Securities Law of the People's Republic of China
Securities Law of the People's Republic of China
Securities Law of the People's Republic of China
Promulgated by the Sixth Session of the Ninth National People's Congress Standing Committee on December 29, 1998 according to the Order of the President [1998] No.12.
Chapter I General Provisions
Article 1 The formulation of this law aims to regulate stock issuance and transactions, to protect investors' legitimate rights and interests, to safeguard economic order and public interests of the society, and to enhance the development of the socialist market economy.
Article 2 This law will be applicable to the issuance and transactions of shares, company bonds, and other securities designated by the State Council according to law within China's territory. Situations that are stipulated in this law will be covered by the provisions of the Company Law, other laws, and administrative rules and regulations.
The issuance and transactions of government treasury bonds will be governed separately by the provisions of other laws and administrative rules and regulations.
Article 3 When issuing and dealing in securities, all concerned must abide by the principles of openness and fairness.
Article 4 All participants involved in issuing and dealing in securities enjoy equal legal status, and shall abide by the principles that their acts will be voluntary, reimbursable, honest, and trustworthy.)>
Article 6 Stock firms, banks, trust firms, and insurance agencies shall operate separately and be administered separately. Stock firms, banks, trust firms, and insurance agencies shall be established separately.
Article 7 According to law, the securities regulatory body under the State Council shall centralize and unify the supervision and administration of all stock markets in China.
If necessary, the securities regulatory body under the State Council may set up branches that will execute supervisory and administrative functions according to authorization.
Article 8 Under the prerequisite that the state shall centralize and unify the supervision and administration of the issuance and transactions of securities, stock brokers shall establish their own associations so as to exercise self?disciplining administration.
Article 9 According to law, the state auditing organ shall supervise by auditing the accounts of stock exchanges, securities companies, securities registration and settlement organizations, and securities supervision and administration organizations.
Chapter II Stock Issuance
Article 10 Before publicly issuing securities, one must fulfill the provisions of laws and administrative rules and regulations; report, according to law, to the securities regulatory body under the State Council, or to a relevant department authorized by the State Council; and attain its prior approval. Without attaining prior approval according to law, no unit or individual is allowed to openly issue securities to the public.
Article 11 Before publicly issuing shares, one must abide by the provisions of the Company Law, and report to and attain prior approval from the securities regulatory body under the State Council. The applicant?issuer must submit to the securities regulatory body under the State Council, application documents as required by relevant provisions of the Company Law and other relevant documents as stipulated by the securities regulatory body under the State Council.
Before issuing company bonds, one must abide by the provisions of the Company Law, and report to and attain prior approval from a relevant department authorized by the State Council. The applicant?issuer must submit to the relevant department authorized by the State Council, application documents as required by relevant provisions of the Company Law and other relevant documents as stipulated by the relevant department authorized by the State Council.
Article 12 The organ or department legally in charge of examining and approving the application of an applicant?issuer who applies to publicly issue securities according to law shall decide the formats of application documents and the modes for submitting them,
Article 13 When submitting application documents to the securities regulatory body under the State Council or to a relevant department authorized by the State Council for the approval to issue securities, the applicant?issuer must furnish truthful, accurate, and complete information.
The special organizations and personnel in charge of issuing relevant documents for securities issuance must strictly execute their legal duties, and ensure that the documents issued by them are truthful, accurate, and complete.
Article 14 The securities regulatory body under the State Council shall establish an issuance examination committee that will examine and approve, according to law, the applications for share issuance.
The issuance examination committee will consist of professionals from the securities regulatory body under the State Council and outside experts hired by the securities regulatory body under the State Council. They will decide by casting their votes on the applications for share issuance, and expressed views on their deliberations.
The securities regulatory body under the State Council shall formulate the specific provisions for establishing the issuance examination committee, and the appointment periods and work procedures for its personnel, and submit them to the State Council for its approval.
Article 15 The securities regulatory body under the State Council shall be responsible for approving stock issue applications in accordance with the law. The approval procedure shall be made public and subject to supervision in accordance with the law.
Personnel who are involved in approving stock issue applications shall not have any interests in units applying for the issue; shall not receive gifts from units applying for the issue; shall not hold stocks of the approve issue; and shall not have private contact with units applying for the stock issue.
