The main steps and processes of the share reform of the company to be listed

01. What is share reform?

Share reform is the company's shareholding reform (or reorganization), which refers to the process of changing the company's form from a joint-stock company. The above-mentioned concept of share reform is also a consensus formed based on the understanding in practical work, and there is no clear definition of share reform in China's current laws and regulations. The Company Law only mentions the requirement that a company after the share reform should meet certain conditions for share reform, but does not elaborate on the concept and nature of the share reform.

The Measures for the Administration of Initial Public Offerings and Listings clarifies the special share reform method of "overall change", that is, the overall change to a joint-stock company can continue to calculate the operating time. The relevant provisions of the overall change are a supplement to the provisions of the Company Law on the share reform, and are an answer to the questions of whether and how the share reform can continue to calculate the operating time. Overall change is the most common form of share reform in practice, and the term "share reform" used in this article is only understood in a narrow sense of "overall change".

In order to further understand what share reform is, it is necessary to clarify the logic behind share reform. There are two forms of statutory companies in China: limited liability company and share limited liability company refers to an economic organization registered in accordance with the provisions of the Regulations of the People's Republic of China on the Administration of Company Registration, established by less than 50 shareholders, and each company bears limited liability to the company within the limit of its subscribed capital contribution, and the company legal person bears full responsibility for the company's debts with all its assetsShares refer to the company established by two shareholders with more than 200 shares, with the company's capital as shares, and the shareholders are liable to the company to the extent of the shares they subscribe.

From the theory of partnership enterprise law, under normal circumstances, people come together basically based on "human cooperation", that is, the trust relationship between people to do things together, this model corresponds to the partnership, which is mainly regulated by the Partnership Enterprise LawThe second is the model between "capital cooperation" and "person cooperation", which corresponds to a limited liability companyThe third model is "capital cooperation", which corresponds to the shares *** This is the most obvious in listed companies, as long as you have money, you can become a shareholder of a listed company, and shareholders do not need to know each other and do not need too much trust relationship, it is completely based on the game of capital.

A limited liability company has a certain degree of personal compatibility, and the relationship between the person in charge of the enterprise or the investor is more emphasized. Paragraph 2 of Article 35 of the Company Law stipulates that when a shareholder transfers his or her equity to a person other than a shareholder, the consent of more than half of all shareholders must be obtainedThe third paragraph stipulates that, under the same conditions, the shareholders have the right of first refusal to purchase the transferred equity. This provision constitutes a restriction on the transfer of equity by shareholders of a limited liability company to others, and ensures that a third party can be excluded from joining the company if the shareholders are willing to exercise the right to purchase, which is the most significant manifestation of the compatibility of the limited liability company. There is no such requirement for shares***. The capital cooperation of shares is strong, and the capital cooperative enterprise believes that the main thing that investors invest in the enterprise is capital, rather than the investor itself, so the right to speak is positively related to the amount of capital contribution, and it is only necessary to ensure the safety of the invested capital and obtain returns.

Through the above analysis, we can understand the share reform from the following perspectives: First, the share reform refers to the process of changing a limited liability company with high privacy, strong personal compatibility and inconvenient free transfer of equity into a share with strong capital compatibility and free transfer of shares;Secondly, this process can not only prove that the company meets the formal conditions for listing (successfully transformed into a joint-stock company, a good public company carrier), but also partially reflects the company's compliance with the substantive conditions for listing (through auditing, evaluation to summarize and sort out the first-class operation, through the formulation and implementation of the three-meeting system to improve the corporate governance and decision-making mechanism);Finally, in practice, share reform usually refers to the process of converting the original book net asset value of a limited liability company (only referring to the audited net assets) into shares, and the duration of continuous operation can be calculated from the date of establishment of ***.

02. Why do we need to carry out share reform?

Understanding the concept of share reform and the logic behind it, we understand the necessity of the company's share reform before listing. With the development of China's multi-level capital market in recent years, all trading sectors require enterprises to carry out share reform. For enterprises interested in entering the capital market, a legal and compliant share reform without leaving flaws is not only an inevitable choice before the company goes public, but also can improve the company's internal control and governance level through the share reform, and lay a solid foundation for the company's future listing work, its importance is self-evident.

