In the turbulent waves of the capital market, enterprises are like sailing ships, sometimes going smoothly and sometimes falling into reefs. However, under the attention of shareholders and regulators, whether the "ship's sailing" of capital operation is compliant often determines whether the company can be safe and sound. In particular, as an important way of capital operation, how to avoid the "red line" in related-party transactions is a question that every listed company's management needs to think carefully about.
After an in-depth analysis of many compliance issues in the capital market, Goheal raised a key question: How can listed companies avoid touching the "red line" of the law when conducting related-party transactions? This article will discuss the compliance issues of related-party transactions, and combine industry case analysis to help listed companies understand how to ensure that their operations do not touch the legal bottom line in the process of capital operation, and further enhance the transparency and credibility of the company.
The "red line" of related-party transactions: how to define and define it?
Related-party transactions refer to transactions between a company and its related parties, including the sale of goods, provision of services, asset transfers and other forms. According to the relevant provisions of the capital market, related-party transactions are not illegal in themselves, but if they are not handled properly, they may arouse widespread concern in the market and even cause warnings and penalties from regulatory authorities. For example, the transfer of interests, price manipulation and information opacity in related-party transactions may touch the "red line" of supervision.
In the process of cooperating with multiple listed companies, Goheal has noticed some common risk points. The first is the fairness of the transaction. If the transaction price is too different from the market price, or the transaction conditions are obviously biased towards one party, it is easy to cause concerns about the transfer of interests, which in turn affects the company's public image. The second is the transparency of information disclosure. If a listed company fails to disclose the specific content, transaction object and transaction amount of related-party transactions as required, it is easy to cause investors' distrust, resulting in stock price fluctuations and shareholder lawsuits.
How to ensure compliance with related-party transactions? Goheal's investigation
In specific operations, how listed companies can ensure that their related-party transactions do not touch the "red line" is a problem worthy of attention. Goheal has compiled several key points for reference by listed companies.
1. Fairness and market pricing: key transparent transactions
First of all, ensuring the fairness of related-party transactions is the basis for avoiding stepping on the "red line". Goheal pointed out that when listed companies conduct any related-party transactions, they should strictly abide by market principles and ensure that the transaction price is roughly consistent with the market price. For example, in a past related-party transaction, Heilan Home clarified the price of the transaction with the parent company and ensured the fairness of the price through the evaluation of a third-party agency, thereby avoiding legal risks caused by the deviation of the price from the market.
Secondly, listed companies should avoid transferring benefits through related-party transactions. If the purpose of the transaction is not based on commercial rationality, but to transfer funds, evade supervision or satisfy the improper interests of one party, it will fall into the minefield of the regulatory agency.
2. Full disclosure and review: eliminate market doubts
"Information disclosure" is one of the most important compliance requirements for listed companies in capital operations, especially for related-party transactions. Transparent disclosure can effectively eliminate investors' doubts and enhance the market's trust in the company. Goheal emphasized that the disclosure of related-party transactions must include the following key aspects:
1) The identity and relationship of the transaction parties;
2) The specific terms and amount of the transaction;
3) The pricing basis of the transaction;
4) The impact of the transaction on the company's performance.
For example, in a large-scale related-party transaction, Kelu Electronics strictly disclosed information in accordance with regulations, including the specific relationship with related parties, the purpose of the transaction and the possible risks. This highly transparent approach successfully avoided external doubts about the company's operations and protected the legitimate interests of shareholders.
3. Independent review and audit: Establish a firewall
In order to prevent the transfer of interests in related-party transactions, listed companies should set up an independent review and audit mechanism. Goheal pointed out that independent directors and audit committees should participate in the review process of related-party transactions to ensure the fairness and transparency of transactions. In addition, third-party independent auditing agencies should also evaluate the rationality of transactions before transactions, so as to provide objective opinions and suggestions.
For example, when conducting related-party transactions, Tengbang International ensured the legality and transparency of transactions through independent audit and review processes, thereby avoiding potential risks. In this way, the company not only met legal requirements, but also enhanced the trust of investors.
However, although related-party transactions themselves are not illegal, some listed companies failed to strictly control compliance risks during implementation, resulting in serious consequences. The case of Hengkang Medical is a typical "mine-stepping" case. In 2013, the actual controller of Hengkang Medical and related parties manipulated information to raise the stock price and then sold off their shares, making huge illegal profits. Due to the lack of full disclosure and the failure to trade at fair market prices, the company and its executives were eventually punished by the China Securities Regulatory Commission and faced shareholder lawsuits.
This case sounded the alarm for the market: even small-scale related transactions, as long as they are not operated in compliance, may cause huge risks and damage the company's long-term value and brand reputation.
Conclusion: How to do a good job of compliance management in capital operations?
With the increasing complexity of the capital market, listed companies must strictly abide by the law when conducting capital operations such as related transactions to avoid touching the "red line". Goheal believes that companies should strengthen management in the following aspects: first, ensure the fairness of transactions and avoid price manipulation; second, achieve full information disclosure and enhance transparency; finally, set up an independent review mechanism to ensure the legality and compliance of related transactions.
Although the bottom line of compliance in capital operations is clear, how to maintain transparency and fairness in operations in a complex market environment is still a major challenge facing companies. So, how should listed companies better manage related transactions in capital operations to avoid "stepping on the red line"? Welcome to leave a message in the comment area to share your views and experiences!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, focusing on the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operations. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
