Laws and Regulations
The Measures on Management to Strategic Investment by Foreign Investor in Listed Companies
Article 1 The Measures on Management to Strategic Investment by Foreign Investor in Listed Companies (hereinafter referred to as Measures) is formulated in light of the requirements of the Guiding Opinions on Non-tradable Share Reform of Listed Companies, and in accordance with relevant laws and regulations on the supervision over foreign investment and listed companies, as well as the Interim Provisions for Foreign Investors in Mergers and Acquisitions of Domestic Enterprises with the purpose of governing the strategic investment of foreign investors in A-share listed companies (hereinafter referred to as listed companies) after non-tradable share reform, maintaining the order of securities market, introducing advanced overseas management experiences, technologies and capital, improving the corporate governance of listed companies, and protecting the lawful rights and interests of listed companies and their shareholders.
Article 2 These Measures apply to such acts as foreign investors (hereinafter referred to as investors)acquire A shares of the listed companies that have completed the non-tradble share reform or of newly listed companies after the non-tradable share reform by means of medium and long-term strategic mergers and acquisitions investment(hereinafter referred to as strategic investment) with certain scale.
Article 3 Investors may make strategic investment in listed companies in accordance with these Measures upon the approval of the Ministry of Commerce.
Article 4 Strategic investment shall abide by the following principles:
1. Abiding by relevant state laws, regulations, and industrial policies, and not impairing national economic security and public interests;
2. Sticking to the principle of openness, justness and fairness, maintaining the lawful rights and interests of listed companies and their shareholders, and being subject to the supervision of the government and the public, and the jurisdiction of judiciary and arbitration of China;
3. Encouraging medium and long-term investment, and maintaining the order of securities market, not making sensationalism; and
4. Not obstructing fair competition, or resulting in over-concentration of domestic related products or elimination or restriction of competition.
Article 5 An investor shall comply with the following requirements when making strategic investment:
1. To acquire A shares of a listed company by way of contract transfer or private placement or by other means as prescribed by state law or regulation;
2. Investment may be conducted by stages, with the shareholding ratio after the initial investment no less than 10 percent of outstanding shares of the listed company, except special provisions for special industry or the approval by the competent departments;
3. The A shares of a listed company obtained shall not be transferred within three years;
4. For the industries with specific provisions by law or regulation on foreign shareholding ratio, the investor shall comply with the relevant provisions; for any fields prohibited from foreign investment by law or regulation, the investor shall not make investment in any listed company in the aforesaid field; and
5. Investment involving state-owned shareholder of a listed company shall comply with the relevant provisions on state-owned assets administration.
Article 6 An investor shall meet the following requirements:
1. Foreign legal person or other organization established and operated according to law, with sound financial condition, good credit standing, and mature management experiences;
2. Having no less than USD 100 million of total overseas real capital or no less than USD 500 million of total overseas real capital under management; or the total overseas real capital possessed by its parent company is no less than USD 100 million or the total overseas real capital under management of its parent company is no less than USD 500 million;
3. Having sound governance structure and internal control system, and standardized operation; and
4. Without records of substantial penalties by any regulatory institution both home and abroad within the past three years (including its parent company).
Article 7 Strategic investment conducted through private placement by a listed company shall be carried out in light of the following procedures:
1. The board of directors of the listed company adopts the resolutions on private placement and draft amendments to the articles of association of the listed company;
2. The shareholders' meeting of the listed company adopts the resolutions on private placement and amendments of the articles of association of the listed company;
3. The listed company signs private placement contract with the investor;
4. The listed company submits the relevant application documents to the Ministry of Commerce in accordance with Article 12 of the Measures, special provisions prevail when available;
5. The listed company, after obtaining the approval-in-principle letter from the Ministry of Commerce on the strategic investment in the listed company by an investor, shall submit the application documents for private placement to China Securities Regulatory Commission (hereinafter referred to as the CSRC), and the CSRC shall grant approval according to law; and
6. The listed company, after the completion of private placement, shall collect the certificate of approval for foreign-funded enterprises at the Ministry of Commerce, and go through alteration registration at the administrative department of industry and commerce upon the certificate of approval.
Article 8 Strategic investment conducted by way of contract transfer, shall be undertaken in accordance with the following procedures:
1. The board of directors of the listed company adopts the resolutions on the strategic investment of an investor by means of contract transfer;
2. The shareholders' meeting of a listed company adopts the resolutions on the strategic investment of an investor through contract transfer;
3. The transferor signs a share transfer agreement with the investor;
4. The investor submits the relevant application documents to the Ministry of Commerce in accordance with Article 12 of the Measures, special provisions prevail when available;
5. Investor with shares in the listed company, after receiving the approval from the Ministry of Commerce, shall go through the formalities for confirmation of share transfer at the securities exchange concerned, apply for registration and transfer formalities at the securities depository and clearing institution, and report to the CSRC for record filing;
6. The listed company, after completing contract transfer, shall collect the certificate of approval for foreign-funded enterprises at the Ministry of Commerce, and go through alteration registration at the administrative department of industry and commerce upon the certificate of approval.
