Chinese regulators have requested additional details from Ruike Advanced Materials regarding its proposed Hong Kong listing, specifically concerning the valuation and tax payments related to its acquisition of domestic entities by an overseas firm.
On August 14, the China Securities Regulatory Commission (CSRC) released its latest round of supplemental filing requirements for companies seeking overseas listings. The CSRC's International Department issued comments to eight companies, including Ruike Advanced, which was asked to clarify whether its acquisition structure complies with regulations governing foreign investors' mergers with domestic enterprises.
Key areas of regulatory inquiry
Regulators have requested Ruike Advanced to address the following points, with legal opinions required from its counsel. First, the company must explain the transaction consideration, pricing basis, and tax payment status for the overseas entity's acquisition of onshore operations, and whether this complies with the Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, as well as relevant foreign exchange, foreign investment, and tax management rules.
Second, regarding the internal restructuring involving the acquisition of Ruihua Xindian, the company is asked to update its filing report and equity structure chart accordingly. It must also disclose the revenue, profit, total assets, and net assets of its domestic operating entities after the acquisition, and how these figures compare to the consolidated financial statements.
Third, the CSRC has questioned why LOW Loke Chew is not identified as a joint controller, given his familial relationship with actual controller HWANG Shin Hung, his ability to exercise voting control, and his significant influence over corporate decisions.
Fourth, the company must clarify whether there has been any share entrustment arrangement in the historical evolution of its main domestic operating entities. If so, it must verify whether such shares have been fully restored and registered with the industrial and commercial authorities. It must also provide a conclusive opinion on the legality of all past equity changes.
Fifth, Ruike Advanced is required to disclose the composition and roles of its equity incentive participants, including any affiliations with other shareholders, directors, supervisors, or senior management. It must also confirm that no individuals prohibited by law from participating in equity incentives are involved. The company must explain the fairness of the subscription price, contractual terms, decision-making procedures, and operational compliance, and provide a clear conclusion on whether there is any conflict of interest. Additionally, it must detail the rationale for reserved shares, the criteria and timeline for their allocation, and whether any Chinese residents are included.
Sixth, the company must explain the specific business scope of its subsidiaries Ruihua Xindian, Ruihua Gaoke, and Ruihua Property, which involve real estate development, property management, and leasing. It must clarify whether these activities are actually carried out, and whether they fall within negative list restrictions on foreign investment. The CSRC also wants to know whether the company will continue to comply with foreign investment access requirements before and after the listing.
Seventh, the company is asked to list the main business of each domestic operating entity, their specific roles in the overall corporate structure, and the relevant business licenses obtained. It must also describe its business model and core competitiveness in plain language, referencing its main products or services, key customers and suppliers, industry position, and comparable companies.