Article 8 of Chapter II of the Interim Measures for the Administration of Initial Public Offerings and Listings (Decree No. 122 of the China ** Regulatory Commission) promulgated by the China ** Regulatory Commission stipulates that the issuer shall be legally established and legally existing shares*** According to Article 10 of the Interim Measures for the Administration of Initial Public Offerings and Listing on the Growth Enterprise Market and Article 10 of the Administrative Measures for the Registration of Initial Public Offerings on the Science and Technology Innovation Board (for Trial Implementation), the issuer is a share established in accordance with the law and has been in continuous operation for more than 3 years***

Therefore, the share is the legal subject condition of the listed company, and it is also the only way for the enterprise to become a public company, and it is the starting point for the enterprise to enter the capital market, and this system work will have a profound impact on the subsequent development of the enterprise. At the same time, the joint-stock company is the most favorable organizational form for enterprises to concentrate social capital, which is conducive to absorbing idle capital, facilitating the merger and acquisition of enterprises and the reorganization of assets, and can also realize the transformation of assets, so that enterprises can be freely transferred in a wider range.

03. How to carry out share reform.

Share reform is not only a simple change in the organizational form of an enterprise, but a complex system engineering, involving many aspects such as the equity structure, internal management structure, business structure, financial structure, tax planning and so on. Knowing the necessity of pre-IPO share reform, let's discuss how to carry out share reform. In order to successfully complete the share reform, we should first formulate a feasible share reform plan and form an effective resolution of the shareholders' meeting.

1) The formulation of the share reform plan and the preparatory work that needs to be made before the share reform

In the preparatory stage of share reform, the following tasks are usually required:

1.Collect and sort out the historical evolution data of the enterprise to be reformed, sort out the historical evolution of the enterprise, and analyze the compliance of the establishment and change procedures of the enterprise and the qualifications of the company's shareholders and senior executivesPreliminary determination of the establishment and selection of directors, supervisors and senior personnel of the joint-stock company.

2.Sort out all the financial information of the enterprise during the reporting period, take inventory and inventory of the company's property, check the actual accounts, and check the current accountsCarry out asset clearance and capital verification, and standardize the accounting during the reporting period. At the same time, it is necessary to sort out the situation of enterprises' foreign investment.

3.Identify the related parties of the enterprise, sort out the relationship between related parties, analyze whether the enterprise has intra-industry competition, understand the reasons for the formation and the necessity of existence, the impact on the ability of the enterprise to continue to operate, and standardize the possible plans for related party transactions and avoid intra-industry competition.

4.Sort out the company's business types and business processes, and analyze whether the company's operation meets the requirements of relevant laws and regulationsand sort out the litigation materials and punishment materials during the reporting period, and analyze whether the relevant entities have major violations of laws and regulations.

5.Organize the rules and regulations of the enterprise, and analyze the rationality and effectiveness of the implementation of the internal control system of the enterprise.

6.Combined with the actual situation, comprehensive consideration and analysis, the formulation of the enterprise share reform plan. Since the restructuring plan is irreversible in many cases once implemented, the enterprise must closely focus on the core purpose of the restructuring, with the participation of relevant intermediaries, according to the preliminary investigation of the enterprise, summarize the various problems existing in the enterprise to be restructured, put forward constructive solutions, formulate the company's business adjustment, equity and asset adjustment plan, and form the overall restructuring plan and work schedule on this basis.

2) Appointment of intermediaries.

Share reform is the core and focus of the entire listing process of the enterprise, and the work of share reform is done solidly, and the work after that is easy to do, so the share reform must hire a professional intermediary agency. The intermediaries involved in the process of share reform generally include securities firms, law firms, accounting firms and asset appraisal agencies. Usually, the brokerage company takes the lead in each intermediary institution, and cooperates with the issuer to complete the determination of the issuance plan + audit + evaluation + the establishment of the three-meeting system to solve all kinds of problems encountered in the process of share reform, as well as whether there are obstacles worthy of attention and solutions. At the same time, as the financial adviser of the restructuring, the securities company assists the enterprise in formulating the restructuring and reorganization plan, and conducts quality checks on whether the preliminary standardization work can achieve the restructuring goal and whether it meets the listing and listing conditions. After intervening in the project, conducting due diligence to fully understand the company is the first priority of each intermediary. Depending on the stage of the intervention, the purpose and method of due diligence will be different.

