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2024-07-23 09:00:00
1.Overview of Holding Companies
A holding company, that is, it basically does not operate specific businesses by itself, and its main income and profits basically come from the subsidiaries in the consolidated financial statements. According to public channel searches, cases of successful listings of holding companies have not been uncommon in recent years. Among the more typical types are holding companies registered and established overseas with their main business entities located within China (such as Beijing Novogene Biotech Co., LTD., which was listed on the STAR Market on September 21, 2022, and China Resources Microelectronics Co., LTD., which was listed on the STAR Market on February 7, 2020). And group holding companies (such as Liaoning He's Eye Hospital Group Co., LTD., which was listed on the Growth Enterprise Market on March 22, 2022, and Zhongshan Huali Industrial Group Co., LTD., which was listed on the Growth Enterprise Market on April 26, 2021).
2.Legality Analysis of the Listing of Holding Companies
(1) Laws, regulations and regulatory requirements
According to Article 30 of the "Administrative Measures for the Initial Public Offering of Stocks and Listing" (2016) (hereinafter referred to as the "Administrative Measures") :
The issuer shall not have the following circumstances that affect the continuous profitability:... (4) The net profit of the issuer in the most recent fiscal year mainly came from investment income outside the scope of the consolidated financial statements.
Article 71 of the "Work Standards for Due Diligence of Sponsors" (2022) (hereinafter referred to as the "Work Standards")
Investigate whether the issuer has formulated specific investor protection measures under circumstances such as red-chip structure, special voting rights structure, agreement control structure or similar special arrangements, including but not limited to the following contents:
... If the issuer is a holding company, it shall verify the contents of the profit distribution provisions in the articles of association and financial management system of the major holding subsidiaries, as well as whether it can effectively ensure that the issuer has the ability to distribute cash dividends in the future. Whether the issuer's ability to distribute profits is restricted by aspects such as foreign exchange control, regulatory and policy requirements of the place of registration, constraints of debt contracts, profit levels, and unremedied losses at the end of the period, and the specific impacts of these factors on profit distribution, as well as solutions or improvement measures.
Chapter 6 Investor Protection Investigation of the "Detailed Rules for the Catalogue of Working Papers on the Sponsorship Business of Securities Companies' Initial Public Offering of Stocks and Listing" (2022) (hereinafter referred to as the "Detailed Rules")
"6-1-5 If the issuer is a holding company, the provisions on profit distribution in the articles of association and financial management system of the major holding subsidiaries, as well as the specific impact of foreign exchange control, regulations of the place of registration, etc. on profit distribution, and relevant materials."
(II) Preliminary Conclusion
According to the search of regulations, the current laws, administrative regulations and regulatory provisions have no restrictive provisions on holding companies as listing entities. Moreover, according to Article 30 of the "Administrative Measures", the basis for judging the sustainable profitability of the issuer is the consolidated financial statements. If the financial indicators of the issuer's consolidated financial statements meet the relevant regulations, it can meet the conditions for the initial public offering. However, according to Article 71 of the "Working Standards" (2022) and the "Detailed Rules of the Catalogue" 6-1-5, a holding company whose profits mainly come from its subsidiaries, as the issuer, shall verify and disclose the content of the profit distribution provisions in the articles of association and financial management system of its major holding subsidiaries, as well as whether it can effectively ensure that the issuer has the ability to distribute cash dividends in the future. Whether the issuer's ability to distribute profits is restricted by aspects such as foreign exchange control, regulatory and policy requirements of the place of registration, constraints of debt contracts, profit levels, and unremedied losses at the end of the period, and the specific impacts of these factors on profit distribution, as well as solutions or improvement measures. After searching through public channels, it is found that there have been many cases of successful listings of holding structure enterprises in the past three years. Accordingly, if the issuer is a holding company structure, there are no substantive obstacles when applying for listing.