The examination and approval of a company's application for bond issue by State Council authorized departments shall be implemented in accordance with the stipulations of the previous two paragraphs.
Article 16 The securities regulatory body under the State Council or State Council authorized departments shall make a decision within three months from the date of receipt of stock issue application papers. The organizations or departments shall give an explanation for applications that are not approved or examined.
Article 17. When a stock issue application is examined and approved, the stock issuer shall, in accordance with the stipulations of laws and administrative rules and regulations, issue a public subscription notice before the public issue of the stock, and place the notice in designated places for the public to read.
Before making public the information on the stock issue in accordance with the law, any person who has information on the issue shall not disclose such information.
The issuer shall not issue stocks before issuing a public subscription notice.
Article 18 When the securities regulatory body under the State Council or State Council authorized departments discover that the approval or decision to examine and approve a stock issue is not in compliance with the stipulations of laws and administrative rules and regulations, they shall annul the approval and decision. The stock issue shall be canceled if the issue has not commenced. For stocks already issued, stockholders shall ask the issuer to reftmd the issue price and the interest calculated on the price, using the bank deposit interest rate for the corresponding period.
Article 19 After the issue of stock in accordance with the laws, the issuer shall be responsible for changes in the operations and profits; and investors shall be responsible for investment risks arising from these changes.
Article 20 When a listed company issues new stocks, it shall comply with the conditions required by the Company Law on new stock issue. It may sell the new stocks to the public or to existing stockholders.
A listed company shall utilize the capital it procures from stock issue in accordance with the uses explained in the public issue subscription notice. Changes in the listed capital uses in the stock issue explanations shall be approved by the general shareholders' meeting. A company shall not issue new stocks if it makes unauthorized changes in the use of capital which are not corrected or which are not approved by the shareholders' meeting.
Article 21 A securities company shall, in accordance with the stipulations of laws and administrative rules and regulations, underwrite to sell the securities an issuer offers for public subscription. The underwriting business is operated on a commission or sole agency basis.
Commission underwriting refers to the method whereby a securities company undertakes to sell securities on behalf of the issuer and return all unsold securities to the issuer at the end of the underwriting period.
The sole agency method of underwriting refers to the method whereby a securities company acquires all securities of the issuer in accordance with the agreement, or acquires all unsold securities after the publicoffer at the end of the underwriting period.
Article 22 An issuer who publicly issues securities has the right to select an underwriting securities company. Securities companies shall not procure the underwriting business with improper means of competition.
Article 23 The following shall be included in the underwriting or sole agency agreement signed between a securities company and a stock issuer:
1. Names, addresses, and legal representatives of the parties;
2. Types, quantity, monetary amount, and issue price of the stocks underwritten on the commission and sole agency methods;
3. The duration, including the commencement date and deadline of the securities underwriting on the commission and sole agency methods;
4. The payment method and payment date for the securities underwriting on the commission and sole agency methods;
5. The fees and settlement method for the securities underwriting on the commission and sole agency methods;
6. Liability for breach of contract.
7. Other matters specified by the securities regulatory body under the State Council.
Article 24 A securities company shall verify the authenticity, correctness, and completeness of documents of the public stock issue it underwrites. It shall not proceed with the sale if false records, misrepresentations, or major omissions are discovered in the documents. It shall immediately stop the sale and take remedial measures on stocks it has sold.
Article 25 Where the total face value of a public stock issue exceeds 50 million renminbi, the issue shall be underwritten by an underwriting syndicate, which shall include a principal underwriting securities company and other companies who participate as joint underwriters of the share issue.
Article 26 The maximum period for underwriting the stock issue on a commission or sole agency basis shall not exceed 90 days.
Within the period for underwriting the stock issue on a commission or sole agency basis, the securities company shall guarantee to first sell the stocks to subscribers. The securities company shall not reserve the stocks it underwrites to sell or make advance purchases of the stocks it solely underwrites.
Article 27 Where a securities company solely underwrites a stock issue, it shall report the stock sale to the securities supervision and administration organizations for record within 15 days after the expiry of the period of solely underwriting.
