Interim Administrative Regulations on Share Issuing and Trading

Interim Administrative Regulations on Share Issuing and Trading

Order of the State Council [1993] No. 112

April 22, 1993

We hereby promulgate the Tentative Regulations on Share Issuing and Trading, it shall be implemented as of the day of promulgation.

Premier of the People's Republic of China Li Peng

Contents
Chapter I General Principles
Chapter II Issuing Shares
Chapter III Trading of Shares
Chapter IV Acquisition of Listed Companies
Chapter V Custody, Clearance and Transfer
Chapter VI Disclosure of Information by Listed Companies
Chapter VII Investigation and Penalties
Chapter VIII Arbitration of Disputes
Chapter IX Supplementary Provisions

Chapter I General Principles

Article 1 These Regulations are formulated to meet the needs for development of a socialist market economy, to establish and develop a national unified and highly efficient stock market, to safeguard the lawful rights and interests of investors as well as the public interest, and to promote national economic development.

Article 2 The issuing and trading of shares and related activities within the territory of the People's Republic of China shall be conducted in accordance with these Regulations.
The provisions concerning shares in these Regulations shall be applicable to securities that possess the characteristics and functions of shares.

Article 3 The issuing and trading of shares shall be conducted under the principles of transparency, fairness and honesty.

Article 4 The issuing and trading of shares shall be conducted in such a way that the socialist public ownership system is maintained in the predominant position and that state-owned assets shall be protected from infringement.

Article 5 The State Council Securities Committee (SCSC) shall be the organ responsible for the administration of the securities markets throughout the country. It shall carry out unified administration on securities markets in accordance with the laws and regulations. The China Securities Regulatory Commission (CSRC) shall be the administrative organ of the SCSC and it shall regulate and supervise the specific activities concerning issuing and trading of securities in accordance with the laws and regulations.

Article 6 Specific measures shall be formulated separately for issuing and trading of special Renminbi-denominated shares.
The direct or indirect issuing of shares outside China and the trading outside China of such shares conducted by an enterprise inside China, shall be subject to examination and approval of the SCSC. Specific measures on these matters shall be formulated separately.

Chapter II Issuing Shares

Article 7 An issuer of shares must be a company limited by shares that is qualified to issue shares.
The term "a company limited by shares" in the preceding paragraph shall include companies limited by shares already established and those that have been approved to be established.

Article 8 An established company limited by shares applying for issuing shares to the public must satisfy the following conditions:
1.Its production and operation must conform to the industrial policies of the State;
2. Its common shares must be limited to one type, and shall carry the same rights;
3. The capital stock subscribed by the promoters must not be less than 35 percent of the total capital stock planned to be issued by the company;
4. The capital stock subscribed by the promoters out of the total shares planned to be issued by the company must not be less than CNY 30 million , unless otherwise provided for by the State;
5. The capital stock to be issued to the public must not be less than 25 percent of the total capital stock planned to be issued by the company, among which the share capital subscribed by the employees of the company must not be more than 10 percent of the total capital stock planned to be issued to the public. If the total share capital to be issued by the company exceeds CNY 400 million , the CSRC may reduce the proportion to be issued to the public based on the circumstances and in accordance with regulations, provided that the proportion is not lower than 10 per cent of the total share capital to be issued by the company;
6. The promoters must not have committed any serious illegal acts during the past three years;
7. Other conditions as may be specified by the SCSC.

Article 9 Where a company limited by shares converted from an enterprise applying for issuing shares to the public, it must satisfy the following conditions in addition to the conditions listed in Article 8.
1. Its net assets at the end of the year prior to the issuance shouldn't be less than 30 percent of the total assets, and its intangible assets shouldn't be more than 20 percent of the total net assets, unless otherwise provided for by the SCSC;
2. It has been profitable for the past three consecutive years.
Where a company limited by shares converted from a State-owned enterprise issues shares, the ratio of State-owned shares to the total shares planned to be issued by the company shall be prescribed by the State Council, or a department delegated by the State Council.