(III) Reference Cases
Serial number | 01 |
Abbreviation (Code) | Novogene (688428) |
Listed board | Star Market |
Listing time | 2022-9-21 |
Brief summary | Novogene Biopharmaceuticals Limited is a holding company incorporated in the Cayman Islands, with its main business entity located within China. The dividends paid by domestic subsidiaries to the company are subject to the relevant restrictions on company dividends and foreign exchange supervision stipulated by Chinese laws and regulations. Novartis is an innovative biopharmaceutical enterprise driven by its outstanding independent research and development capabilities. It possesses comprehensive R&D and commercialization capabilities, focusing on areas with significant unmet clinical needs such as oncology and autoimmune diseases, and developing best-in-class or first-in-class drugs with breakthrough potential in the global market. |
Serial number | 02 |
Abbreviation (Code) | Bona Film Group (001330） |
Listed board | Main Board of the Shenzhen Stock Exchange |
Listing time | 2022-8-18 |
Brief summary | The parent company of Bona Film Group is itself a management-oriented holding company. Its main business is mainly operated by its wholly-owned subsidiaries, including Zhejiang Bona Film and Television Production Co., LTD., Tianjin Bona Culture Media Co., LTD., Horgos Bona Culture Media Co., LTD., Beijing Bona International Cinema Investment Management Co., Ltd. and its affiliated cinemas, etc. The company is the first private enterprise in China to engage in film distribution business. It has been deeply involved in the film and television industry for many years and has continuously extended to the upstream and downstream of the industrial chain. It has now become a well-known film group company with a full industrial chain layout in the industry. The company's main business is the investment, distribution, cinema chain and cinema business of films. |
Serial number | 03 |
Abbreviation (Code) | Ruitai New Materials (301238） |
Listed board | Growth Enterprise Market |
Listing time | 2022-6-17 |
Brief summary | The current business of Ruitai New Materials is mainly implemented by its subsidiaries such as Huarong Chemical and Chaowei New Materials. The company is mainly responsible for formulating the overall development strategy and controlling and managing its subsidiaries. The company's profits mainly come from the investment income in its subsidiaries. The profit distribution policies, specific distribution methods and distribution time arrangements of the subsidiaries are all controlled by the company. Moreover, the articles of association of the major subsidiaries have stipulated that the profits distributed in cash each year shall not be less than 30% of the distributable profits realized in the current year. Ruitai New Materials mainly engages in the research and development, production and sales of lithium-ion battery materials and chemical new materials such as silane coupling agents. |
Serial number | 04 |
Abbreviation (Code) | Minglida (301268) |
Listed board | Growth Enterprise Market |
Listing time | Growth Enterprise Market |
Brief summary | Minglida is a holding company that has not engaged in specific research and development or production. It mainly undertakes administrative, financial and other management functions and is involved in some sales business. The company specializes in the design, research and development, production and sales of precision structural components and molds. With product research and development, mold design and process design and innovation as its core, and based on precision die-casting, precision injection molding, profile processing and metal stamping technologies, it provides various types of one-stop precision structural components for high-quality customers at home and abroad. |
Serial number | 05 |
Abbreviation (Code) | He's Eye Hospital (301103) |
Listed board | Growth Enterprise Market |
Listing time | 2022-3-22 |
Brief summary | He Shi Eye Hospital is a group-holding chain medical service institution that provides specialized ophthalmic diagnosis and treatment services and optometry services through a three-level eye health medical service model. Among them, the eye care service institution is the main source of the company's income. Aimu Trading Company, Xiongan Management Company, and others all provide supporting auxiliary services such as procurement and management around the three-level eye health medical service model. The company's main business is to provide specialized ophthalmic diagnosis and treatment services and optometry services for patients with eye diseases. |
Serial number | 06 |
Abbreviation (Code) | Hetaike (301022) |
Listed board | Growth Enterprise Market |
Listing time | 2021-7-2 |
Brief summary | Haitaike has a total of 3 entities (including the parent company of the issuer and its two subsidiaries), among which the parent company of the issuer is a holding platform company and has no actual business operations. The subsidiary, Thailand Haitaike, was established in July 2019. It has a relatively short history and is still in the early stage of development with a small business scale. The subsidiary, Hetaike Mould, was the main business entity of the issuer during the reporting period. The company is mainly engaged in the research and development, design, manufacturing and sales of injection molds and plastic components. The company adheres to injection molds as its foundation, constantly enhancing the automation and intelligence levels of mold manufacturing, and providing injection molds and plastic parts for modern manufacturing industries. The company's injection molds and plastic components are currently mainly applied in the automotive industry. |
Serial number | 07 |
Abbreviation (Code) | 欢乐家（300997） |
Listed board | Growth Enterprise Market |