The lawyer's responsibilities are mainly to sort out the historical evolution of the enterprise, analyze the compliance of the establishment and change procedures of the enterprise, and review and judge the qualifications of the company's shareholders and executivesStandardize the problems existing in the historical operation process of the enterprise;Identify related parties and related party transactions in accordance with the law, and propose solutions;Drafting of relevant documents and systems, etc. The lawyer's work is generally carried out in two rounds: the first round is the due diligence in the restructuring stage, the purpose of which is to correctly formulate the restructuring plan and determine the working hours, and of course, to prepare for the future issuance and listing, this investigation should focus on understanding whether the company meets the requirements of a joint-stock company, and to what extent it can meet the requirements of issuance and listing. The second is to start the legal opinion for the correct completion of the issuance and listing at the time of the issuance and listing, focusing on understanding whether the company meets all the requirements for the issuance and listing. The first round of investigation is the foundation, the second round of investigation is perfect, and when the second round of investigation is completed, the legal issues of issuance and listing should be basically resolved.

The accounting firm mainly guides the enterprise to sort out the financial information, sort out the historical accounts, find and solve the financial problems left over from the history of the enterprise, analyze and judge the financial risks and accounting of the overall plan of the enterprise restructuring, and issue audit reports and capital verification reports. Some enterprises also need to hire an asset appraisal agency to evaluate the company's overall capital contribution at the book net asset value on the base date of the share reform, and issue an appraisal report.

Enterprises should give full play to the role of intermediary agencies, rationally divide labor, complement each other's advantages, and jointly do a good job in all aspects of the share reform. It can be said that a good cooperation mechanism between intermediaries and issuers can achieve twice the result with half the effort.

The general operation process is as follows:

Note: The latest ** law abolishes the requirement of the qualification of accountants**. The above is the general mode of operation of the share reform of domestic enterprises, and the share reform mode of foreign-invested enterprises (including Hong Kong, Macao and Taiwan-funded enterprises) will be different. Foreign-invested enterprises will generally be changed to Sino-foreign joint ventures before the proposed share reform, and then the shares will be changed to foreign-invested shares***, and compared with domestic enterprises, the share reform of foreign-invested enterprises also has an additional process for filing with the competent commercial authority. ）

Once the share reform plan is determined, it is necessary to actively and steadily promote the various tasks arranged in the plan, focusing on:

1.The board of directors shall be convened to resolve to carry out the shareholding system reform, determine the base date of the share reform, determine the intermediary institutions such as audit and evaluation, and go to the administrative department for industry and commerce to go through the pre-approval procedures for the name of the joint-stock company to be established;Complete accounting, auditing, asset appraisal work, and issue formal audit reports and asset appraisal reports.

2.Convene a shareholders' meeting to review the "Audit Report" and "Evaluation Report", and make resolutions on the company's share reform.

3.Prepare the "Promoter Agreement of the Joint Stock Company", "Articles of Association of the Joint Stock Company", "Rules of Procedure of the General Meeting of Shareholders", "Rules of Procedure of the Board of Directors", "Rules of Procedure of the Board of Supervisors" and other materials, guide the company to issue a notice of convening the general meeting of shareholders, and prepare relevant documents for applying for industrial and commercial change registration.

4.The promoters of the joint-stock company sign the "Promoters Agreement of the Joint-stock Company", determine the equity ratio of each promoter, and issue a notice of convening the founding meeting of the joint-stock company and the first general meeting of shareholdersConvene a workers' congress to elect employee supervisors;The accounting firm conducts capital verification and issues the "Capital Verification Report" of the restructuring.

5.The founding meeting and the first general meeting of shareholders were held to review the report of the promoters on the preparation of the company, notify the articles of association, elect the members of the board of directors and the board of supervisors, and review and approve various systems. The board of directors convenes the first session of the board of directors to elect the chairman of the board, appoint managers, financial leaders, board secretaries and other senior management personnel, and review the company's internal control systemThe Board of Supervisors convenes the first session of the Board of Supervisors and elects the Chairman of the Board of Supervisors.

6.The board of directors appoints personnel to go to the industrial and commercial registration authority to change the registration and renew the business license of the joint-stock companyMake the official seal of the joint-stock company, change the relevant licenses and account names, and handle the relevant materials and qualification transfer procedures.

7.Formulate and revise the internal rules and regulations of the enterprise, and improve the corporate governance and internal control system;And promptly notify customers, merchants, creditors and debtors and other stakeholders of the company's restructuring and name change.

In the process of the company's share reform, various legal, financial and operational compliance problems will be encountered at the practical level, and the company's shareholders and directors and senior supervisors can only reap greater benefits in the follow-up development by adhering to the road of standardized operation, and also provide a broader space for enterprises to enter the capital market.

