“MSCI's recent decision to partially include China A Shares in its Emerging Markets Index highlighted how foreign investors still view corporate governance issues as one of their biggest concerns in China. As China continues along its path of gradually opening its markets, we can anticipate additional measures to tackle some of issues which remain a sticking point for many investors.”
Cara O’Brien, Senior Managing Director
Country:
China
Average % of insider ownership:
Activism
Threat Level
To learn more about this country, please click on the tabs below
While China has seen some cases of shareholder activism, it is still uncommon. Most of its public companies have a controlling shareholder, often remaining family-controlled, and many of its investors are individual retail investors, meaning that activism is neither a common or particularly effective practice in China. However, Chinese companies have faced a steady onslaught of short activist attacks which show no signs of slowing down.
Shareholders reaching or exceeding the five percent threshold must disclose their voting rights to the China Securities Regulatory Commission and the China Stock Exchange, as well as the company, and notify the public within three days from the transaction day. No further transactions can take place during this period of time.
While poison pills are permitted for Chinese companies, A Shares regulations make it difficult for companies to issue preference shares. Additionally, this strategy cannot be used without approval obtained in a shareholders’ meeting. Companies do, however, have the right to amend and enact their Articles to protect themselves against hostile acquisitions (e.g. setting the procedures for change in directors in order to ban the investor from obtaining managerial power of the company within a certain timeframe).
Pac-Man defense, whereby the target firm then tries to acquire the company that has made the hostile takeover attempt, is another common defense tactic for Chinese companies.
Top Campaigns by Type
1. Major Business Fraud
2. Accounting Fraud
3. Removal Of CEO Or Other Board Member
Campaigns By Year
Total
Campaigns
Notable Invested Activists
• Heng Ren Investments L.P.
• Muddy Waters Research
• Citron Research
Recent activism campaigns
| China Shanshui Cement Group | VS. |
Asia Cement Corporation |
| Pingtan Marine Enterprise Ltd. | VS. |
Aurelius |
| China Hongqiao Group Limited | VS. |
Emerson Analytics |
Total Active
Campaigns
Contact FTI Consulting
Capital Markets Research and Activist Engagement
Managing Director
+1 312 861 4721
Geoff.Serednesky@FTIConsulting.com
Senior Managing Director
+852-3768 4537
Cara.Obrien@fticonsulting.com