First, the new securities law opens a new era of issuance registration system

On December 27, 2015, the 18th meeting of the Standing Committee of the 12th National People's Congress deliberated and adopted the Decision on Authorizing The State Council to adjust and apply the relevant provisions of the Securities Law of the People's Republic of China in the implementation of the Reform of the registration System of Stock Issuance, authorizing The State Council to comply with the requirements of the reform of the registration system of stock issuance. Adjust and apply the provisions of the Securities Law on the stock approval system, and make special arrangements for the specific system of registration system reform. After the introduction of this system, the registration system was partially piloted within the scope of the Science and Technology Innovation Board in March 2019, and it has been fully practiced and tested. The decision will come into effect on March 1, 2016 and will expire on February 29, 2020 after an extension. On this basis, the new Securities Law makes it clear that the public issuance of securities shall implement a registration system, that is, the public issuance of securities must meet the conditions stipulated by laws and administrative regulations, and report to the securities regulatory body under The State Council or the department authorized by The State Council for registration according to law. Without registration according to law, no entity or individual may publicly issue securities. However, the specific scope and implementation steps of the securities issuance registration system shall be formulated by The State Council. Subsequently, The State Council, the China Securities Regulatory Commission, the Shanghai Stock Exchange and the Shenzhen Stock Exchange will orderly promote the implementation of the registration system in accordance with the new securities Law. At the same time, the new Securities Law also establishes a multi-level capital market system, dividing securities trading venues into three levels: stock exchanges, other national securities trading venues approved by The State Council, and regional equity markets established in accordance with the regulations of The State Council. It clarifies the self-regulatory authority of stock exchanges and other national securities trading venues approved by The State Council. It has clarified that the regional equity market established in accordance with the regulations of The State Council can only conduct the issuance and transfer of non-public securities. The implementation of the new securities law means that the approval system of public issuance of securities has become a history, and the registration system has opened a new era in history.

Second, a registration legal system with information disclosure as the core has been established

The core of the "registration system" under the new securities law is to hand over the right to choose to the market on the basis of the perfect information disclosure system, and the government as the auxiliary hand, focusing on post-supervision. The key points of the information disclosure system under the new securities Law are mainly reflected in: issuers and other information disclosure obligations stipulated by laws, administrative regulations and securities regulatory bodies under The State Council shall fulfill the information disclosure obligations in a timely manner and expand the subject of information disclosure obligations; The information disclosed by the obligor shall be true, accurate, complete, concise, clear and easy to understand, without false records, misleading statements or major omissions, and the disclosure standards shall be clearly defined; Where securities are publicly issued and traded both in China and abroad, the information disclosed by the information disclosure obligor abroad shall be disclosed simultaneously in China. Regarding whether to fully disclose the information necessary for investors to make value judgments and investment decisions, it can be judged from the following aspects:

1. Adequacy. Whether the contents disclosed in the IPO application documents contain information that has a significant impact on investors' investment decisions, and whether the degree of disclosure reaches the level necessary for investors to make investment decisions, Including but not limited to whether the issuer's business, technology, finance, corporate governance, investor protection and other aspects of the full disclosure of information and the situation of the issue and the impact on the issuer, whether the full disclosure of all factors that may have a material adverse impact on the issuer's operating conditions, financial conditions and other matters.

2. Consistency. Whether the content of the application documents and information disclosure are consistent, reasonable and inherently logical, including but not limited to whether the financial data is reasonable, whether it conforms to the actual situation of the issuer, whether the non-financial information and financial information are mutually confirmed, whether the sponsor and securities service institution have sufficient verification basis, Be able to make reasonable explanations for changes in financial data or differences with other companies in the same industry.

3. Understandability. Whether the disclosure content of the issuance and listing application documents is concise and easy to understand, whether it is easy for general investors to read and understand, including but not limited to whether it is in plain language, whether it is concise, focused and logical, and whether it is targeted information disclosure in combination with the characteristics of the enterprise itself. The new Securities Law has set up a new special chapter to systematically stipulate the information disclosure system, put forward higher information disclosure requirements on the basis of expanding the scope of information disclosure obligations, clarified the responsibilities of information disclosure obligations, better protected the right of investors, especially small and medium-sized investors to know, and provided a feasible institutional basis for market form options and post-supervision by regulatory authorities.