04. What problems do we need to pay attention to in the process of share reform?

In order to complete a successful share reform, it is not enough to know only the concept and operation mode. In the practice of share reform, there are still many problems worthy of detailed study, this part analyzes some typical problems commonly encountered in the practice of share reform, and puts forward simple solutions.

1) The basic principle of converting net assets into shares.

The net assets of the original enterprise are converted into shares according to the provisions of the "Opinions on the Standardization of Shares", the original enterprise is reorganized into a joint-stock company, and all the assets of the original enterprise must be invested in the company, and the creditor's rights and debts of the original enterprise shall be borne by the reorganized company, and the net assets of the original enterprise (the balance of all assets after deducting all liabilities) should be discounted into shares. Article 95 of the Company Law stipulates that when a limited liability company is approved to be changed into shares*** in accordance with the law, the total paid-in share capital shall not be higher than the company's net assets. The common practice is to convert the audited net assets on the base date of the share reform (audit) into a certain proportion of the share capital and invest in the joint-stock company, and the rest as the capital reserve of the joint-stock company. There are several principles for the conversion of net assets into shares:

1.The net assets used as the basis for the calculation of the share conversion are the net assets on the company's single statement on the base date of the share reform, not the net assets on the consolidated statementAnd the net assets should be audited net assets, and the appraisal value cannot be taken, otherwise the performance cannot be calculated continuously.

2.The number of shares of a joint-stock company after the conversion of net assets cannot be higher than the net assets data;In practice, the net assets of more than 1 yuan are converted into 1 share, and the remaining part of the net assets after the conversion of shares goes into the capital reserve of the joint-stock company.

3.Although there is no restriction on the proportion of net assets to be converted into shares, attention should be paid to meeting the minimum total share capital requirements of the listed sector, that is, if you choose to be listed on the main board, the total share capital before issuance shall not be less than RMB 30 million.

4.The audit value or appraisal value on which the net assets are converted into shares should be made by a qualified accountant or appraiser institution, otherwise it will become a defect in the subsequent listing, and may need to be remedied by a qualified intermediary issuing a review opinion and the intermediary issuing a clear opinion.

According to the relevant guidelines of Question 1 of the latest "Non-financial Knowledge Questions and Answers on IPO Review" (i.e., Article 51 of IPO Review), if a limited liability company is converted into shares according to the original book net assets as a whole, the continuous operation time can be calculated from the date of establishment of the limited liability company. The net book assets mentioned above refer to audited net assets, not assessed net assets. If a joint-stock company is established with the assessed net assets converted into shares, it will be regarded as a new joint-stock company, and the performance cannot be calculated continuously.

2) Whether the conversion of net assets into shares can make up for the lack of capital contribution in the past.

There are three possible scenarios in which the net assets of the original enterprise are discounted into shares. First, the amount of shares exchanged for net assets is greater than the net assets according to the actual price paid, and the difference should be listed as goodwill;Second, the amount of shares converted at par value is equal to the assets, and the converted amount should be included in the "share capital" accountThird, the amount of shares exchanged for net assets at par price is less than the net assets. The difference shall be listed as the premium income issued over par value and included in the "capital reserve" item.

In practice, many companies have a situation where the registered capital has not been fully paid up before the share reform, but the company's net assets have increased significantly after years of operation. In this case, the shareholders of the company should make up for the historical lack of capital contribution through the practice of converting net assets into shares during the share reform. Let's give an example of what this could do:

A *** was established in 2013 with a registered capital of 30 million yuan, but the shareholders actually only paid 15 million yuan. After auditing, when the company carried out the share reform in 2018, the company's net assets were 80 million yuan, and the company converted all the net assets into 80 million yuan in a ratio of 1:1. Can it be considered that the conversion of net assets into shares has compensated for the historical undercapital?

