Senior board secretaries assess the implications of regulatory reforms in the PRC, both for the work of board secretaries and for the integrity and efficiency of China's capital markets.
China's capital markets have been developing very rapidly in recent years and board secretaries are playing a key role in this development. They are dedicated to not only creating value for their enterprises but also to improving the capital markets and the flourishing economy of China. This article focuses on three reforms to the regulatory infrastructure of China's capital markets:
- the introduction of a new 'direct information disclosure' system whereby corporate announcements are made directly to the market without having to be pre-vetted by the stock exchange
- the launch of preferred shares, and
- the introduction of new rules relating to mergers and acquisitions.
1. Direct information disclosure
Information disclosure is one of the most important obligations of listed companies and corporate announcements are one of the main channels for communication between listed companies and investors. In the last two years, China has been implementing its new 'direct information disclosure' reform. CSj interviewed Xie Bing, Board Secretary of China Southern Airlines, on the implications of this reform. 'To put it simply, the new direct information disclosure system means that listed companies have to directly register, transmit and distribute documents for the purpose of information disclosure by electronic means,' he says. Previously such announcements had to go through the stock exchange and were pre-vetted by the exchange. Since the implementation of this reform the exchange will only post-vet such announcements.
The new disclosure regime was introduced on 1 July 2013 and has been underpinned by the new electronic information disclosure system introduced by the Shanghai Stock Exchange on 3 December 2012. Listed companies can now directly upload their announcements by electronic means in an effective, secure and controllable way.
'Direct information disclosure might seem to be only a small change in the method of disclosure, but in fact it is a significant change to regulatory philosophy in the PRC.' says Mr Xie. He points out that the reform is part of the shift towards more reliance on self-regulation by companies. 'Securities regulation in China has been focusing too much on managing companies rather than regulating them – the focus was too much on prior scrutiny rather than subsequent supervision.'
The new disclosure regime is therefore part of the general shift towards relying on market forces to discipline behaviour. 'In simple terms, it means a relaxation of control and a reinforcement of regulation and a clear distinction between the functions of government and functions of the market,' says Mr Xie.
The new regime is also part of wider reforms to information disclosure in the Mainland. Mr Xie points out that regulators have formalised new disclosure requirements, particularly in the 'Announcement Classification Concerning Information Disclosure of Listed Companies and the Guideline for the Formats of Interim Announcements of Listed Companies'. This states explicitly the specific requirements, operating processes and regulation measures relating to information disclosure.
The recent reforms have clarified the roles of the different parties involved in disclosure. In particular, listed companies need to take responsibility for information disclosure while regulators are responsible for making rules, taking measures against violations and protecting the interest of investors. The stock exchange will no longer give its 'endorsement' to corporate announcements via the pre- vetting regime. Regulators are seeking to encourage other parties, such as investors, to participate in the regulation of listed companies to increase the efficiency of China's capital markets.
'I think the standard of regulation of information disclosure in China's capital markets has caught up with that of Hong Kong and the US and is even stricter and more effective than Hong Kong and the US in certain respects,' says Mr Xie. He adds that these changes have very significant implications for the work of board secretaries in China. 'In my experience, direct information disclosure poses great challenges for companies' disclosure programmes,' he says.
Highlighting the benefits of information disclosure
Many companies used to regard their information disclosure obligations primarily as a regulatory burden, but the recent reforms have highlighted the rationale behind companies' disclosure obligations, in particular investors’ right to know. The reforms are intended to encourage companies to go beyond fulfilling the minimum regulatory requirements and to focus on the many benefits of a good disclosure regime – such as improving corporate governance and satisfying the needs of investors.Strengthening information disclosure systems and processes
The reforms have also obliged listed companies to rebuild their systems and processes for information disclosure. At China Southern Airlines, Mr Xie created a new system which seeks to institutionalise the work, streamline the procedures and document the processes involved in corporate disclosure. He created a number of work lists relating to the company's regular and interim reports, and integrated these with other lists, such as those relating to board meetings. This has achieved a standardised, efficient and process-oriented disclosure system. Moreover, he also adopted a quality control system ensuring that all information disclosure work is cross- checked. New positions responsible for information disclosure of the company's A-share and H-share listings have been set up and they are responsible for cross- checking documents. The documents are then submitted to the representative of securities affairs for checking before coming to Mr Xie for final approval. 'A strictly controlled system and process will ensure a standard of "zero error" in the work of information disclosure,' says Mr Xie.Increasing the pool of professional talent
Mr Xie emphasises that, to meet the challenges of the new disclosure requirements, companies must put more emphasis on the training of personnel and team building. He says that people who are 'dedicated, diligent, skillful and committed' are most suitable to work in information disclosure. 'By “dedicated”, I mean those who pay special attention to their work. By “diligent”, I mean those who work hard and are prepared to ask questions and willing to learn. By “skillful”, I mean those who pursue excellence. They strive to ensure that every announcement is perfect, in particular making sure that the figures disclosed are accurate and without error. Candidates should also be well-equipped with professional knowledge and capabilities. They should be selfless, well- trained and trustworthy. By “committed”, I mean those who are keen to work and have passion.'
