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(A)  Holding Foreign Companies Accountable Act (HFCA Act)

   The amendments under the HFCA Act, which becomes effective as of 10 January 2022 has had a significant impact on Chinese companies to be listed or already listed on US Stock Exchanges. In summary, the new amendments target issuers whose auditors are not subject to PCAOB (Public Company Accounting Oversight Board) inspection. The new amendments under the HFCA Act relate to Section 104 of the Sarbanes-Oxley Act of 2002 (the “SOX”) which mandates the SEC to identify each “covered issuer” that has retained a registered public accounting firm to issue an audit report where such registered public accounting firm has a branch or office that is located in a foreign jurisdiction; and that the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction (more specifically China). The SEC will impose an initial trading prohibition on a registrant as soon as practicable after it is conclusively identified as a Commission-Identified-Issuer for three consecutive years. If such issuer is again determined by the SEC as a Commission-Identified-Issuer, the SEC will impose a subsequent trading prohibition for a minimum of five years.

A Commission-identified-Issuer is required to disclose in its annual report:

· The PCAOB-Identified Firm that caused the issuer to be identified as a Commissioner-Identified-Issuer during the period covered by the filing form, i.e., Form 8-K or 6-K (as applicable);

·The percentage of the issuer’s shares owned by governmental entities in the foreign jurisdiction in which the issuer is incorporated or otherwise organized;

·Whether governmental entities in the foreign jurisdiction where that registered public accounting firm is located have a financial interest in the issuer;

·The name of each official of the Chinese Communist Party (CCP) who is a member of the board of directors of the issuer or the operating entity with respect to the issuer;

·Whether the articles of incorporation of the issuer (or equivalent organizing document) contains any charter of the CCP, including the text of any such charter.

（B）Disclosure Considerations for PRC-Based Issuers

When preparing the registration statement and the prospectus, PRC issuers should consider disclosing the following issues/risks particular to issuers based in the PRC, the issues to be disclosed are:

· Disclosure on the limitations of PCAOB to inspect the audit work of its outside audit firms in China and Hong Kong, in particular, the difficulty regulators such as the SEC and PCAOB may have in obtaining audit work papers etc.;

·Disclosure on the limits imposed by Chinese laws on the ability of US authorities, including the SEC, PCAOB, the Department of Justice, to conduct investigations and brings actions, including Article 177 of the Securities Law of China which prohibits oversea securities regulator to conduct investigations or evidence collection activities within the PRC, and that no entity or individual in China may provide documents and information relating to securities business activities to oversea regulators without Chinese government approval;

· Disclosure on the risks in relation to VIE structure such as, uncertainty about the legality of VIE structure under Chinese laws; the VIE structure may not be as effective as direct ownership in controlling entities organized in China; control over, and funds due from, the VIE may be jeopardized if the natural person or persons that hold the equity interest in the VIE breach the terms of the agreement etc.;

· Disclosure on the risks relating to the regulatory environment in China, including risks related to a less developed legal system, which may result in inconsistent and unpredictable interpretation and enforcement of laws and regulations*.

* More specifically address in the CF Disclosure Guidance (Disclosure Considerations for China-Based Issuers) published on 23 November 2020 by the Division of Corporate Finance of the SEC.

The above issues are typically included in the SEC’s comments in the event that disclosure of these issues is omitted from the registration statement and prospectus on their initial filings. Therefore, in order to avoid unnecessary delay due to SEC’s comments on these issues, PRC lawyers acting for the issuer are advised to address the above issues on their legal opinion, and to disclose the same in the registration statement and the prospectus upfront.

In addition, it is envisaged that the issuers shall be required to address and disclose as to whether the recently promulgated Cyber Security Law, the Data Protection Law and the Personal Information Protection Law shall be applicable to the issuers (particularly those whose businesses involve data collection and usage) and the risks for non compliance.

(A)  REVIEW UNDER THE CYBERSECURITY LAW OF CHINA

Pursuant to the newly promulgated Measures on Cyber Security Review (effective as at 15 February 2022), oversea listing (including Hong Kong SAR) for China-Based issuers whose businesses involve personal data collection and usage, and having more than 1 million users on their data bases are required to disclose relevant particulars as regards the cyber security and personal information protection compliance system to the Office for Cyber Security Review (the “Office”) for review.

The Office for Cyber Security Review will confirm, within 10 working days upon receipt of the information from the intended issuer, as to whether such intended issuer will be subject to cyber security review. In the event that the Office determines that the issuer shall be subject to security review, a preliminary review by the Office shall conduct and complete within 30 working days from the date of issuing a written notice informing the intended issuer that a preliminary review shall be conducted (which may be extended for further 15 days if the case involved is complicated). The conclusion and recommendation of such review shall then be forwarded to relevant government units and departments for their respective opinions. The relevant government units and departments shall provide their respective opinions within 15 working days from the date of receipt of the conclusion and recommendation from the Office. In the event that there are differing opinions amongst the relevant units and departments, a special review shall have to be conducted. The special review should be completed within 90 working days, but could be extended if the case involved is complicated. Please note that the above time length does not include any additional time incurred if supplementary information are required by the reviewing authorities.

Issuers are therefore advised to commence the declaration process at least 3 months prior to the intended date of first filing of their registration statement.

(B) REGULATIONS CONCERNING THE MANAGEMENT OF CHINESE COMPANIES ISSUING SECURITEIS AND PUBLIC LISTING ABOARD

Pursuant to the above-mentioned Regulations (promulgated by the State Council on 24 December 2021), and the “Measures on Reporting Management for Chinese Companies Issuing Securities and Listing Aboard” (currently at consultative stage), issuers of securities or public listing aboard are required to report to the China Securities Regulatory Commission (CSRC) for record purposes within 3 working days from their first filing of registration statements to the relevant oversea authorities. The following documents shall have to be submitted for record purpose at the time of reporting:

   - Report for record purpose and relevant undertakings;

     - Opinion, report for record purpose, approval issued by relevant government authorities regulating the specific business of the issuers in question (if applicable);

   -Report of security review issued by relevant authorities (if applicable);

       -Chinese legal opinion;

       -  Prospectus related to the issuance of securities or public listing.

As mentioned above, the Measures are currently at consultative stage. Accordingly,please contact us for updated information once the Measures become final and effective.