Private placements on the New Third Board, and the procedure for them

A private placement on the New Third Board means the issue of shares by a company applying to be listed, or by a listed company, to specified subscribers. It covers two situations: a placement after which the total number of shareholders exceeds 200, and an issue by a public company with more than 200 shareholders to specified subscribers.

1. Who may subscribe

1. Shareholders of the company

2. The company's directors, supervisors and senior officers;

Core employees (nominated by the board, made known to all employees for comment, on which the supervisory board gives an express opinion, and approved by the shareholders' meeting).

3. Qualified investors

(1) Institutional investors:

A legal person: registered capital of not less than RMB 5 million;

A partnership: total capital actually paid in of not less than RMB 5 million.

(2) Individual investors:

Securities assets in the investor's own name with a market value of not less than RMB 5 million at the close of the preceding trading day, and at least two years' experience of securities investment, or a professional background or training in accounting, finance, investment, economics or a related field.

Note: the subscribers in categories 2 and 3 together may not exceed 35 in number.

2. Approval of the private placement

1. Applying for the CSRC's approval:

The following documents are submitted to the CSRC:

(1) the prospectus for the private placement;

(2) the legal opinion issued by a law firm;

(3) the audit report issued by an accounting firm qualified for securities and futures business;

(4) the recommendation documents issued by a securities company.

2. Exemption from the CSRC's approval:

(1) where the total number of shareholders after the placement does not exceed 200;

(2) where a public company issues shares within 12 months raising in total less than 20 per cent of its net assets.

(3) Requirements: a. filing with the CSRC (within five working days after each issue);

b. the sponsoring broker shall perform its duty of continuing supervision and give its opinion;

c. the listed company, once the capital has been verified after the issue, completes the filing registration form and goes through the formalities for registering and listing the new shares on the NEEQ system.

3. Methods of issue

1. A single issue

2. Issue in instalments:

(1) the first instalment: within three months of the date of the CSRC's approval;

the number of shares issued: not less than 50 per cent of the total number to be issued;

(2) the remainder: to be issued within 12 months, the company determining each instalment itself;

the number issued in each remaining instalment is determined by the company itself.

Filing requirement: within five working days after each instalment, the issue is reported to the CSRC for filing.

3. A fresh application:

Where no issue is made within the period of validity fixed in the approval document, a fresh approval of the CSRC must be obtained before any issue may be made.

4. The procedure for a private placement

The relevant laws, regulations and business rules for reference:

The Measures for the Supervision and Administration of Non-Listed Public Companies

The Business Rules of the National Equities Exchange and Quotations System for Small and Medium Enterprises