The Shanghai Stock Exchange ("SSE") has recently issued the Circular on Revising Several Articles of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (the "Circular"). In the meantime, the Shenzhen Stock Exchange ("SZSE") has also issued the Circular on Revising the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange and the Rules Governing the Listing of Stocks on ChiNext of the Shenzhen Stock Exchange. Both documents take effect immediately from the issue date.
The Circular adds two new articles. One article explicitly requires the board of directors of a listed company to establish an audit committee, that is, a new article is added after Article 3.1.5 of Chapter III "Directors, Supervisors and Senior Executives", reading as "a listed company shall set up an audit committee under the board of directors, and its internal audit department shall be responsible and report to the audit committee. In the audit committee, independent directors shall represent over fifty percent and act as conveners, and at least one independent director shall be an accounting professional". The other article, stipulating procedural requirements a listed company shall follow at the general meeting of shareholders to engage or dismiss an accounting firm, is introduced after Article 6.4 of Chapter VI "Periodical Reports", provides for relevant rules.