acquisitions" have been fully implemented

Since the release of the "Six Mergers and Acquisitions" on September 24 last year, the capital market has been injected like a shot in the arm and has become extremely active. Now, the revision and release of the "Measures for the Administration of Major Asset Restructuring of Listed Companies" (hereinafter referred to as the "Restructuring Measures") means that the measures of the "Six Mergers and Acquisitions" have been fully implemented!

Let's take a look at the specific data: since September 24 last year, listed companies have disclosed more than 1,400 asset restructuring projects, including more than 160 major asset restructurings.

This year's situation is even hotter: listed companies have planned and disclosed more than 600 asset restructuring projects, 40% more than the same period last year; Among them, there were about 90 major asset restructurings, 3.3 times that of the same period last year; What's even more exciting is that the amount of major asset restructuring transactions that have been completed has exceeded 200 billion yuan, which is 11.6 times that of the same period last year!

These figures illustrate the fact that the function of the capital market has been effectively brought into play, and the vitality of the market has been greatly enhanced.

In the next step, the CSRC said that it will continue to work hard to ensure that the provisions of the Restructuring Measures are fully implemented and further stimulate the vitality of the M&A and restructuring market. This means that there may be more policy support and optimization measures in the future, bringing more opportunities to the market.