CHINA Law and Practice Contributed by: Bing Zhai, Commerce & Finance Law Offices
4.3 Hurdles to Stakebuilding Companies cannot set higher reporting thresh - olds than those mandated by law, but they may lower the thresholds in their articles of incor - poration or by-laws. Other common hurdles to stakebuilding include regulatory scrutiny, restric - tions on foreign ownership in certain sectors and the need for approvals from authorities like the CSRC. 4.4 Dealings in Derivatives Dealings in derivatives, such as equity swaps or options, are allowed in China. However, they are subject to strict regulatory oversight to prevent market manipulation and ensure transparency. 4.5 Filing/Reporting Obligations Concerning securities disclosure laws, holdings through derivatives that confer economic or vot - ing rights equivalent to shares must be disclosed under the same thresholds as direct sharehold - ings. Concerning competition laws, if the deriva - tive position could influence control or market competition, it may trigger antitrust filings with the SAMR. 4.6 Transparency When an acquirer holds a certain percentage of shares in a listed company, it triggers mandatory information disclosure obligations in the Chinese securities market. Depending on the acquirer’s shareholding ratio and whether it becomes the largest shareholder or de facto controller of the listed company, the acquirer or its engaged intermediaries must prepare different types of disclosure documents. Through a simplified equity change report, as stipulated in the Administrative Measures on the Acquisition of Listed Companies and the Con - tent and Format Guidelines No 15 for Informa - tion Disclosure of Companies Offering Securities
on a stock exchange, they must prepare an equity change report within three days from the date of the occurrence of such event. This report must be submitted to the CSRC and the stock exchange, notified to the listed company and publicly disclosed. During this three-day period, the investor and persons acting in concert are prohibited from further trading the shares of the listed company. • After reaching the 5% threshold, if the shareholding of the investor and persons acting in concert increases or decreases by 5% through securities trading on a stock exchange, they must comply with the report - ing and disclosure requirements outlined in the foregoing. Additionally, from the date of the occurrence of such event until three days after the disclosure, they are prohibited from further trading the shares of the listed com - pany. • After reaching the 5% threshold, if the share - holding of the investor and persons acting in concert increases or decreases by 1%, they must notify the listed company and make a public disclosure on the day following the occurrence of such event. • If an investor and persons acting in concert intend to acquire at least 5% of the issued shares of a listed company through an agree - ment transfer, they must prepare an equity change report within three days from the date of the occurrence of such event. This report must be submitted to the CSRC and the stock exchange, notified to the listed com - pany and publicly disclosed. • After reaching the 5% threshold through an agreement transfer, if the shareholding of the investor and persons acting in concert increases or decreases by 5% or more, they must fulfil the reporting and disclosure obliga - tions outlined in the foregoing.
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