3. Marketization and clarity of registration system issuance conditions

The registration system under the new securities law has established the market-oriented direction of the issuer's public offering of shares, and further clarified the conditions for the public offering of shares under the registration system. The issuance conditions of the five registration systems under the registration system are basically consistent with the issuance conditions of the pilot registration system of the Science and Technology board, which implements the results of the pilot registration system of the science and Technology board, reflects the market-oriented orientation, and further defines the boundaries of the corresponding conditions, so that the public issuance of stocks by issuers is more predictable. Under the registration system, the registration conditions for public issuance of shares are as follows:

1. Have a sound and well-run organization. Whether under the approval system or the registration system, having a sound and well-run organization is an important condition for issuance. A good organization is the basis for the development of an enterprise, which can ensure the sustainable development of an enterprise, and also ensure that the listed entity complies with the law in the subsequent operation. Good corporate governance must be built on the system construction and power balance of shareholders' meeting, board of directors, board of supervisors and independent directors. The stability of the structure of directors, supervisors and senior executives, core technology and core business personnel is the basis for ensuring the sound and good operation of the organization, so this condition becomes an important reference basis for judging whether an enterprise has a modern enterprise system. The China Securities Regulatory Commission and the stock exchange have formulated more specific requirements in the rules and guidelines for the registration of stock issuance, such as the science and Technology board requires the control of the issuer and the directors and supervisors to remain stable in the last two years, and there can be no major changes.

2. Sustainable business ability. Under the registration system, the essential difference between the approval system and the registration system is to judge whether the enterprise has the conditions for issuing and listing according to the sustainable operation ability. Under the approval system, the regulatory authorities pay more attention to whether the issuer has the profitability, and the fluctuation space of the issuer's financial indicators is limited; Under the registration system, the regulator pays more attention to whether the issuer has sustainable operating ability, reduces the attention to the financial indicators such as the "profitability" of the issuer, and gives the issuance of greater space for financial indicators. This adjustment reflects the thinking of market choice and releases greater operating space for the issuer. How to judge the sustainability of the issuer? Market capitalization will be one of the criteria to determine whether a company has the qualifications to go public. As for the registration system design of securities issuance, its basic structure will still refer to the estimated market value valuation system of the Science and Technology Board, and it is expected that The State Council, the China Securities Regulatory Commission and the stock exchange will formulate a review system of listed market value indicators in line with the current situation of the capital market on the basis of the pilot of the science and Technology Board, according to the positioning and characteristics of the main board and the GEM. However, any valuation of the estimated market value is based on the company's ability to continue as a going concern. With reference to the "Shanghai Stock Exchange Science and Technology Board Stock Issuance and Listing Review Q&A" (hereinafter referred to as "Science and Technology Board Review Q&A") on the judgment of sustainable business ability, the following ten aspects are mainly used to predict whether the listed enterprise has sustainable business ability: The issuer's industry is subject to the risk of major adverse changes due to national policy restrictions or international trade conditions; Cyclical recession, overcapacity, sharp decline in market capacity, stagnant growth, etc., in the issuer's industry; The issuer's industry has low entry threshold and fierce competition, and it has no obvious advantages in technology, capital and scale effect compared with rival issuers. Material changes in the upstream and downstream supply and demand relationship of the industry in which the issuer operates, resulting in material adverse changes in the purchase price of raw materials or the selling price of products; Due to the negative impact of business transformation, the operating income, gross margin, cost expenses and profit level of the issuer have significant adverse changes, and the operating performance of the latest period has not shown a significant improvement trend; There is a material adverse change in an important customer of the issuer that will have a material adverse impact on the stability and continuity of the issuer's business; The market share of the issuer continues to decline due to outdated processes, backward products, technological changes, and research and development failures, major impairment risks occur in important assets or main production lines, and the main business stagnates or shrinks; A number of business data and financial indicators of the issuer show a worsening trend, and there is no sign of improvement in the short term; There are major disputes or lawsuits over important assets or technologies such as trademarks, patents, proprietary technology and franchise rights that have a significant impact on the issuer's business operations or revenue realization, which have had or will have a significant impact on the issuer's financial position or operating results; Other circumstances that significantly affect or lose the ability to continue operations.

3. The financial accounting report of the last three years has been issued without qualified opinion audit report. Under the registration system under the new securities Law, according to the requirements of the issuer's operation, finance and internal control, the accounting firm of a professional securities service institution is handed over to judge, and whether the audit report with standard unqualified opinion is issued as the standard for judging the financial accounting standards of enterprises. Accounting firms bear joint liability for the authenticity, accuracy and integrity of the audit report issued by the standard unqualified opinion with the issuer, which increases the professional responsibility and professional risk of securities service institutions. However, under the approval system, "the financial situation is good and there is no false record in the financial accounting documents of the last three years" to "the financial accounting report of the last three years has been issued an unreserved opinion audit report" is a major legislative progress. Because good financial status and no false records require subjective judgment, and the standard boundary is fuzzy, the audit department has a large space for artificial operation; Under the registration system of the new securities law, the "unqualified audit report" is an objective condition and the standard is clear, which puts the responsibility of judging the financial status of the issuer on the work of the intermediary, and the judgment standard of financial norms is more clear.