Listing time | 2021-6-2 |
Brief summary | Since the implementation of the relocation and transformation plan of Huanlejia, the issuer has become a holding company, and the issuer's future profits will mainly come from the dividends of each holding subsidiary. Since its establishment, the company has been committed to the research and development, production and sales of food and beverage products such as canned fruits, plant protein beverages, fruit juice beverages and lactic acid bacteria beverages. |
Serial number | 08 |
Abbreviation (Code) | Huali Group (300979) |
Listed board | Growth Enterprise Market |
Listing time | 2021-4-26 |
Brief summary | The business of Huali Group is mainly operated by its wholly-owned subsidiaries. The parent company is mainly responsible for the control and management of its holding subsidiaries. The company's profits mainly come from each subsidiary, and the funds for cash dividend distribution mainly come from the cash dividends of the subsidiaries. Huali Group is engaged in the development, design, production and sales of sports shoes and is a world-leading professional manufacturer of sports shoes. Mainly provide development, design and manufacturing services for globally renowned sports brands such as Nike, Converse, Vans, Puma, UGG, Columbia, Under Armour, HOKA ONE ONE, etc. The main products include sports casual shoes, outdoor boots and shoes, sports sandals/slippers, etc. The company has established long-term and stable cooperative relationships with five of the top ten companies in the global sports shoes and clothing market share. |
Serial number | 09 |
Abbreviation (Code) | China Resources Microelectronics (688396) |
Listed board | Star Market |
Listing time | 2020-2-27 |
Brief summary | China Resources Microelectronics is a company established under the Companies Act of the Cayman Islands. It has no actual production and operation business of its own and is a holding company. Its operating entities are mainly located within the territory of China. The company is a leading semiconductor enterprise in China with integrated operation capabilities covering the entire industrial chain, including chip design, wafer manufacturing, packaging and testing. Its products focus on power semiconductors, intelligent sensors and intelligent control fields, providing customers with a wide range of semiconductor products and system solutions. The company's product design is independent and the manufacturing process is fully controllable. It has strong product technology and manufacturing process capabilities in both discrete devices and integrated circuits, and has formed advanced characteristic processes and a series of product lines. |
3.Legality Analysis of the Listing of Holding Companies
Based on the feedback from the listing of relevant holding companies, the main concerns of the listing review inquiries for holding companies are as follows:
(1) Profit distribution of subsidiaries
Given that the holding company itself does not participate in the actual operation and its profits mainly come from its subsidiaries in the consolidated financial statements, the audit inquiries of the holding company are usually required to explain or supplement the disclosure of the dividend situation of the subsidiaries during the reporting period, the financial management system and the dividend terms stipulated in the articles of association of the company. It is also required to explain whether the financial management system and dividend terms of the subsidiary can ensure that the issuer has a continuous and stable cash dividend distribution capacity in the future. The reference cases are as follows:
Serial number | 01 |
Abbreviation (Code) | 诺诚健华（688428） |
Listed board | Star Market |
Listing time | 2022-9-21 |
Review inquiry Matters of Concern
| First round of review inquiries: Question 8. Regarding holding companies According to the prospectus, the issuer is a Cayman Islands Company, and currently its revenue mainly comes from its domestic subsidiaries. Please ask the issuer to explain: (1) In combination with the profit distribution provisions in the articles of association and financial management system of the important subsidiaries, and the actual dividend distribution situation of the important subsidiaries during the reporting period, analyze the company's control ability over the relevant decisions of the subsidiaries and whether it has the ability to distribute cash dividends in the future; |
Serial number | 02 |
Abbreviation (Code) | Bona Film Group (001330） |
Listed board | Main Board of the Shenzhen Stock Exchange |
Listing time | 2022-8-18 |
Review inquiry Matters of Concern
| Feedback: I. Normative Issues 2. The prospectus discloses that the issuer has a large number of subsidiaries, and its revenue mainly comes from these subsidiaries. (5) Please have the issuer supplement the disclosure of the dividend situation of its subsidiaries during the reporting period, the dividend terms stipulated in the financial management system and the articles of association of the subsidiaries, and explain whether the above-mentioned financial management system and dividend terms can ensure that the issuer has the ability to distribute cash dividends in the future. Please have the sponsor institution and the reporting accountant verify and express a clear opinion on whether it can ensure that the issuer has the ability to distribute dividends in the future. Please have the sponsor institution and the issuer's accountant verify the above matters and express clear verification opinions. |
Serial number | 03 |
Abbreviation (Code) | Ruitai New Materials (301238 |
Listed board | Growth Enterprise Market |
Listing time | 2022-6-17 |
Review inquiry Matters of Concern