Article 9 Where an investor obtains de facto control for a listed company by way of contract transfer, it shall, after receiving the approval in light of the procedures of items (1) through (4) of Article 8, submit the acquisition report for the listed company and relevant documents to the CSRC, and after the examination and approval by the CSRC, conduct the formalities for confirmation of the share transfer at the concerned stock exchange, and apply for share registration and transfer at the securities depository and clearing institution. The listed company, after completing the aforesaid formalities, shall handle in accordance with item (6) of Article 8.
Article 10 An investor, making strategic investment in listed companies, shall fulfill its obligations of report, announcement, and other statutory obligations in accordance with the Securities Law and the relevant provisions of the CSRC.
Article 11 If an investor intends to make ongoing strategic investment in the listed companies in which it holds shares, it shall conduct in light of the ways and procedures as prescribed in the Measures.
Article 12 The listed company or investor shall submit the following documents to the Ministry of Commerce:
1. Application Letter for Strategic Investment (For the format, please see Annex I);
2. Strategic Investment Scheme (For the format, please see Annex II);
3. Private placement contract or share transfer agreement;
4. Opinions of sponsor institution (in case of private placement) or legal opinions;
5. The letter of commitment for continuous share holding by the investor;
6. Statements that the investor has no records of major punishment by any regulatory institution both home and abroad within the last three years, and statements on whether it has received any non-major penalties;
7. Registration certificate of the investor with lawful notarization and certification, and identity certificate of the legal representative (or the authorized representative) of the investor;
8. Balance statements in the last three years with the audit of certified public accountant;
9. The documents to be submitted as prescribed in the aforesaid items (1), (2), (3), (5), and (6) shall be signed by the legal representative of the investor or its authorized representative. If the documents are signed by the authorized representative, the power of attorney signed by the legal representative and the corresponding notarized or certified documents shall also be submitted; and
10. Other documents as prescribed by the Ministry of Commerce.
Except the documents as listed in items (7) and (8) in the preceding paragraph, the originals of the Chinese versions shall be submitted. For the documents as listed in items (7) and (8), the original and Chinese translation shall be submitted.
The Ministry of Commerce shall give principle reply within 30 days after it has received all the aforesaid documents, and the valid period of the principle reply shall be 180 days.
Article 13 Foreign company (parent company) meeting the requirements stipulated in Article 6 of the Measures may make strategic investment through its wholly-owned overseas subsidiaries (investors), the investors shall, besides submitting the documents as listed in Article 9 of the Measures, submit the letter of irrevocable commitment of the parent company on assuming joint and several liabilities for the investment acts of the investors to the Ministry of Commerce.
Article 14 An investor shall open its foreign exchange account within 15 days from the day of principle reply of the Ministry of Commerce according to the relevant provisions on foreign investment and mergers and acquisitions. For the foreign exchange capital remitted from overseas by an investor for the use of strategic investment, the investor shall, in accordance with the relevant provisions on foreign exchange control, open a special foreign exchange account (of the category of acquisition) exclusively for the use of foreign investor at the local foreign exchange bureau where the registration office of the listed company locates, the formalities for settlement and exchange of foreign capital within the account and write-off of the account shall be handled in accordance with the relevant provisions on foreign exchange control.
Article 15 An investor may go through the relevant formalities at the securities depository and clearing institution upon the approval document of the Ministry of Commerce for its strategic investment in listed companies and its effective identity certificate.
For the non-tradable shares held by the investor before the non-tradable share reform of the listed company or the shares held by the investor prior to the initial public offering of the listed company, the securities depository and clearing institution may open a securities account upon the application of the investor.
The securities depository and clearing institution shall formulate the corresponding provisions in accordance with the Measures.
Article 16 An investor shall start up its strategic investment within 15 days from the date of capital settlement and exchange, and shall complete the strategic investment within 180 days from the day of principle reply.
If an investor fails to complete the strategic investment in light of the strategic investment scheme within the prescribed time limit, the principle reply of the examination and approval organ shall be invalidated automatically. The investor shall, within 45 days from the day of invalidation of the principle reply, purchase foreign exchange for the RMB capital obtained from settlement and exchange upon the approval of the foreign exchange bureau and remit it out of China.
Article 17 After completing strategic investment, the listed company shall collect the certificate of approval for foreign-funded enterprises at the Ministry of Commerce holding the following documents within 10 days:
1. Application letter;
2. Letter of principle reply of the Ministry of Commerce;
3. The shareholding certificate issued by the securities depository and clearing institution;
4. Business license of the listed company and the identity certificate of its legal representative; and
5. Articles of association of the listed company.
The Ministry of Commerce shall, within 5 days from the day of receiving all the aforesaid documents, issue the certificate of approval for foreign-funded enterprises, noted with the "foreign-funded joint-stock company (mergers and acquisitions of A shares)".
If an investor obtains 25 percent or more shares of a single listed company and promises to hold no less than 25 percent shares within 10 years, the Ministry of Commerce shall note the"foreign-funded joint-stock company (mergers and acquisitions of A shares of 25% or more)" in its certificate of approval for foreign-funded enterprises.
