May 20, 2026
Executive Summary
On May 14, 2026, the Securities and Exchange Commission (“SEC”) issued a release approving (via accelerated approval) a Nasdaq proposal that significantly raises the barrier to entry for China-based issuers seeking to list on the Nasdaq markets. The new rules apply broadly to companies headquartered, incorporated, or whose business is principally administered in China, including Hong Kong and Macau.
These heightened initial listing criteria affect China-based companies across various entry paths to listing, including initial public offerings (“IPOs”), business combinations, direct listings and transfers from the OTC markets or other national securities exchanges.
The rules will become effective 30 days after the date of the SEC’s approval order (i.e., on or about June 13, 2026). Nasdaq submitted the initial proposal in September 2025, and it was recently approved by the SEC via accelerated approval after three amendments and several extensions.
Key Regulatory Changes
Increased Minimum Offering Size Requirements for China-Based IPOs
- China-based issuers conducting an IPO must offer a minimum number of securities through a firm commitment offering[1] in the United States to public holders resulting in gross proceeds to the issuer of at least $25 million.
- This requirement marks a notable increase from the standard $15 million Market Value of Unrestricted Publicly Held Shares requirement that generally applies to companies listing on the Nasdaq Capital Market through an IPO.
Minimum Market Value of Publicly Held Shares for China-Based Business Combinations
- A China-based issuer listing on Nasdaq in connection with a business combination must have a minimum Market Value of Unrestricted Publicly Held Shares of at least $25 million.
Restrictions on China-Based Direct Listings
- China-based issuers will not be permitted to list on either the Nasdaq Global Market or the Nasdaq Capital Market via a Direct Listing, even if they otherwise meet the applicable initial listing requirements for those tiers.
- Direct Listings for China-based issuers will only be permitted on the Nasdaq Global Select Market, which is subject to more stringent listing standards.
Restrictions on China-Based Issuer Transfers from OTC or Other Exchanges
- A China-based issuer transferring from the OTC market or from another national securities exchange must (i) have traded on that other market for at least one year before becoming eligible to list on Nasdaq, and (ii) maintain a minimum Market Value of Unrestricted Publicly Held Shares of at least $25 million.
How Nasdaq Identifies China-Based Companies
The new rules apply to any company that is headquartered or incorporated in China (which, for this purpose, includes Hong Kong and Macau), or whose business is “principally administered” in China.
Nasdaq will make the “principally administered” determination based on the following factors:
- whether the company’s books and records are located in China
- whether at least 50% of the company’s assets are located in China
- whether at least 50% of the company’s revenues are derived from China
- whether at least 50% of the company’s directors are citizens of, or reside in, China
- whether at least 50% of the company’s officers are citizens of, or reside in, China
- whether at least 50% of the company’s employees are based in China, or
- whether the company is controlled by, or under common control with, persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in China.
Implications for China-Based Companies Considering U.S. Listings
These rule amendments underscore heightened regulatory scrutiny by the SEC and Nasdaq regarding transparency, liquidity, and investor protection concerns surrounding cross-border listings.[2]
Chinese firms planning U.S. listings must meticulously evaluate their corporate and financial structuring, offering sizes, and intended listing mechanisms to determine the most appropriate path forward.
For additional details, the SEC order can be found here.
If you have any questions regarding this client alert, please call or e-mail your SRFC attorney.
DISCLAIMER: This communication, which we believe may be of interest to our clients and friends of the firm, is for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice. This may be considered attorney advertising in some jurisdictions.
[1] The SEC emphasizes in the release that firm commitment offerings typically involve significant due diligence by broker-dealers subject to U.S. regulatory oversight.
[2] According to Nasdaq, from August 2022 to April 2025, approximately 70% of the matters Nasdaq referred to the SEC or FINRA concerning potential manipulation involved Chinese emerging market companies, even though Chinese companies represented less than 10% of all Nasdaq listings during this period.