The answer is no. Net assets are composed of registered capital, paid-in capital, capital reserve, surplus reserve and undistributed profits, if the registered capital is not paid in full, this deficit is always there, and the company's total net assets are bound to be less, which must be made up by external funds, that is, shareholders who have paid inWhen the net assets are converted into shares, the company's existing net assets are only adjusted in the internal accounting accounts, and the total amount has not changed, and the deficit of the registered capital that has not been paid in still exists and still needs to be made up. As far as this case is concerned, the company has converted its net assets into the share capital of the joint-stock company of 80 million yuan, and the statement of the joint-stock company alone seems to be the registered capital of 80 million yuan and the capital reserve of 0 yuan, which seems to be the share capital of the joint-stock company has been paid-in, but in fact, the unpaid capital of 15 million yuan in the first stage still needs to be paid by shareholders to make up, that is, its net assets before the conversion of shares should be 95 million yuan, and if it is still converted into shares at a ratio of 1:1, it should be converted into the share capital of the joint-stock company of 95 million yuan.

Therefore, the conversion of net assets into shares cannot make up for the defects of historical misrepresentation of capital contributions.

3) Whether the conversion of net assets into shares can make up for historical losses.

Article 168 of the Company Law stipulates that "the capital reserve shall not be used to make up for the company's losses", but there is no clear legal provision on how to determine how to determine the company's losses when the net assets are converted into shares and the share reform is actually made up by the capital reserve, and there are also controversies on this issue in practice. Here are some examples:

Suppose the registered capital of a certain *** is 30 million yuan (all paid-in), the undistributed profit is -3 million yuan (that is, the cumulative loss is 3 million yuan), the surplus reserve is 0 yuan, and the capital reserve is 5 million yuan. In the case of continuous normal operation, the company cannot use capital reserves to cover losses;However, if the company carries out a share reform with the conversion of net assets into shares, the situation will be different.

According to the general model of share reform, the company's net assets are 32 million yuan (3000-300+0+500), which is higher than the registered capital and meets the conditions for share reform. At the time of the share reform, shareholders will be charged 107:1 ratio of share conversion, that is, 30 million yuan into the share capital, the remaining 2 million yuan into the capital reserve, surplus reserve, undistributed profits have become 0. It can be seen that although the company did not directly use capital reserves to make up for losses, the reason why the accumulated losses before the share reform disappeared after the share reform was precisely due to the filling of capital reserves. This situation is often encountered in the share reform, and the market supervision and management department often has no objection and can successfully complete the share reform, but it seems to conflict with the provisions of the Company Law.

In practice, there are also cases where a company to be listed on the stock market is suspected of using capital reserves to make up for losses during the share reform, which is the focus of the CSRC. A typical example is the three squirrels, according to the draft prospectus, which is likely to have negative undistributed profits at the time of the share reform. The China Securities Regulatory Commission (CSRC) issued a feedback request: "The change process of paid-in capital, capital reserve, surplus reserve and undistributed profits before and after the share reform, explain whether there is any behavior of using capital reserve to make up for losses, and explain whether the share reform process complies with relevant laws and regulations." ”

In addition, according to the regulatory Q&A on the "Regulatory Requirements for Uncompensated Losses in the Overall Change of Initial Offering Enterprises in the Establishment of Shares" issued by the China Securities Regulatory Commission on January 11, 2019, if there are uncompensated losses in the overall change of IPO, it can only be declared after 36 months after the overall change of industrial and commercial registration.

To sum up, if the company has a negative undistributed profit before the share reform, it should make up for the loss or reduce the capital to make up for the loss through normal operation, and then carry out the share reform, otherwise the company may face the situation that it can only be declared after 36 months of operation after the completion of the overall change.

4) Property rights issues.

Generally speaking, for enterprises that intend to seek restructuring and listing, the property rights are often relatively clear, but the operating mechanism for straightening out the interests of owners, operators and employees is often not perfect. The historical evolution of some enterprises is more complex, and there may be problems such as property rights disputes, lack of legal documents, and incomplete legal procedures in the process of share reform, which need to be well regulated in the process of restructuring and issuance and listing.

At this stage, the common property rights problem in the process of enterprise restructuring is mainly the issue of affiliation, that is, some enterprises often enjoy certain preferential policies through affiliation and other forms at the beginning of their business. If an enterprise wants to be listed on the stock market, it must sort out the property rights relationship and dissolve the previous affiliation relationship, which is likely to cause property rights disputes. In practice, there are mainly the following practices:

1) If it is only a simple affiliation, the affiliated unit shall issue a certificate to clarify that it has no actual ownership of the enterprise and the assets of the enterprise, and declare the termination of the affiliation relationship, which needs to be confirmed by the relevant ** department.

2) If the affiliated entity has provided guarantee for the private enterprise in the course of its operation, and the guarantee liability has not been discharged, it shall pay the guarantee fee as soon as possible, repay the debt, terminate the guarantee relationship, and then terminate the affiliation.

