The Reach of Shareholder Look-through

Authors: Yaohua HU 丨 Xin DU 丨 Yikai WANG 丨 Yunting YE

The PRC Law on Securities (“Securities Law”) and relevant laws and regulations strictly
prohibit the unauthorized issuance of shares to the public (the issuance of shares either to nonspecified
persons or to specified persons which results in the issuer having more than 200
shareholders). In practice, the China Securities Regulatory Commission (“CSRC”) is intently
focused on whether the number of shareholders exceeds 200 upon applying certain shareholder
“look-through” rules. In general, “look-through” means to examine the upstream shareholding
structure of companies or the subscription structure of private equity (“PE”) funds or asset
management plans to determine the ultimate natural person, listed company or State-owned
Assets Supervision and Administration Commission (“SASAC”) investors. The scope of the
look-through rules is an important factor that affects the 200 shareholder threshold
determination, although this concept continues to be ambiguous. By analyzing the relevant
laws, regulations and cases, this article discusses the scope of look-through in determining the
number of shareholders in different types of capital market transactions, including IPOs,
backdoor listings, asset purchases through share issuances (not constituting a backdoor listing),
cash subscriptions for private share placements of A-share listed companies, public issuances
of A-share listed companies (share allotments, additional share issuances), NEEQ listings and
the private placements of NEEQ listed companies.

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