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Australia's Public Listing: Ten Key Control Points for Chinese Enterprises

2019-6-6

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Since June 20, 2016, Australia has opened its Smart Gate system to citizens of China (including Hong Kong SAR, Macao SAR), Japan, Korea and France. Citizens holding Chinese passports can enjoy the same entry treatment as citizens of many developed countries. But the rumors on the Internet that Australia will exempt or land-sign our country may only be a good expectation of our country's future strength.
At the same time, Australia has also opened its doors to Chinese enterprises to seize the beach of its capital market. For the recent upsurge of Chinese enterprises'listing in Australia, we summarize the following ten main points based on past experience:
1 Australia's leading stock exchanges - ASX and NSX
Australian Stock Exchange (ASX), the Australian Stock Exchange Company Limited, is Australia's largest stock exchange and one of the top ten exchanges in the world. The Australian National Stock Exchange of Australian - NSX is currently Australia's second largest exchange and a fast-growing exchange, mainly for growing small and medium-sized enterprises.

2 Australian listing has a high cost performance ratio
At present, the capital markets of Chinese enterprises listed abroad are mainly in Hong Kong, the United States, Australia and other regions or countries. Since the Hong Kong Stock Exchange has existed and developed before its regulator in history, the Hong Kong Securities Regulatory Commission of China has no right to approve a company's listing, but has the right of veto. At the same time, due to the influence of political and geographic factors, the Hong Kong Stock Exchange understands the laws of the mainland of China. The SFC and the stock exchange have the power to veto the listing of enterprises. If any enterprise does not comply with the laws of the mainland of China, it will be vetoed. The cost of lawyers, auditing fees, investment fees, travel fees paid by enterprises for preparing for listing will be drifted away.
The Australian and American stock markets have adopted the "registration system". In practice, the company structure of Chinese Internet companies listed overseas has not strictly abided by the law. This situation is also related to the lack of clear rules for Internet companies listed abroad in mainland China. However, even if Chinese enterprises listed abroad do not comply with the relevant laws and regulations of China, as long as they fulfill their disclosure obligations and obtain the recognition of investors, they can still achieve overseas listing financing. Therefore, the cost-effective ratio of Chinese enterprises to Australia is very high.
3. Chinese companies only need to deal with the Troika when they go to Australia for listing.
When Chinese enterprises go to Australian capital market for listing, they must employ three professional institutions, namely, China (Australia) law firms, sponsorship agencies (generally Australia) and China (Australia) accounting firms, commonly known as the "Troika". Generally, Chinese enterprises will employ a general consultant for listing in China, who will coordinate the professional institutions of both Chinese and foreign companies to help enterprises to promote listing and financing.
4. Don't emphasize the concept of "unicorn"
Based on our experience in operating projects in the Australian securities market, Chinese companies listed abroad should not emphasize the concept of "unicorn", because Australian investors are relatively conservative and do not believe in the great "unicorn" companies. As long as our Chinese companies emphasize what we do, what our companies can do in the future and how well they can do, this can also be done. It will lay a good foundation for future sustained overseas financing.
5. Always collect all kinds of information about Australia and listing.
If Chinese enterprises want to do a good job in the future market value and liquidity management of listed companies after listing abroad, they must constantly acquire relevant knowledge through reading, collecting, exchanging and other ways, such as reading relevant articles covering a wide range of periodicals and magazines, and then link the acquired knowledge with the publicity objectives of listed companies, and gradually form excellent operating listed companies. Wisdom. At the same time, Australia has also opened its doors to Chinese enterprises to seize the beach of its capital market.
6 Joint Venture Listing Architecture is a good choice
There are two main modes for Chinese enterprises to be listed overseas, one is to be listed directly, the other is to be listed "red chips" (that is, to control domestic companies by using overseas companies as the main body of listing). The direct listing mode excludes many private enterprises, especially high-tech enterprises, because of the stringent financial requirements and the long approval process. Usually, there are three modes of red chip architecture: joint venture mode (JV), protocol control mode (VIE), and slow walk mode (Slow Walk). As for the capital market of Australia, Joint Venture is the most popular model for Australian regulators and investors, and also the most compliant model for "Chinese enterprises going out".
7. Mergers and acquisitions of Listed Companies in Australia should be supported by the government
It is a win-win choice for Chinese enterprises to take part in industrial M&A in Australia, which can not only implement the national strategy of "Chinese enterprises going out", but also enhance the reputation of Chinese enterprises in Australia and enhance the stock price and market value of the companies. However, Australia's Foreign Acquisition and Acceptance Act 1975 stipulates that foreign companies investing in Australia need approval from the Australian Finance Minister on the basis of national interests, in addition to the outward intention of both parties. In Australia's approval process, even in the same industry, the same target, based on past experience may not be able to accurately predict future transactions.
8. The earnings forecast statement listed in Australia is very important.
From the point of view of ordinary people, the listing of ASX in Australia is very simple: within three years, the company's net profit reaches A$1 million and within one year, the net profit reaches A$400,000, which can meet the minimum requirements of initial public offering listing, and the listing time is relatively short. However, if Chinese listed companies want to obtain sufficient liquidity and reasonable market value, they can achieve good expectations only if they do a good job in earnings forecast and many details to show the value of the listed companies. In fact, the brokerage firms will set higher standards when screening enterprises.
9 In the foreign exchange registration link, advance registration operation is required.
In the process of foreign exchange registration of Chinese enterprises'overseas listing, the situation that many supervisory departments manage separately and are not responsible for each other has resulted in many obscure and stealing ways of operation of Chinese enterprises in the aspects of nationality of actual controllers and foreign exchange registration. In addition to the irregularity of the concept of establishing special purpose companies in the foreign exchange bureau, there is a lack of a unified guidance on the understanding of the "principle of legality and rationality" on which the foreign exchange bureau is based. Although the opportunity of supplementary registration is given after document No. 37 of 2014, in general, the existing laws and regulations and operation are not clear and standardized. Before setting up the listing structure, Chinese enterprises should plan the foreign exchange registration matters to avoid the situation of violating foreign exchange management funds or failing to declare cross-border revenue and expenditure according to the regulations, being punished and affecting the company's compliance operation.
10 Create a Listed Company with "Moat River"
The "moat" is not only unique to China, but also the palaces and temples of western countries are built in easy-to-defend and difficult-to-attack areas. For a modern enterprise, it is urgent to build its own moat. We believe that the first strategy of building a moat for listed companies is to concentrate on their main business and keep an eye on changes in their industry. In the Internet era of rapid information transmission, with the spread of good word-of-mouth, it will be a relatively fast process for listed companies to form an influential brand.