Administrative Measures for the Takeover of Listed Companies (Revised in 2012)
Administrative Measures for the Takeover of Listed Companies (Revised in 2012)
Administrative Measures for the Takeover of Listed Companies (Revised in 2012)
Order of the China Securities Regulatory Commission No. 77
February 14, 2012
(Adopted by consideration and discussion at the 180th Chairman Meeting of the CSRC since May 17, 2006, and revised in accordance with the Decision of the China Securities Regulatory Commission to on the Revision of Article 63 of the Administrative Measures for the Takeover of Listed Companies on August 27, 2008, and the Decision on the Revision of Article 62 and 63 of the Administrative Measures for the Takeover of Listed Companies on February 14, 2012.)
Chapter I General Provisions
Article 1 For the purposes of regulating the activities related to the takeover and the changes of the relevant share equities of listed companies, protecting the lawful rights and interests of listed companies and investors, safeguarding the order of securities market and social public interests and promoting the optimized allocation of securities market resources, these Measures have been formulated in accordance with the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China and other relevant laws and administrative regulations
Article 2 The activities related to the takeover and changes of the relevant share equities of listed companies shall abide by the provisions of laws, administrative regulations and the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"). The relevant parties shall act in good faith, stick to social moralities and business ethics, voluntarily safeguard the order of the securities market, and accept the oversight of the government and the public.
Article 3 The activities related to the takeover and changes of the relevant share equities of listed companies shall comply with the principles of openness, fairness and equality.
The persons subject to information disclosure in the activities related to the takeover and changes of the relevant share equities of listed companies shall make full disclosure of the their equities and the changes thereof in the listed companies, and strictly perform the reporting and announcing duties and other statutory obligations, and shall keep confidential the relevant information before the disclosure thereof.
The information reported and announced by the persons subject to information disclosure must be true, accurate and complete and shall not contain any false records, misleading statements or material omissions thereof.
Article 4 The activities related to the takeover and changes of the relevant share equities of listed companies shall not endanger the state security or social public interests.
The activities related to the takeover and changes of the relevant share equities of listed companies that involve the national industrial policies, industrial access and transfer of state-owned shares, when required for approval by the relevant state authorities, may be conducted only after having obtained such approval.
Foreign investors that carry out the activities related to the takeover and changes of the relevant share equities of listed companies shall obtain the approval of the relevant state authorities, apply Chinese law and be subject to Chinese judicial and arbitration jurisdiction.
Article 5 The purchaser may become a controlling shareholder of a listed company by way of acquisition of shares, become the actual controller by means of investment relationship, agreements and other arrangements, or acquire the controlling rights of the listed company by a combination of the above-mentioned ways and means.
The purchaser includes investors and their concerted persons.
Article 6 Nobody may damage the lawful rights and interests of the target company and of its shareholders by taking advantage of the takeover of a listed company.
In any of the following cases, a listed company shall not be acquired:
1. if the purchaser has large amount of debts due but not paid, which is in an ongoing situation;
2. if the purchaser had material violations or was suspected of material violations in the past three years;
3. if the purchaser had serious breach of faith in the securities market for the past three years;
4. if the purchaser, as a natural person, falls under any of the circumstances specified by Article 147 of the Company Law of the People's Republic of China; or
5. other circumstances where no listed company may be acquired as provided by laws and administrative regulations and specified by the CSRC.
Article 7 Neither the controlling shareholders nor the actual controllers of a target company may damage the lawful rights and interests of the target company or other shareholders by abuse of their rights of shareholders.
Where the controlling shareholders or actual controllers or any of their affiliates of a target company have damaged the lawful rights and interests of the target company or/and other shareholders, the above-mentioned controlling shareholders and actual controllers shall, prior to the transfer of their controlling rights of the target company, take initiatives to eliminate the damages; and if such damages have not been eliminated, they shall make arrangements where the proceeds from sale of the relevant share shall be used to eliminate such damages, provide sufficiently effective performance bonds or arrangements for the part insufficient to eliminate such damages, and obtain the approval of the general shareholders' meeting of the target company according to its Articles of Association.
Article 8 The directors, supervisors and officers of the target company owe fiduciary and loyal duties to the company they serve and shall treat equal all the purchasers aiming to acquire their company.
The board of directors of the target company shall make decisions and adopt measures concerning the takeover that are conducive to maintaining the interests of the company and its shareholders, and shall not abuse their powers to set up improper obstacles against the takeover, make use of corporate resources to provide the purchaser with any form of financial assistance or damage the lawful rights and interests of the company and its shareholders.
