Sponsors to conduct due diligence on the credit information of enterprises seeking a listing on ChiNext

On 14 November, the CSRC published the Conducting Due Diligence on Credit Information About Enterprises Notice (Regulatory Letter for Issuance on ChiNext [2011] No. 135). The Notice requires sponsors to include credit information about enterprises seeking a listing on ChiNext in the scope of due diligence investigation. The information is available from the financial industry’s credit information platform.

Under the requirements of the Notice, a sponsor must obtain both a simplified and a detailed report on the general credit information about an enterprise through the credit information platform, and verify the information contained in the report. The sponsor is required to check 17 pieces of information, including (i) the general information about the enterprise, (ii) details of any administrative punishment imposed on it, (iii) details of any administrative licensing granted to it, (iv) details of any certification received by it, (v) details of the qualifications obtained by it, (vi) details of related court decisions and the implementation of such decisions, (vii) details of overdue taxes, (viii) details of payment of social insurance premiums, (ix) details of contributions to the public housing fund, (x) details of foreign investment, (xi) borrower’s financial status, (xii) information about outstanding credit at the end of a year, (xiii) information about outstanding bad credit, (xiv) information about settled bad credit, (xv) details of current guarantees provided to external parties and of guarantees received, (xvi) information about payment credit, (xvii) information about quality inspection customs clearance, and (xviii) information about the enterprise’s import and export control.

Moreover, an issuer and a sponsor should check each of the above items against the information disclosed in the prospectus, analyse the differences between them and explain the reasons for such differences. The sponsor should also present an explicit inspection opinion on whether the differences between the results of the checks and the information disclosed have revealed any false representations, misleading statements or material omissions. If any of the above items are non-disclosure items, the issuer and the sponsor must also analyse any exceptional circumstances that exist, and explain the causes of these exceptional circumstances and their impact on the IPO application.

The Notice also requires sponsors to issue a special inspection opinion on credit information available from the financial industry’s unified credit information platform, based on the above analysis, as a prerequisite of closing.