Revised Guidelines for China Disclosure Rules Under Articles 13 & 14 of the Takeover Measures

To ensure the correct understanding and application of Articles 13 and 14 of the ‘Administrative Measures for the Acquisition of Listed Companies,’ the China Securities Regulatory Commission (CSRC) has introduced new guidelines. On 5th January 2024, the CSRC drafted the ‘Opinions on the Application of Articles 13 and 14’ (Order No. 166), and the finalised version, designated as Order No. 19, was officially released on 10th January 2025.

Articles 13 and 14 focus on the disclosure obligations of investors and their concerted parties when their shareholding crosses specified reporting thresholds. Here’s a breakdown of the key points:

Reporting Thresholds:

• 5% Acquisition Threshold: If an investor and its concerted parties acquire 5% or more of the issued shares of a listed company through securities transactions on the stock exchange or via a transfer agreement, they must submit a report to the stock exchange and provide a copy to the CSRC representative’s office within 3 days of crossing the threshold. A public announcement must also be made.
• Subsequent 5% Changes: Any subsequent increase or decrease in the shareholding ratio by 5% triggers an obligation to submit a report and make a public announcement within 2 days of the transaction.

The CSRC’s Order No. 19 provides clarifications on ambiguities in Articles 13 and 14:

1. Incremental Disclosure Rules: The reference to “every increase or decrease of 5%” and “every increase or decrease of 1%” should be interpreted as integer multiples of these percentages (e.g., 10%, 15%, 20%), rather than smaller incremental changes like 11% or 7%.
2. Exemptions for Capital Structure Changes: Changes in shareholding due solely to adjustments in the company’s capital structure (e.g., share buybacks, convertible bond conversions) do not require disclosure or compliance with trading restrictions.
3. Company-Level Disclosure Obligation: Listed companies must disclose changes in investor shareholdings resulting from changes in the company’s share capital. Investors are required to monitor only their static shareholding ratio, without needing to factor in complex calculations arising from changes in the company’s share capital. This reduces compliance burdens and costs.

These clarified regulations come into effect on 10th January 2025.