Companies planning to list on China's Growth Enterprise Market (GEM) will have to follow a stricter delisting mechanism, according to the new-published GEM listing rules.

The Shenzhen Stock Exchange Friday published the listing rules for the GEM, the country's first Nasdaq-style stock market. The rules will take effect from July 1 this year.

With a major focus on risk control, the document sets out a stricter delisting mechanism, information disclosure rules, and more rigid stock sale restrictions for controlling shareholders compared with stocks trading on the main boards in Shanghai and Shenzhen.

A GEM-listed company would be subject to delisting procedures if its debts exceeded total assets in the latest fiscal, or its share trading volume was below 1 million shares for 120 straight trading days. These rules are not required on the main boards in Shanghai and Shenzhen.

Meanwhile, if a GEM-listed company did not release its annual report or quarterly financial reports within the required period, the company would be delisted in three months, compared with six months on the main boards.

The Shenzhen bourse solicited public opinion on the draft rules from May 8 to 22.

The rules marked a major step toward introducing the much-anticipated GEM, a board intended to nurture innovation-driven start-ups as the government tries to help smaller companies get financing and encourage technological advances, analysts have said.

Compared with the draft, the document focused more on information disclosure and supervision over inside trading, said Mi Qun, manager with Lightspeed China, part of the U.S.-based Lightspeed Venture Partners global venture capital firm.

According to the new rules, people with inside information should promise not to trade or recommend others to trade the company's stocks or other financial derivatives.

(Xinhua News Agency June 6, 2009)