Article 9 The purchaser that carries out takeover of a listed company shall engage a professional agency as its financial advisor that has registered in China with qualifications for undertaking of financial advisory business, and otherwise, the purchaser shall not acquire the listed company.
The financial advisor shall act in due diligence, abide by the professional norms and ethics, and guarantee the truthfulness, accuracy and integrity of the documents it prepares and issues.
The financial advisor who believes that the purchaser damages the lawful rights ad interests of the target company and its shareholders by taking advantages of the takeover of the listed company shall refuse to provide the purchaser with any financial advisory service.
Article 10 The CSRC shall supervise and administer the activities related to the takeover and changes of the relevant share equities of listed companies by force of law.
The CSRC may establish a special committee comprised of professionals and the relevant experts to put forward advisory opinions on whether a specific transaction constitutes takeover of a listed company, whether there is any circumstance where a listed company shall not be acquired and other relevant matters at the request of the functional departments of the CSRC. The CSRC shall make corresponding decisions by force of law.
Article 11 The stock exchanges shall formulate business rules by force of law, organize transactions and provide services for the activities related to the takeover and changes of the relevant share equities of listed companies, carry out real-time supervision on the relevant securities transactions, and oversee that the persons subject to information in the activities related to the takeover and changes of the relevant share equities of listed companies practically perform their information disclosure duties.
The securities registration and clearing agency shall formulate business rules by force of law and provide services for such matters as securities registration, custody and management and settlement concerning the activities related to the takeover and changes of the relevant share equities of listed companies.
Chapter II Disclosure of Equities
Article 12 The equities of an investor in a listed company include the shares registered in its name and those not registered in its name the voting right of which may be actually controlled by such investor. The equities of a listed company owned by the investor and its concerted persons shall be calculated together.
Article 13 When the shares whose equities are owned by an investor and its concerted persons in a listed company through securities transactions on the stock exchange jointly reach 5% of the shares issued by the listed company, a report shall be prepared on equity changes within 3 days of the occurrence of such fact, and a written report thereof shall be submitted to the CSRC and the stock exchange, with a copy thereof to the CSRC office (hereinafter referred to as the local office) of the place where the listed company is located, and with a notice thereof to the target listed company and a public announcement thereof shall be made. During the term above, the shares of the listed company shall no longer be traded.
After the shares whose equities are owned by the investor and its concerted persons in a listed company jointly reach 5% of the total shares issued by the listed company as mentioned above, each time when the proportion of the shares issued by the listed company whose equities are jointly owned by them increases or decreases by 5% through securities transactions on the stock exchange, reports and public announcements shall be made according to the provisions above. During the report period and within two days of the making of such reports and public announcement, shares of the listed company shall no longer be traded.
Article 14 When the shares whose equities are owned by an investor and its concerted persons in a listed company jointly reach or exceed 5% of the shares issued by the listed company through transfer by agreement, a report shall be prepared on equity changes within 3 days of the occurrence of such fact and a written report thereof shall be submitted to the CSRC and the stock exchange, with a copy thereof to the local office, and with a notice thereof to the target listed company, and a public announcement shall be made.
After the shares whose equities are owned by the investor and its concerted persons in a listed company jointly reach 5% of the total shares issued by the listed company, each time when the proportion of the shares issued by the listed company whose equities are owned by them increases or decreases by 5% or more, the reporting and publicly announcing duties above shall performed.
Neither the investor nor its concerted persons mentioned above may trade the shares of the listed company before having made the required report and public announcement. And the relevant share transfer and transfer registration procedures shall be handled according to the provisions of Chapter IV of these Measures, the stock exchanges and the securities registration and clearing agency.
Article 15 When the shares whose equities are jointly owned by the investor and its concerted persons by administrative transfer or change, or execution of court ruling, inheritance or donation reach the proportion specified in the preceding article, the reporting and announcing duties shall be performed, and the registration procedures for share transfer shall be handled by reference with the provisions specified in the preceding article.
Article 16 If the investor and its concerted persons are not the largest shareholders or actual controllers of a listed companies, when the shares whose equities are owned by them reach or exceed 5% of the shares issued by the listed company but not reach 20% thereof, a short form equity change report containing the following contents shall be prepared:
1. the names and domiciles of the investor and its concerted persons; and the name, registered address and legal representative of the investor and its concerted persons when they are legal persons;
2. purposes for holding of shares, whether or not intend to keep increasing their equities in the listed company in the coming 12 months;
3. name of the listed company, and categories, quantity and proportion of its shares;
4. the time and methods for the shares of the listed companies who equities are owned to reach or exceed 5% of the shares issued by the 5% or for the increase or decrease of the shares whose equities are owned to reach 5%;
5. brief description of the trading of the shares of the company through securities trading on the stock exchange within 6 months before the date of the occurrence of the fact of equity change; and
6. other content as may be required by the CSRC and the stock exchange to disclose.