Where a securities company underwrites stocks on a commission basis, it shall report the stock sale jointly with the issuer to the securities regulatory body under the State Council for record within 15 days after the expiry of the period for underwriting the stock issue on a commission basis.
Article 28 Where a stock is issued at a premium, the issue price shall be discussed and determined between the issuer and the underwriting securities company, and report to the securities regulatory body under the State Council for approval.
Article 29 Where a domestic enterprise directly or indirectly issues stocks abroad or lists its stocks for trading abroad, the enterprise shall obtain approval from the securities regulatory body under the State Council.
Chapter III Stock Transactions
Section I General Rules
Article 30 Stocks traded by parties to a stock transaction shall be the stocks issued and paid for in accordance with the law.
Stocks not issued in accordance with the law shall not be traded.
Article 31 Stocks, company bonds, and other securities issued in accordance with the law shall be subject to restrictions stipulated by the law on the allotted times for transfer. They shall not be traded within the restricted allotted time periods.
Article 32 Stocks, company bonds, and other securities approved for listing and trading in accordance with the law shall be listed for trading in stock exchanges.
Article 33 The method of open and centralized price bidding shall be adopted for trading of stocks in stock exchanges.
The principle of price and time preference shall be practiced in centralized price bidding in stock trading.
Article 34 Stocks traded by parties to a stock transaction shall be in paper form or other forms specified by the securities regulatory body under the State Council.
Article 35 The spot transaction method shall be implemented in stock transactions.
Article 36 Securities companies shall not engage in stock trading activities to raise capital or stocks from clients.
Article 37 Personnel working at stock exchanges, securities companies, and securities registration and settlement institutions; personnel working at securities supervision and administration organizations; and other personnel prohibited by laws and administrative rules and regulations from participating in stock trading shall not hold stocks, trade in stocks, and receive stocks given by other people, directly under their names or under false names or other people's names during the term of their office or within the allotted time periods specified by the law.
When a person becomes one of the personnel listed in the preceding paragraph, he or she shall transfer his or her stocks in accordance with the law.
Article 38 Stock exchanges, securities companies, and securities registration and settlement institutions shall keep their client accounts confidential in accordance with the law.
Article 39 Any special organization or its personnel that have prepared an auditing report, assets appraisal report, or legal advice for the issuance of a stock are prohibited from buying or selling the stock in question while the stock is being underwritten and within six month after the period of underwriting.
In addition to provisions of the preceding paragraph, any special organization or its personnel that prepares an auditing report, assets appraisal report, or legal advice for a listed company is prohibited from buying or selling stocks of the company from the day it accepts the assignment until five days after the aforementioned document is published.
Article 40 Fees for security exchanges shall be reasonable; fees, fee standards, and fee methods shall be made public.
Fees for securities exchanges, fee standards and management procedures shall be standardized by relevant authorities under the State Council.
Article 41 A stockholder shall notify the company within three days when the stocks in his possession have reached five percent of the stocks issued by a limited liability company. The company shall report it to the securities regulatory body under the State Council within three days of receipt of the report. Where is the company is listed, it shall also report it to the security exchange.
Article 42 Where the stockholder in the preceding Article sells the stocks of the company in his possession within six months after he purchases them, or where he buys them back within six months after he sells them, profits from the transaction shall belong to the company and the company's board of directors shall take back the stockholder's profits. Where the securities
company, as the sole underwriter, purchases all the unsold stocks and therefore exceeds the five?percent possession limit, it is exempt from the six?month restriction when it resells the stocks.
Where the board of directors refuses to comply with the provisions of the preceding paragraph, other stockholders have the right to ask the board to comply.
Where the board of directors' refusal to comply with the first paragraph of this Article has resulted in losses to the company, the responsible directors are liable for the damages in accordance with the law.
Section Il Stock Listing
Article 43 When a limited liability company applies to have its stocks listed, it shall submit an application to the securities regulatory body of the State Council for approval.
The securities regulatory body of the State Council may empower a security exchange to approve stock listings in line with legally prescribed conditions and procedures.
Article 44 The state encourages companies that conform with the policy for encouraging industrial development and also meet the conditions for stock listing to have their stocks listed.
Article 45 The following documents shall be submitted together with an application to the securities regulatory body of the State Council to have one's stock listed and traded at the exchange:
1.
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