He adds that the team should be highly conscious of the risks involved and should always be very cautious. Mr Xie uses the equation '100-1=0' to remind his colleagues of the need for accuracy
in reporting. 'To build up such a team is no easy task,' he says. 'A board secretary should not only be familiar with the rules, but should also be a good “coach” who can train up a very efficient information disclosure team.'
2. The launch of preferred shares
The launch of China's first preferred shares (shares entitling shareholders to a fixed dividend and priority over ordinary shareholders when payments are due) was undoubtedly one of the big regulatory developments of 2014. The State Council's 'Pilot Programme for Preferred Shares' got underway in 2013. The CSRC, the Shanghai and Shenzhen stock exchanges, and the China Securities Depository and Clearing Company Ltd, have promulgated measures relating to preferred shares. In early November 2014, the Agricultural Bank of China completed the issuance of domestic preferred shares and the Bank of China completed the issuance of overseas preferred shares, indicating that the system of preferred shares has been firmly established in China in less than one year.
CSj interviewed Yao Jun, Company Secretary of Ping An Insurance (Group) Company of China Ltd (Ping An), about the opportunities and challenges this new financing method brings for listed companies. He emphasises that the system of preferred shares requires listed companies to have a good credit worthiness. 'Only a company with sufficient profit for distribution should issue preferred shares,' he says. Moreover, the system of preferred shares poses new corporate governance challenges. This is because preferred shareholders are a new class of people among companies' stakeholders. Mr Yao believes that companies need to maintain the following four 'balances'.
1. The balance between stocks and bonds
Not all preferred shares can be counted toward capital, and not all bonds cannot be counted toward capital. For instance, the guidelines of the State Council require the distribution of dividends to holders of publicly issued preferred shares when there is distributable profit. This provision will very likely mean that publicly issued preferred shares will be unable to meet the core criterion of counting toward capital (namely, that an issuer does not have any obligation to make cash payments under whatever circumstances). Therefore, if a company wishes to replenish capital by means of preferred shares, it should understand thoroughly the related rules and determine the terms of issuance.2. The balance between ordinary shares and preferred shares
Both ordinary shares and preferred shares distribute after-tax profit and they both provide funds for the company's development. So they compete and cooperate with each other. 'Board secretaries must consider the implications of this and should strive to avoid conflict between shareholders of these two different classes since this could jeopardise the entire system of share issuance,' Mr Yao says.3. The balance between preferred shares and other capital raising tools
In addition to preferred shares, there are other capital raising methods for companies, such as convertible bonds, perpetual bonds and sustainable medium-term notes. Companies should fully consider the advantages and disadvantages of these financing tools and seek the most suitable option. For example, in the case of banks, preferred shares can replenish their tier one capital. However, in the case of non- financial companies such as power plants, sustainable medium-term notes may be a better option, as they can not only reduce the asset-liability ratio, but their financial cost will also be less than that of preferred shares.4. The balance between normal and abnormal circumstances
In a developed capital market, preferred shares are often used in certain 'abnormal' circumstances. For example, after the financial crisis the US government injected capital into some financial institutions by purchasing preferred shares. In addition, preferred shares are also frequently used in merger and acquisitions. A board secretary must fully consider how the company can utilise preferred shares effectively under normal and abnormal circumstances. 'As a board secretary, if you can achieve these four balances, then you can effectively make use of preferred shares as a tool to create value for both the company and all the shareholders,' Mr Yao says.3. New merger and acquisition rules
The merger and acquisition (M&A) market in China has grown rapidly in recent years, and China has become an active player in the global M&A market. This trend was spectacularly evident in 2014. By the end of September, the value of M&A transactions in China reached RMB1 trillion, exceeding the value for the entire year in 2013.
One company which has been very active in this field is Guangzhou Shipyard International. It purchased a 100% shareholding in CSSC Guangzhou Huangpu Shipbuilding Company from China State Shipbuilding Corporation through the issuance of shares, and also purchased relevant shipbuilding assets from Yangzhou Kejin Shipyard Company, thus creating Shanghai and Hong Kong's biggest issuer in the military industry sector.
CSj interviewed Shi Wei Dong, Board Secretary of Guangzhou Shipyard International, about the strategy behind his company's recent acquisitions. He cites three main considerations. Firstly, the acquisitions will help the company to adapt to the changes in both the Mainland economy and the structure of its shipbuilding industry – in particular the low concentration of the industry, the overcapacity of production and insufficient innovation. Secondly, they have achieved an injection of major assets into the Group and enhanced the competitiveness and earning capacity of the listed company. Thirdly, they will help the company to meet the needs of the national military industry and provide a mechanism and funds for the development of the military industry through the platform of the capital market.
