To strictly implement and consolidate the delisting system on a continuing basis, based on the unified arrangements of CSRC, SZSE issued the Notice on Strengthening 2022 Annual Report Disclosure by Companies with a Delisting Risk (the “Notice”) on January 13, and revised relevant announcement formats synchronously. Also, SZSE planned work related to delisting regulation for 2023, and made regulatory requirements on listing companies that have been given a delisting risk warning for financial reasons (“companies with a delisting risk”) in respect of the disclosure of the annual performance forecast, annual report preparation and relevant information for 2022. These are major moves SZSE took to step up regulation over companies with a delisting risk and further improve delisting as a regular practice.
The Notice highlights two principles. First, information disclosure should remain at the core, with greater efforts devoted to the disclosure of delisting risk. On one hand, the frequency of delisting risk disclosure is increased. According to the Notice, a company with delisting risk is required to disclose the first risk warning announcement within one month after the expiration of an accounting year, and disclose subsequent risk warnings once every ten trading days before releasing the annual report. We also revised the announcement formats to make them simpler and easier to read. On the other hand, there are additional requirements on disclosing the progress of annual report preparation. Companies with a delisting risk are required to disclose the updates of annual report preparation and audit work the 20th trading day and 10th trading day prior to the scheduled disclosure date of the annual report. Accounting firms may report to and issue special explanation documents to SZSE if they differ greatly with the listed companies in material accounting treatment, key audit items, types of audit opinions and the scheduling for audit report issuance. Second, the problem-oriented approach should be upheld, with the focus on circumvention of delisting related matters. On one hand, pertinent regulatory requirements are put forward, centering on key issues like the confirmation of deductions from operating revenue, the identification of non-recurring profit and loss, types of audit opinions and abnormal financial treatment. On the other hand, directors, supervisors and senior management members of the companies with a delisting risk and their auditors should be urged to perform their duties in four aspects.
Since the release of the new delisting rules, SZSE has taken solid steps to fulfill its primary responsibility. In 2022, in strict accordance with the standards and procedures prescribed, SZSE made the decision on delisting 24 companies compulsorily. As a result, a number of zombie enterprises were cleared, and a sound market ecosystem, featuring “survival of the fittest through both listings and delistings” is taking shape at a faster pace. Built on the past experience on desilting regulation, the Notice improves the pertinence and efficiency of delisting risk disclosure due to financial reasons.
Going forward, SZSE will continue studying and implementing the guiding principles of the 20th CPC National Congress and the decisions and plans of the Central Economic Work Conference, follow the unified arrangements of CSRC, uphold the market-oriented and rule-of-law principles, and prioritize stability while pursuing progress. Also, SZSE will urge the companies with a delisting risk to perform their duty in information disclosure in strict accordance with the Notice, press ahead with various delisting regulation jobs in line with laws and regulations, maintain normal market orders, and ensure the implementation of the three-year action plan for improving the quality of listed companies, with the aim to protect the legitimate rights and interests of investors and facilitate the healthy and steady development of the capital market in the long run.