In February this year, the China Securities Regulatory Commission published the Implementing Method for Losing Listed Companies to Temporarily Suspend and Terminate Listing. Since it was put into practice, three listed companies have been de-listed and withdrawn one after another from the stock market. Letting loss-making listed companies withdraw from the market is a means to select the superior and weed out the inferior, which is conducive to impelling listed companies to better their operation and management and improve their overall qualities, it also guides investors to establish a correct investing idea. Despite the achievements gained since its implementation, there are still rooms for improvement in the aspects of operation and transparency.

According to the China Securities Regulatory Commission, in the New Method, important revisions have been made in regard to the authority and procedure of ratification and stock exchange.

Compared with the old method, the New De-listing Method contains the following revisions:

Firstly, in line with related stipulations of the Corporation Law and the Securities Law, the China Securities Regulatory Commission authorizes the stock exchanges to legally make the decision on the suspension, restoration and termination of listing.

Viewed from the perspective of common international practice, the company's listing is an arrangement made in accordance with the agreement reached between the Stock Exchange and the company. Under the circumstance of meeting the requirements prescribed by the Stock Exchange, the company signs a listing agreement with the Stock Exchange, then the company's stocks can be transacted in the bourse. Conversely, if the listed company fails to meet the listing requirements, the Stock Exchange has the right to terminate the listing agreement signed with the listed company and make a decision to terminate listing. This stipulation of the New Method means taking a step closer to the common international practice and gives expression to the marketization principle of de-listing .

Secondly, the New Method abolishes the relevant procedures concerning the application for a grace period.

If a company suffers losses for three consecutive years, it shall suspend listing its stocks on the market. If the company still fails to reverse losses in the first six months after the temporary suspension of listing, the Stock Exchange will directly make a decision on terminating listing. If the company makes profits, it may apply for restoration of listing in accordance with the procedures as stipulated in the New Method. This enhances objectivity, reduces subjective factors and simplifies procedures.

Finally, the New Method abolishes the "PT" (Particular Transfer) system. After the company temporarily suspends listing, the transaction of its stocks shall be immediately stopped, the Stock Exchange shall cease providing transfer service.

The PT system aims to provide conveniences for the shareholders to transfer shares. This system has played an active role in releasing market risks since it was put into effect. But the PT stock speculation phenomenon has magnified market risks. The New Method has abolished the PT system. Companies terminated listing may entrust securities dealers approved by the China Securities Business Association to provide the service of transferring stocks for them, so as to protect the share-holders' right of stock transfer.

( December 06, 2001)