信息披露是上市公司最重要的义务之 一，也是上市公司与投资者交流的最主 要渠道。近两年内地一直在推行信息披 露直通车（简称“直通车”）。为深入 探寻直通车带来的挑战，本刊采访了资 深董秘-南航董事会秘书谢兵。
问：您能否介绍一下什么是信息披 露直通车？
谢兵：信息披露直通车简单说就是上市 公司通过电子方式自行登记、传送和发 布信息披露文件，交易所不进行事前审 核，而实行事后审核。上海证券交易所 2012年12月3日正式启用上交所信息披 露电子化系统，2013年7月1日起正式实 施上证直通车。
受多方面因素影响，中国的证券监管一 直是管理职能多、监督职能少，事前审 批强，事后监管弱。信息披露直通车的 实施，根源是监管理念的变革，即从行 政性监管向市场化监管的大幅转变，简 单地说就是“放松管制、加强监管”， 让“政府的归政府、市场的归市场”。
在监管方式上，以直通车的实施为契 机，监管机构也对信息披露的监管进行了大幅度的改革，主要特点有：
1. 制度化。为适应直通车的实施，监 管机构全面加强信息披露的制度建 设，制定了《上市公司信息披露公 告类别索引》、《上市公司临时公 告格式指引》等配套文件，明确了 信息披露的具体要求、操作流程、 监管措施。
2. 规范化。直通车的实行使各主体的 定位、权责及监管方式都更加规 范。上市公司作为“运动员”必须 严格按要求履行信息披露义务，交 易所不再“背书”；监管机构负责 规则制定、打击违规行为，保护投 资者权益。投资者等其他主体也能 共同参与监督上市公司，资本市场 运行更加有效。
3. 信息化。监管机构建设并启用了信 息披露电子化系统，推进与内部 各管理流程系统的对接；上市公 司严格进行电子化上传管理，保 证信息披露电子化处理的高效、 安全与可控。
我个人认为，内地资本市场的信息披露 监管已经与香港、美国等地基本接轨， 有些方面甚至还更加严格和高效，大有 后来居上的趋势。
问：您作为多地上市公司的资深 董秘，在应对信息披露直通车方 面有哪些经验能和我们分享？
谢兵：根据我的体会，信息披露直通车 对信息披露的定位、制度及流程再造以 及队伍建设等方面都有很大的挑战，也 必须在这些方面做好有效应对：
1. 提升信披工作的定位。 之前很多 公司认为信息披露就是满足交易所 的监管要求。直通车实施后，信息 披露的功能也有了变化，更多是为 保障投资者的知情权；此外，信息 披露的质量还与再融资等资本运作 挂钩。因此，信息披露的定位必须 从满足最低监管要求，到提升公 司治理、满足投资者的信息获取需 求、公司再融资、并购重组等市值 管理需求以及满足监管要求等多重 目标进行转变。
2. 加强信披制度和流程建设 。信批 直通车不只是电子化上传的简单操 作，而是上市公司信息披露工作的 系统性的制度和流程再造。我在南 航就提出了“工作制度化、制度流 程化、流程表单化、表单集成化” 的要求，将公司定期报告、临时报 告的工作分解成具体制度，画成流 程图，并形成工作表单，再将工作 表单与董事会召开等其他表单进行 整理与合并，用制度化、规范化、 流程化来规范和指导信息披露工 作。此外，实行分级审核与交叉复 核相结合的质量控制体系，A股和H 股信息披露岗位分设并交叉审核， 再交由证券事务代表统一审核并由 我审批后定稿。严格的制度流程保 证了信息披露工作的“零差错”。
3. 加强专业人才储备。 为适应直通 车的挑战和信息披露的新定位，公 司必须更加注重信息披露人才培养和团队建设。我认为，“敬业、勤 业、精业、乐业”的人才是最合适 的信批人员。敬业是指对公司、 对工作高度负责；勤业是多做、多 想、多问、多学；精业是追求完 美，每个公告都要做好，每个数 字都要准确，不留瑕疵与错漏； 要有专业知识和专业能力，更要 有无私、训练有素和值得信赖的专 业素养；乐业是工作有兴趣，有激 情。此外，团队要有高度的风险意 识，要时时刻刻都战战兢兢、如履 薄冰，我常用“100-1=0”来警示 大家。当然培养这样的团队很不容 易。对董秘而言，不仅自己熟悉规 则，更要当好“教练”，打造一支 过硬的信息披露团队。
二、 优先股带来的新挑战
2014年最受关注的融资方式创新无疑是 优先股。在此之前，很多内地投资者不 知道优先股的存在。优先股的横空出世 对监管机构、投资者以及上市公司都是 全新的挑战。
自2013年底国务院发布《国务院关于开 展优先股试点的指导意见》后，优先股 的制度建设在2014年全面铺开。中国证 监会、上海和深圳证券交易所以及中国 证券登记结算公司等都发布了相关的配 套制度。11月初，中国农业银行完成了 境内优先股的发行，中国银行完成了境 外优先股的发行，标志着优先股仅用不 到一年就在内地落地生根。
优先股为上市公司提供了一种全新的股 权融资方式，作为董秘该如何看待及迎 接这一挑战呢？中国平安公司秘书姚军 先生认为优先股制度看起来很美，但用 起来却要格外小心：
1. 优先股对上市公司的资质要求较 高。 优先股的股息来源于税后利 润，要获得投资者的认可和保证股 息的兑付，公司必须具有持续的高 盈利能力和较好的现金流。简单地 说，能赚钱、多赚钱、能分钱的公 司才适合发优先股；
2. 优先股对公司治理提出新的挑战。 优先股的出现，使公司的利益相关 者多出了一个特殊的层次-优先股 股东，他们既不是一般的股东，也 不是普通的债主。公司经营得好如 约分红，他们只分钱不参与决策； 经营不好无法分红，他们立即变成 了手握投票权的股东，来找公司算 账，会对公司的经营管理产生较大 的影响。
如何用好优先股这个工具为公司发展 服务呢？姚军先生简单总结为做好几 个平衡：
