The first red-chip listing on the SSE Star Market

By Lilian Woo and Wynne Lau, CONYERS

On February 27, 2020, China Resources Microelectronics officially launched its initial public offering (IPO) on the SSE Star Market, becoming the first Cayman incorporated company to be listed in Mainland China. It has raised approximately US$614 million, which will primarily be used for investing in 8-inch high-performance sensor and power semiconductor construction projects, and partly for improving product manufacturing and technological innovation capabilities, as well as strengthening forward-looking technology and product research and development capabilities.

Acting as the Cayman Islands and British Virgin Islands legal counsel to China Resources Microelectronics, our firm formed a team led by Lilian Woo, a senior partner with almost 30 years of experience, and Wynne Lau, a newly promoted partner with nearly two decades of experience. The team also consisted of Beverly Cheung (associate) and Rowan Wu (legal manager) as well as paralegals, who worked together to handle this highly significant and ground-breaking project.

China Resources Microelectronics is one of the largest power semiconductor enterprises in China. In the ranking of Chinese semiconductor companies for 2018, China Resources Microelectronics was the only enterprise in the top 10 that mainly operates as an integrated device manufacturer, and was the largest power device enterprise in China.

What is the significance of the China Resources Microelectronics IPO?

First of all, it is the first red-chip structured enterprise in China to directly launch an IPO on the A-share market.

Secondly, it is the first red-chip enterprise listed on the A-share market that operates in the form of a limited company rather than a joint-stock company.

It also represents the first A-share issuer whose par value of shares is in Hong Kong dollars instead of renminbi.

Last but not least, it has set an unprecedented example of a listed enterprise exercising an over-allotment option (commonly known as a greenshoe option) on the SSE Star Market.

Given the multiple “firsts” China Resources Microelectronics has created, there is no precedent for reference when coping with some legal issues. In the face of differences between offshore and PRC laws, the prime task is to assist the client in coordinating different requirements of offshore and onshore jurisdictions, and smoothing out the difficulties in application process so as to ensure a successful listing. Drafting articles of association for the issuer has proved to be one of the biggest challenges as Cayman law is based on the Western common law system. Though it is a Cayman company, the requirements on the rights of, and protection for, its shareholders shall in no way be less stringent than those of the PRC laws and regulations. As such, we have to abandon the standard form of the constitutional documents for Cayman companies and use innovative drafting skills to bridge the gap between the two completely different jurisdictions.

Another challenge faced by the offshore lawyers for China Resources Microelectronics was to conduct due diligence on a vast number of companies within a very short time frame. Unlike a typical due diligence, a different approach was necessary for this listing project. Our legal team conducted extensive due diligence on not only existing subsidiaries of the issuer, but also companies that were once in the group but had subsequently been dissolved. The sheer volume of work made it more difficult and time consuming than a regular IPO in Hong Kong.

W: www.conyers.com
T: (852) 2842 9525

E: Lilian.Woo@conyers.com – T: (852) 2842 9588
E: Wynne.Lau@conyers.com – T: (852) 2842 9532