“Three types of shareholders” usually refer to shareholders involved in asset management products such as the contractual-type private funds, the asset management plans, and the trust plans. According to the basic requirements of the current securities law, company law and IPO rules, the stability of the equity structure and the clarity of the controlling shareholder and the actual controller are the basic auditing conditions, so the enterprises which intend to be listed and in which there are “three types of shareholders” usually will be subject to strict and prudent supervision and verification by the regulatory authorities. Meanwhile, due to the influence of the policy factor of the National Equities Exchange and Quotation (NEEQ), the “three types of shareholders” problem is particularly prominent in the enterprises to be listed in the NEEQ.
The reason why the “three types of shareholders” problem is the focus of supervision and verification in the IPO process and the core issue of sustained attention from the regulatory authorities lies in the legal construction and structural characteristics of the “three types of shareholders” itself. Under the existing legal system, there may be conflicts or challenges in terms of “equity clarity”, “equity structure stability” and other conditions required by the listing rules, which are mainly reflected in the following aspects:
First, the “three types of shareholders” are based on the construction of contracts, asset management plans or trust plans, the legal basis of which is the legal relationship of trust, and which do not themselves have a “real” subject and therefore do not have the civil subject qualification and legal person qualification, and there are problems such as the attribution of shareholders’ rights and the bearing of responsibilities.
Secondly, the “three types of shareholders” all have a fixed duration, and the term of such duration is usually shorter. In the meantime, there may be rolling issues, or transfer of shares or the right to yields in some asset management plans or trust plans, which may cause its stability as a shareholder be questioned.
Finally, the structure of the “three types of shareholders” is complex and may involve multi-layered nesting, grading, and leveraged arrangements and, in consideration of the difficulty to verify the actual holding subject or the interest subject, the “three types of shareholders” can easily become the channel for arrangements such as shareholding entrustment, benefit transfer, and connected transaction.
Nevertheless, the regulatory authorities have not completely blocked the path of listing for enterprises involving the “three types of shareholders”. From the past successful IPO cases, the “three types of shareholders” will not be a substantial obstacle to the IPO reviewing if the enterprise to be listed can demonstrate the legal compliance of the establishment of the “three types of shareholders”, carry out penetration disclosure against its structure and state that the shareholding ratio of such shareholder is lower, except for the above-mentioned first issue which involves the coordination and architecture of upper laws. Especially at the press conference of China Securities Regulatory Commission on 12 January 2018, the spokesman made clear the IPO reviewing principles for enterprises involving the “three types of shareholders” in the speech, providing a more operational supervision and verification standard for enterprises to be listed.
It should be noticed that the Guiding Opinions on Regulating Asset Management Business of Financial Institutions (New Regulations on Asset Management) promulgated by the People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and the State Administration of Foreign Exchange on 27 April 2018 may provide a new idea about the supervision and verification of the current “three types of shareholders” problem.
The main idea of the New Regulations on Asset Management is to conduct a comprehensive and unified supervision against the asset management business of all types of institutions under the current financial regulatory mechanism to eliminate the existence of regulatory arbitrage and regulatory vacuum. At the same time, the New Regulations on Asset Management also tries to “set unified standards and rules for problems such as multi-layered nesting, unclear leverage, serious arbitrage, and frequent speculation”, and requires to “conduct penetration supervision against asset management products and, for multi-layer nested asset management products, to identify the ultimate investors of such products upwards and to identify the underlying assets downwards (excluding the publicly offered securities investment funds)”.
Even though the New Regulations on Asset Management is only a framework regulation for cleaning up and regulating the asset management business and the asset management products, and concrete rules or guidelines still need to be further implemented by the regulatory authorities, we believe that after the effective implementation of the regulatory objectives and regulatory approaches established in the New Regulations on Asset Management, especially after the determination of the principles for controlling the nesting structure and the “penetration supervision”, the above-mentioned uncertainties of the “three type of shareholders” in terms of “shareholder stability”, “clear equity structure” and “with or without benefit transfer arrangement” will be regulated from the source, so as to eliminate the challenge posed by the “three types of shareholders” against the current IPO reviewing requirements to the maximum extent.
On the other hand, the New Regulations on Asset Management can also, to a certain extent, reconcile the different viewpoints and standpoints of the current financial supervision and judicial practice on the legality, validity and affirmation of legal consequences of the asset management products, and the public or external institutions will pin a more explicit expectation on the legal consequences of the structural arrangement of the “three types of shareholders”. It will also help to eliminate the uncertainty of legal compliance and validity of the “three types of shareholders” in the argumentation of IPO reviewing.