Chinese Update – U.S. Listed Chinese Companies and the Holding Foreign Companies Accountable Act
摘要
On May 21, 2020, the United States Senate passed the Holding Foreign Companies Accountable Act (the “Bill”) with unanimous consent. If it becomes law, the Bill would apply to Chinese companies, among others, listed on U.S. securities exchanges and require them to comply with U.S. regulatory and audit standards and information sharing, notwithstanding that to do so may result in a breach of Chinese law. The consequence of non-compliance would be a prohibition on the trading of the company’s securities on any national securities exchange or through any over-the-counter method in the United States. The compliance dilemma facing companies reporting in the U.S., but with audited operations in China, is rooted in the tension between the laws of China and the United States. Therefore, unless there is a reconciling and collaborative response at the regulatory level between the two countries, which the CSRC has noted it is keen to pursue, there does not seem to be an apparent path to compliance for a U.S. Reporting Chinese Company who wishes to maintain its U.S. listing status. As such, we anticipate that the Bill, if passed into law, may prompt and accelerate a new wave of “going private” transactions by Chinese issuers listed in the U.S., or moving their listing to a Hong Kong securities exchange, in order to avoid the consequences of a lack of compliance in their respective jurisdictions.
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