If the investor and its concerted persons above are the largest shareholders or actual controllers of a listed company, when the shares whose equities are owned by them reach or exceed 5% of the shares issued by the listed company, but not reach 20% thereof, the contents specified by Article 17(1) of these Measures shall be disclosed.
Article 17 Where the shares whose equities are held by the investor and its concerted persons jointly reach or exceed 20% but less than 30% of the shares issued by a listed company, such investor and its concerted persons shall prepare a detailed equities change report, which shall, in addition to the information specified in the preceding paragraph, disclose the following contents:
1. the structure chart of the controlling shareholders and actual controllers of the investor and its concerted persons and their equity controlling relationship;
2. the price for obtaining the relevant shares, fund needed, source of fund or other payment arrangements;
3. whether there is any competition in the same business or potential competition in the same business and whether there is any ongoing related-party transaction between the investor, the concerted persons and their controlling shareholders and actual controllers on one side, and the listed company on the other; in case of any competition in the same business or ongoing related-party transaction, whether there is any corresponding arrangement that ensures the avoidance of competition in the same business between the investor, the concerted persons and their related parties on one side and the listed company on the other and the independence of the listed company.
4. the subsequent plan on the adjustment of the assets, business, personnel, organizational structure, articles of association and other relevant matters in the coming 12 months;
5. the substantial transactions in the preceding 24 months between the investor and its concerted persons on one side and the listed company on the other side;
6. where no situation set out in Article 6 of these Measures exist; and
7. being capable for providing the relevant documents according to the provisions of Article 50 of these Measures;
Where the above-mentioned investor or any of its concerted persons is the largest shareholder or the actual controller of the listed company, they shall also engage financial advisor to issue a verification opinion on the content disclosed in the above-mentioned equities change report, except for administrative transfer or change of state-owned shares, transfer of shares between different entities under common control of the same actual controller, and obtaining shares by inheritance. Where the investor and its concerted persons commit not to exercising the voting rights of the relevant shares for at least 3 years, they shall be exempt from engagement of a financial advisor and provision of the documents set out in Item 7 of the preceding paragraph.
Article 18 Within six months as of the date of the disclosure, if the investor and its concerted persons who have disclosed the equities change report are required to report and announce the equities change reports again due to the change of shares whose equities are held by them, the report and announcement may be made only on the part different from the previous reports; and 6 months later after the date of the previous disclosure, the investor and its concerted persons shall prepare the equities change report according to the provisions of this Chapter, and perform their reporting and announcing duties.
Article 19 If any change of shares whose equities held by the investor and its concerted persons falls under any of the circumstances specified in Article 14 of these Measures due to the reduction of share capital by the listed company, the investor and its concerted person shall be exempt from performance of the reporting and announcing duties. The listed company shall, within 2 working days from the date of the completion of the alteration registration for the reduction of the share capital, make an announcement on the change of shares whose equities are held by the shareholders of the company due to such reason; if it is possible that the reduction of the share capital by the company will enable the investor and its concerted persons to become the largest shareholder or the actual controller of the company, such investor and its concerted persons shall, within 3 working days as of the announcement of the relevant resolutions on reduction of the share capital of the company by the board of directors, perform their reporting and announcing duties according to the provisions of Article 17(1) of these Measures.
Article 20 In case the relevant information has been disseminated at the media or something abnormal has been found with the trading of the stocks of the company before a disclosure is made by any person subject to information disclosure in the activities related to the takeover and changes of the relevant share equities of listed companies according to law, the listed company shall immediately inquire the person concerned and such person shall immediately make a written reply thereof, for which the listed company shall make a prompt public announcement.
Article 21 The persons subject to information disclosure in the activities related to the takeover and changes of the relevant share equities of listed companies shall disclose information at least one media designate by the CSRC according to law; the contents of disclosure in other media shall be consistent with those disclosed on the designated media, and the time of disclosure shall not be earlier than that made on the designated media.
Article 22 Where the persons subject to information disclosure are to take concerted actions in the activities related to the takeover and changes of the relevant share equities of listed companies, they may specify one among them as the appointed representative to take charge of the preparation of uniform information disclosure documents in a written form, and agree to authorize the appointed representative to sign and affix the chop on the information disclosure documents.
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