Article 10 A company limited by shares applying for issuing shares to the public in order to increase its capital must satisfy the following conditions in addition to the conditions listed in Articles 8 and 9:
1. The use of capital generated from the last public issue of shares should have been in consistent with the purpose described in the prospectus, and such use have been effective and well-functioning;
2. At least 12 months have passed since its last public issue of shares;
3. No serious illegal acts have been committed by the company in the period between the last public issue of shares and the present application;
4. Other conditions as may be imposed by the SCSC.

Article 11 Where a company that has previously placed its shares privately applies for issuing shares to the public, the following conditions must be satisfied in addition to those listed in Articles 8 and 9;
1. The proceeds from the private placement should have been used in consistent with the purpose described in the prospectus, and such use have been effective and well-functioning;
2. At least 12 months have passed since the latest private placement of shares;
(3) No serious illegal acts have been committed by the company in the period between the latest private placement and the present public issue;
4. The shares held by employees and internal staff have been issued in accordance with the scope of the prescribed regulations and the share certificates have been submitted to a securities institution designated by the State for centralized custody;
5. Other conditions as may be imposed by the SCSC.

Article 12 To apply for issuing shares to the public, the following procedures shall be abided by:
1. The applicant shall retain professional organizations including an accounting firm, an asset appraisal organization and a law firm to examine and assess its credit-worthiness, assets and financial position and issue written legal opinions on the issues concerned; thereupon, the applicant shall submit its application for issuing shares to the public to the People's Governments of the province, autonomous region, centrally-governed municipality or city with independent development plans (hereinafter referred to as the local government) or to the central department in charge of the enterprise, depending on the subordinate relation of the applicant.
2. Within the limits on share offerings imposed by the State, the application submitted by a local enterprise must be examined and approved by the relevant local government; the application submitted by a centrally-controlled enterprise shall be examined and approved by the competent department in charge of the centrally-controlled enterprise after consultation with the local government in the place where the enterprise is located; the local government or the competent department in charge of the centrally-controlled enterprise shall make a decision within 30 working days as of the date of receipt of the application, and submit a copy of its decision to the SCSC.
3. After an application is approved, it shall be delivered to the CSRC for review; the CSRC shall issue a written review opinion within 20 working days as of the date of receipt of the application and submit a copy of such written opinion to the SCSC; after the application is reviewed and approved by the CSRC, the applicant may apply for listing of the shares to the listing committee of a securities exchange; shares may be issued only after their listing has been accepted by such listing committee.

Article 13 To apply for issuing shares to the public, the following documents shall be submitted to the local government or the competent department in charge of the centrally-controlled enterprise:
1. An completed application form;
2. The resolution of the promoter meeting or the general meeting of shareholders which approves the public issue of shares;
3. The document approving the establishment of the company limited by shares;
4. A business license or a certificate of preparation for registration of the company limited by shares issued by the Administration for Industry and Commerce;
5. The articles of association of the company or a draft articles of association of the company;
6. The prospectus;
7. A feasibility study report on use of fund; in the case of fixed asset investment projects that require the State to provide funds or other assistance, the document approving the project proposal for the fixed asset investment issued by the relevant State departments shall be submitted as well;
8. Financial reports of the company for the past three years or for the period since its establishment, audited by an accounting firm, and an audit report signed and sealed by two or more registered accountants and their firm;
9. A written legal opinion on the issues concerned signed and sealed by two or more lawyers and their firm;
10. An assets appraisal report singed and sealed by two or more professional appraisers and their organization and an investment verification report singed and sealed by two or more registered accountants and their firm; if State-owned assets are involved, a confirmation document issued by the administration for State-owned assets shall be provided as well;
11. The share issuing and underwriting plan and the underwriting agreement;
12. Other documents that the local government or the competent department in charge of the centrally-controlled enterprise requires to be submitted;

Article 14 When an approved application is delivered to the CSRC for review, the following documents must be submitted in addition to those listed in Article 13:
1.
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