US passes bill to delist Chinese Companies.

   US Senate passed a legislation that will prevent companies to list their share on U.S. exchange unless they follow USA standards for Audits and Regulation.

US lawmakers have already raised redflags due to heavy inflows of funds into China’s companies.

If a company can’t show that it is not under such control or the Public Company Accounting Oversight Board isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges

The Companies listed on US exchange are required to get its books audited by Public Company Accounting Oversight Board (PCAOB) but the Chinese companies refused to do the same. The main reason for passing legislation was to ensure the standards are same for all the companies also they follow the Audits and Regulations that will ensure transparency to the investors.

As per Bloomberg - According to the SEC, 224 U.S.-listed companies representing more than $1.8 trillion in combined market capitalization are located in countries where there are obstacles to PCAOB inspections of the kind this legislation mandates.

For an investor one has to wait how the China will react to the legislation. Also, whether China will retaliate the same on the US companies listed on China exchange.

 

CA Shubham Chhajed