Shanghai exchange to implement stronger delisting rules  

(ECNS) – The Shanghai Stock Exchange (SSE) unveiled revised delisting rules on Sunday to implement the China Securities Regulatory Commission (CSRC)'s guide on tougher delisting, a move to oust trash stocks and improve the stock market.

The new rules, which come into effect on November 16, further encourage and protect voluntary delisting, and strengthen compulsory delisting of companies caught cheating in share issuance or information disclosure.

To protect small and medium size investors, voluntary delisting has to be approved by at least two-thirds of all shareholders, as well as at least two-thirds of all small and medium size shareholders at shareholder meetings.

Firms that are fraudulent in handling their information can resume trading after taking remedial action. But those that commit fraud in share issuance will be removed within one year after the suspension.

Under China's current policy, a company's net profit is the major indicator of whether its listing should be suspended. A delisting procedure is started if a company reports losses for three consecutive years.

Although delisting is common in the US and other markets, it's rare in China, where big shareholders and local governments decide whether a company should exit the market. Some companies caught cheating on their financial statements or other documents have only been fined while their stocks could still trade.

Official data show that since 2000, only 78 companies have been delisted from the Shanghai and Shenzhen exchanges.

Experts say the revised delisting rules would help make delisting more market-oriented, and that strict enforcement is key to success.