1. 股性和债性的平衡。优先股不一定 就能计入资本，债券不一定就不 能计入资本。如条款设计上稍有偏 差，优先股可能被界定为债务融 资，而不是股权融资。比如国务院 指导意见中要求公开发行的优先股 在有可分配利润的情况下必须强制 分配股息，这条很可能会导致公开 发行的优先股不满足计入资本的核 心标准（即权益工具必须是发行人 在任何情况下都不存在现金支付的 义务）。因此，要通过优先股补充 资本，就必须吃透规则，确定好发 行条款；
2. 普通股与优先股的平衡。普通股和 优先股股东都是分税后利润，但两 者都提供资金帮助公司发展，两者 是既竞争又合作。董秘一定要设身 处地，把涉及两类股东利益的情况 和条款都想清楚，力争让两类股东 共同获利，而不用担心互相争利， 否则发行难以成功。
3. 优先股与其他混合型融资工具的平 衡。除优先股之外还有可转债、永 续债及永续中票等金融产品都可补 充资本。公司应充分考虑这些混合 型融资工具的优缺点，寻找最合适 的方式。比如对银行来说，优先股 能补充一级资本；但对电力等非金 融企业，可能永续中票更好，不仅 能降低资产负债率，融资成本还低 于优先股；
4. 常态与非常态下的平衡。在发达资 本市场，优先股经常用于一些非常 态的情况，如金融危机爆发后美国 政府通过认购优先股对部分金融机 构注资。此外，优先股也经常作为 并购重组的对价方式。作为董秘， 必须充分考虑在常态和非常态下， 公司该如何有效利用优先股。
作为董秘，如果能做好这4个平衡，就 能有效利用好优先股这个工具为公司、 为全体股东创造价值。
Mr Shi also discussed recent deregulatory reforms in China's asset restructuring sector. The CSRC promulgated the 'Administrative Measures for the Material Asset Reorganisations of Listed Companies' on 24 October 2014. The new measures aim to simplify M&A procedures by getting rid of some administrative permissions.
'China has been simplifying the examination and approval process for M&As and delegating powers to the market since last year,' says Mr Shi. In 2013, a regime of separate scrutiny was adopted which greatly increased the efficiency of the M&A process. Sale conduct which does not amount to back door listing is no longer subject to approval; the pricing mechanism on acquiring assets by issuing stocks has been improved; there has been an increase in the payment methods for M&As; and costs of takeover bids have been reduced. Moreover, when additional shares are issued to major shareholders, there is no need to submit an application for the exemption from tendering offer.
Mr Shi says that these measures have greatly increased the efficiency of M&A activity in China and his company has benefited from the new policies. For example, both the 'Implementation Procedures for Parallel Examination and Approval' and the regime for separate scrutiny have saved the company a lot of time since these reforms have led to a reduction in the number of documents authorities require. With regard to the pricing system, Guangzhou Shipyard International has, where possible, adopted the “120 Days” pricing model provided for in the new measures.
Mr Shi believes that the deregulatory reforms in China's M&A sector, together with other reforms of China's A-share market, will usher in a new surge in M&A activity. He also makes the following predictions about the future of China's M&A sector.
