CHINA Law and Practice Contributed by: Shuting Qi, Han Kun Law Offices
Amendments to the Takeover Measures On 27 March 2025, the Measures for the Administra - tion of the Takeover of Listed Companies (the “Takeo - ver Measures”) were amended by the CSRC. While the amendments primarily involved technical adjust - ments to maintain consistency with the new PRC Company Law and other securities regulations, such as deleting references to supervisors and replacing “shareholders’ general meeting” with “shareholders’ meeting”, they reaffirmed the CSRC’s commitment to streamlining the takeover framework. On 16 May 2025, the CSRC amended the Measures for the Administration of the Material Asset Restruc - turing of Listed Companies, with the aim of simpli - fying the review procedures, enhancing transaction efficiency and increasing deal flexibility. Clarification of Disclosure Rules On 10 January 2025, the CSRC issued Opinion No. 19 on the Application of Securities and Futures Laws – Opinion on the Application of Articles 13 and 14 of the Measures for the Administration of the Acquisition of Listed Companies (“Opinion No. 19 on the Application of Securities and Futures Laws”). This opinion clarifies the 5% and 1% disclosure thresholds by adopting a tick mark standard, meaning disclosure is triggered only when an investor’s shareholding reaches an exact multiple of 5% or 1%. It also confirms that passive changes due to share capital reductions do not trigger disclosure obligations. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies Though strictly constrained by mandatory disclosure and insider trading rules, stakebuilding prior to a for - mal takeover offer is a customary practice in Chinese public M&A. The principal strategies are as follows: • Incremental open market purchases: Bidders carry out incremental open market purchases through stock exchange trading, gradually acquiring shares to manage price fluctuations and defer reaching the mandatory disclosure threshold to avoid pre - mature market signalling.
• Off-market block trades: Acquirers conduct off- market block trades by negotiating bulk share transfers directly with institutional investors or major existing shareholders, allowing for quick stake accumulation without disturbing regular exchange trading. • Pre-offer controlling shareholder agreements: Bid - ders sign pre-offer agreements with the target’s controlling shareholders to secure a targeted stake transfer, which lays a solid foundation for a sub - sequent voluntary or mandatory tender offer and requires careful pacing to avoid triggering early disclosure. 4.2 Material Shareholding Disclosure Threshold China’s shareholding disclosure and filing regime is set out in Articles 13 and 14 of the Takeover Measures and Opinion No. 19 on the Application of Securities and Futures Laws, covering both exchange trading and off-exchange agreement transfers with uniform regulatory thresholds. • For stock exchange-based trading, investors and persons acting in concert must prepare and submit an equity change report to the CSRC and relevant stock exchange, notify the listed company, and publish an announcement within three days once their stake reaches 5% of the issued shares; no further share trading is permitted during this three- day period unless exempted by the CSRC. After hitting 5%, every 5% incremental or decremental change triggers the same reporting and trading suspension rules. Any illegal excess share pur - chases will result in voting rights being suspended for 36 months for the over-proportional stake. In addition, every 1% change requires notification to the listed company and public disclosure on the next trading day. • For agreement transfers, investors must complete the reporting, notification and announcement requirements within three days from the day when their stake reaches or exceeds 5% and are barred from further share trading before finishing these procedures.
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