| First round of review inquiries: 1. Regarding spin-off listing (3) Explain the dividend distribution situation of the issuer's holding subsidiaries during the reporting period. Can the dividend terms stipulated in the financial management systems and articles of association of these subsidiaries ensure that the issuer will have a continuous and stable cash dividend distribution capacity in the future? |
(II) The issuer's control and management over its wholly-owned subsidiaries
The review inquiries for holding companies are usually required to explain or supplement the disclosure of how the issuer maintains effective control over its holding subsidiaries and whether it has the ability to control the production and operation decisions of the subsidiaries, including the ability to control aspects such as personnel, business, technology, finance, research and development, procurement and sales, as well as quality control and internal control of the subsidiaries. The reference cases are as follows:
Serial number | 01 |
Abbreviation (Code) | Novogene (688428) |
Listed board | Star Market |
Listing time | 2022-9-21 |
Review inquiry Matters of Concern
| First round of review inquiries: Question 8. Regarding holding companies According to the prospectus, the issuer is a Cayman Islands Company, and currently its revenue mainly comes from its domestic subsidiaries. Please ask the issuer to explain: (1) In combination with the profit distribution provisions in the articles of association and financial management system of the important subsidiaries, and the actual dividend distribution situation of the important subsidiaries during the reporting period, analyze the company's control ability over the relevant decisions of the subsidiaries and whether it has the ability to distribute cash dividends in the future; (2) In light of the Cayman Islands Companies Act, the company's articles of association, overseas listing rules and other relevant regulations, analyze the preconditions and restrictive factors for the company's dividend distribution based on the constraints of debt contracts, the company's loss situation and future business plans. |
Serial number | 02 |
Abbreviation (Code) | Minglida (301268) |
Listed board | Growth Enterprise Market |
Listing time | 2022-4-7 |
Review inquiry Matters of Concern
| The first round of review inquiries: 24. Regarding subsidiaries (3) Based on the main financial data and business contents of the parent company and subsidiaries, disclose whether the issuer is a holding company, how the issuer maintains effective control over its subsidiaries and grandsubsidiaries, how it ensures the issuer's continuous acquisition of dividends from subsidiaries, and whether there are upstream and downstream relationships in the purchase and sale or production links between the parent company and subsidiaries and subsidiaries. Whether there are large-scale pricing transfer situations and whether there are tax risks. |
Serial number | 03 |
Abbreviation (Code) | Ruitai New Materials (301238 |
Listed board | Growth Enterprise Market |
Listing time | 2022-6-17 |
Review inquiry Matters of Concern
| First round of review inquiries: 1. Regarding spin-off listing (3) Explain the dividend distribution situation of the issuer's holding subsidiaries during the reporting period. Can the dividend terms stipulated in the financial management systems and articles of association of these subsidiaries ensure that the issuer will have a continuous and stable cash dividend distribution capacity in the future? Whether the corporate governance structure of the issuer after the asset reorganization is sound, whether the issuer actually has control over its holding subsidiaries, and whether there are management and operation risks; The destination and specific uses of the large dividend funds of the issuer in 2017, the reasons for not distributing cash dividends in 2018, the policies on dividend distribution in the articles of association of the company before the issuance and listing, whether the implementation of the above-mentioned dividend distribution of the issuer complies with the relevant provisions of the articles of association, and whether the necessary approval procedures have been fulfilled; The impact of implementing cash dividends on the issuer's financial position and production and operation. |
4.Suggestions and Tips
Based on the above analysis, if the issuer is a holding company structure, there are no substantive obstacles when applying for listing. However, exchanges and regulatory authorities usually pay special attention to the profit distribution of the issuer's subsidiaries and the issuer's control and management over its holding subsidiaries. In view of this, it is suggested that companies planning to adopt the holding company listing model:
Before going public, improve the dividend system of subsidiaries within the scope of consolidated financial statements. The dividend provisions must be clearly stipulated in the articles of association of the subsidiaries to ensure that the subsidiaries have a sufficient dividend ratio each year, enabling the issuer to have a continuous and stable cash dividend distribution capacity in the future. The dividend distribution system directly determines the sustainability of the parent company's operating income and net profit, that is, the issuer's continuous profitability. It is recommended that the subsidiary clearly define the annual dividend ratio and reflect it in the company's articles of association and relevant systems. It is better if there are dividend records of the subsidiary during the reporting period.
2. Before going public, establish a relatively complete internal management and control system to effectively manage the equity, business decision-making, human resources, finance, customer development and service, infrastructure procurement, safety production, investment management and other aspects of each holding subsidiary.