4. The issuer and its controlling shareholders and actual controllers have not committed any criminal crimes of embezzlement, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy in the recent three years. As far as compliance audit is concerned, the compliance condition under the approval system is "issuer has no other major illegal acts", which is broad in scope and covers both major illegal acts and criminal acts. On the other hand, the criterion of this condition is vague, and the judgment of major violations has great subjective factors and artificial space. Under the registration system, the legal compliance requirements of issuers are refined to specific criminal categories, which not only Narrows the scope of compliance audit, but also clarifies the standard boundary of compliance, which is a major legislative progress and a great benefit to issuers. At the same time, compared with the approval system, the registration system has expanded the scope of the subject of compliance audit from the issuer to the controlling shareholder and actual controller of the issuer, which is more in line with the actual regulatory standards. According to the "Science and Technology Board audit Questions and Answers", the last three years generally refer to the last 36 months. As for the issuer and its controlling shareholders and actual controllers involved in criminal crimes, in addition to the crime of embezzlement and bribery, the crime of embezzlement of property, the crime of misappropriation of property and the crime of destroying the socialist market economic order as stipulated in the specific provisions of the criminal law are all within the scope of examination and verification. The crime of destroying the socialist market economic order in the criminal law is the main part of the criminal law, and 108 crimes are determined. According to the provisions of the new securities Law, only four categories of crimes are not included in the scope of the provisions of this article: endangering national security, endangering public security, endangering national defense interests, and soldiers violating their duties.

5. Other conditions prescribed by the securities regulatory body under The State Council as approved by The State Council. This article leaves room for institutional regulation. The field of public offering of securities involves different securities markets, enterprises of different economic types and diversified securities varieties. In the practice process of the registration system, regulators will flexibly formulate or adjust the registration conditions according to the development stage of the securities market and the actual needs of supporting the real economy. At the same time, according to the provisions of the Securities Law, the listing conditions stipulated by the listing rules of the stock exchange will put forward more specific requirements on the operating years, financial status, minimum public issuance ratio, corporate governance and integrity record of the issuer.

Fourth, the predictability of the issuing and listing cycle of enterprises

In addition to the issuance conditions, the cycle of issuing public shares and listing under the approval system has great unpredictability, and it is also a criticized problem. The predictability of public offering and listing cycle under the registration system is another important reference standard for judging the registration system. The new securities law stipulates that the initial public offering of shares, the audit inquiry is limited to three months, but the issuer's supplementary and revised reply feedback time is not counted. Therefore, it is possible to predict the issuance approval time of the company and the time to reply to the feedback of the governance norms can be basically controlled in about 6 months. Therefore, the listing of the issuer within one year will become the normal for corporate issuers to publicly issue shares and go public.

5. Establish issuance failure and repurchase system

Under the new securities law, the purpose of the registration system is to publicly issue stocks and other securities in a market-oriented way, which inevitably leads to the possibility that the issuer is not favored by investors or the overvaluation is not accepted, leading to the failure of the issuance. According to the new Securities Law, the maximum period for the commission or exclusive sale of securities shall not exceed 90 days. When a stock issue adopts the form of commission sale, the issue shall fail if the number of shares sold to investors does not reach 70% of the number of shares to be publicly issued at the expiration of the commission period. The issuer shall return the shares to the subscriber at the issue price plus the interest on the deposit in the bank for the same period. At the same time, the new Securities Law also stipulates that if an issuer conceals important facts or fabricates major false contents in the securities issuance documents such as the prospectus, and has issued and listed the securities, the securities regulatory body under The State Council may order the issuer to buy back the securities, or order the responsible controlling shareholder or actual controller to buy back the securities. This means that even if the issuer has successfully issued shares, if it is found that the listed company has concealed important facts or significant false listing, the China Securities Regulatory Commission can require the issuer or the controlling shareholder, the actual controller to buy back the shares. The establishment of the issuance failure system and the repurchase system in the Securities Law has improved the post-supervision system and realized the supervision of the whole process of issuers' public issuance of securities.