3) If the affiliated unit has allocated assets and the agreement is unclear, it should be resolved through negotiation, and it can be confirmed as an investment or creditor's right according to the situation, so as to terminate the affiliated relationship, and at the same time, it should obtain the approval of the state-owned asset management department and handle the industrial and commercial change registration in a timely manner.

5) Equity issues.

Whether the equity structure is reasonable and whether the equity is clear has a far-reaching impact on the corporate governance and standardized operation of the company. Attention should be paid to the balanced shareholding of equity settings to prevent the phenomenon of one dominant shareAt the same time, it is necessary to prevent excessive dispersion of shareholdings, thereby weakening the shareholder restraint mechanism. In the design of the equity structure, attention should be paid to the diversification of the nature of equity, that is, the form of shareholder ownership, which is conducive to deepening the constraints of shareholders on the management level. For the restructuring of private enterprises, we should also pay attention to guiding the management and technical backbone to hold shares, so as to make them closely linked with the interests of the enterprise, enhance their responsibility for the preservation and appreciation of enterprise assets, and also be conducive to the long-term development of the enterprise.

In addition, it is not uncommon for employees to have more than 200 shareholders due to employee shareholding. In practice, the legal methods to solve the problem of employee shares mainly include:

1.Acquisition of employee shares by the relevant shareholder. As long as it works, this should be the preferred approach. However, if an enterprise wants to be restructured and listed, it will inevitably have better development prospects, and this method will often be more resistant to exercising.

2.The establishment of a new company or partnership to hold shares on behalf of employees will also have problems such as high costs and double taxation.

3.An entrustment agreement is signed to hold the shares by the trustee. This scheme is not suitable for use because the entrusted property cannot be independent of the trustee against a third party, it is difficult to effectively supervise, and it is easy to cause disputes.

4.Hold shares through a trust company or a civil trust. This approach is favored because the CSRC recognizes that it can achieve the purpose of resolving the issue of employee shares and will not harm the interests of employee shareholders. According to the provisions of the Trust Law of the People's Republic of China, the investment activities of shareholders can be completely in the form of equity trust, and it should be noted that the trust agreement must comply with the provisions of the Trust Law and relevant laws and regulations, and at the same time, no remuneration shall be charged for civil trust acts. Of course, since the supporting provisions of China's property trust are not yet perfect, and the protection mechanism of trust property is not yet perfect, although the method of trust company or civil trust is effective, it still needs to be continuously improved in practice and legislation.

6) Tax issues.

Tax irregularities are a common problem of private enterprises, and they are also a key problem in the issuance and listing of enterprises. In the process of restructuring, issuance and listing of private enterprises, non-compliant tax behaviors must be regulated. In addition to the most typical income tax arrears, the China Securities Regulatory Commission also pays attention to the following tax issues: the issue of false payment of VAT late fees, the issue of tax incentives given by the local government during the restructuring of enterprises, and the payment of individual income tax by natural person shareholders in the process of restructuring and dividend distribution.

The tax issues faced by the restructuring, issuance and listing of private enterprises need to be properly handled by enterprises, local governments, finance and taxation departments, and intermediary agencies. For some high-tech enterprises, it is necessary to verify whether the policies and tax incentives they enjoy are in line with the current laws and regulations and the provisions of relevant policies. Generally speaking, there are several ways to solve tax problems during restructuring:

1.Pay back taxes. If there is tax arrears, tax adjustment should be made appropriately, and in principle, the tax should be paid. The China Securities Regulatory Commission has also adopted a more lenient attitude towards enterprises that can take the initiative to pay taxes.

2.Resolve tax issues in *** status. This is a very important step, without affecting the listing of the premise, should design a restructuring plan with less tax costs, as far as possible to solve the problem before the restructuring of the establishment of shares.

3.Seek support from local** and tax authorities. Try to obtain a tax certificate from the tax department or a letter of non-investigation of tax deferred liability to remove the risk of administrative penalties. When the local tax authorities agree to defer the payment of tax arrears, it is also easy to obtain the approval of the CSRC.

In addition to solving the problem at the restructuring stage, before the issuance and listing, the shareholders should make a commitment that they are willing to bear the risk of possible back tax payment, and obtain confirmation documents from the provincial tax department. With these measures, tax issues generally do not constitute an obstacle to the listing of enterprises.

Nine lines of equity and legal basis.

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