An Analysis of the Impact of the New Voluntary Disclosure on Continuous Disclosure in China: Fool-proof or Full of Loopholes?

Abstract

Listed company rules governing information disclosure serve as an instrument to protect and manage investors’ vulnerability to the information asymmetry that exists in the securities market. Throughout the history of the development of securities law in China, the corporate disclosure regime has mainly centred on periodic and continuous disclosures. However, these steps have been criticised for inefficient and insufficient protection provided to investors. In response, the newly revised Securities Law of the People’s Republic of China (2019 Revision) has introduced voluntary disclosure in addition to the existing corporate disclosure provisions. This new provision considers investor decision-making sensitivity as the threshold for material information and, accordingly, factors that can influence investors’ decision-making processes have been introduced into Chinese law. This may be a positive move toward the establishment of a more transparent disclosure regime. However, questions arise regarding the impact of this new voluntary disclosure provision on the interpretation of compulsory continuous disclosure obligations. This paper argues that voluntary disclosure may create confusions and conflicts for both courts and listed companies.