(Reuters) – Beijing has asked law firms to tone down the language used to describe China-related business risks in Chinese companies’ overseas IPO prospectuses, three sources familiar with the matter said.

Firms could be denied an overseas listing if they fail to comply with this rule, the sources added.

On July 20, the China Securities Regulatory Commission (CSRC) met with lawyers and asked them to refrain from including negative descriptions of China’s policies or its business and legal environment in companies’ listing prospectuses, the sources said.

The closed-door meeting follows informal advice given by the regulator to companies working on applications for admission over the past few months, the three sources said.

Chinese companies planning to issue securities overseas generally cite changes in China’s economic, political and social conditions as business risks.

Chinese law firms have been asked to waive such risk statements, said one of the sources who did not wish to be identified as the discussions are confidential.

The guidance could force Chinese companies to delay or even suspend their U.S. listing, with U.S. regulators requiring full risk disclosure, two of the sources said.

China’s new offshore listing rules, which came into effect on March 31, prohibit any comments that “misrepresent or disparage China’s laws and policies, business environment and judicial status” in listing documents.

However, these rules do not specify what might be considered such comments.

Statements of China-specific risks in prospectuses prepared after March 31 caught the attention of some senior officials, prompting the CSRC to reiterate its stance on the matter with dealmakers, one of the sources said.

The CSRC did not immediately respond to a faxed request for comment.

(Reporting Julie Zhu, Kane Wu and Selena Li; Augustin Turpin, editing by Kate Entringer)

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