Article 18 A listed company shall, within 30 days from the day of issuance of the certificate of approval for a foreign-funded enterprise, apply for handling alteration registration on the type of company to the administrative department of industry and commerce, and submit the following documents:
1. The application letter for alteration signed by the legal representative of the company;
2. The certificate of approval for foreign-funded enterprises;
3. The shareholding certificate issued by the securities depository and clearing institution;
4. The lawful business operation certificate of the investor that has been notarized and certified; and
5. Other documents that shall be submitted as prescribed by the State Administration for Industry and Commerce.
Where alteration is made after examination and approval, the administrative department of industry and commerce shall note "foreign-funded joint-stock company (mergers and acquisitions of A shares)" in the column of enterprise type of the business license, if an investor makes strategic investment and obtains 25% or more shares of a single listed company and promises to hold no less than 25% shares within 10 years, it shall note “foreign-funded joint-stock company (mergers and acquisitions of A shares of 25% or more)” .
Article 19 A listed company shall, within 30 days from the day of issuance of the business license of a foreign-funded enterprise, go through the relevant formalities at the departments of taxation, customs, foreign exchange control, and other relevant departments. The administrative department of foreign exchange shall note "foreign-funded joint-stock company (mergers and acquisitions of A shares)" in the foreign exchange registration certificate issued by it. If an investor makes strategic investment and obtains 25 percent or more shares of a single listed company and promises to hold no less than 25 percent shares within 10 years, the administrative department of foreign exchange shall note "foreign-funded joint-stock company (mergers and acquisitions of A shares of 25 percent or more)" in the foreign exchange registration certificate.
Article 20 Apart from the following circumstances, the investor shall not make securities trading (excluding B share trading):
1. The A share stock of a listed company held by the investor for strategic investment may be sold after the expiry of shareholding commitment;
2. In case the investor needs to make acquisition by means of offer in accordance with the relevant provisions of the Securities Law, it may purchase the shares sold by A-share shareholders of the listed company within offer period;
3. The non-tradable shares held by the investor before the non-tradable share reform of a listed company may be sold after the completion of the reform and the expiration of locked-up period;
4. The shares held by the investor before initial public offering of a listed company may be sold after the expiration of locked-up period;
5. Where shares held by the investor before the expiration of shareholding commitment need to be transferred for such specific reasons as bankruptcy, liquidation, or mortgage, they may be transferred upon the approval of the Ministry of Commerce.
Article 21 Where an investor reduces its shareholding to make foreign shareholding ratio of a listed company less than 25 percent, the listed company shall make record filing within 10 days to the Ministry of Commerce, and go through the relevant formalities for alteration of the certificate of approval for foreign-funded enterprises.
Where an investor reduces its shareholdingto make foreign shareholding ratio of a listed company less than 10 percent, and the investor is not a single largest shareholder, the listed company shall file with the examination and approval organ and go through the relevant formalities for writing off the certificate of approval for foreign-funded enterprises within 10 days.
Article 22 Where an investor reduces its shareholding to make foreign shareholding ratio of a listed company less than 25 percent, the listed company shall go through alteration registration at the administrative department of industry and commerce within 30 days from the day of alteration of the certificate of approval for foreign-funded enterprises, and the administrative department of industry and commerce shall change the enterprise type in the business license into "foreign-funded joint-stock company (mergers and acquisitions of A shares)". The listed company shall go through alteration registration on foreign exchange at the administrative department of foreign exchange within 30 days from the day of alteration of the business license, and the administrative department of foreign exchange shall note "foreign-funded joint-stock company (mergers and acquisitions of A shares)" in the foreign exchange registration certificate.
Where an investor reduces its shareholding to make foreign shareholding ratio of a listed company less than 10 percent, and the investor is not a single largest shareholder, the listed company shall go through alteration registration at the administrative department of industry and commerce within 30 days from the day of written-off of the certificate of approval for foreign-funded enterprises, and the enterprise type shall be altered into a joint-stock company. The listed company shall go through formalities for writing off its foreign exchange registration certificate at the administrative department of foreign exchange within 30 days from the day of alteration of the business license.
Article 23 Where the parent company makes strategic investment through its wholly-owned overseas subsidiaries and completes the investment on schedule, it shall report to the Ministry of Commerce before it transfers the aforesaid overseas subsidiaries, and submit application documents in light of the procedures as prescribed in the Measures. The new transferee shall still meet the conditions as prescribed in the Measures, undertake all the rights and obligations of the parent company and its subsidiaries in the listed company, and fulfill its obligations of reporting to the CSRC, announcement, and other statutory obligations.
Article 24 Where an investor assigns the shares of a listed company through A-share market, it may apply for purchasing foreign exchange and remitting it out of China to the local administration of foreign exchange where the registration office of the listed company locates with the following documents:
1. Written application;
2. Approval documents granted by the administration of foreign exchange for capital settlement and exchange within the special foreign exchange account (category of mergers and acquisitions) opened for strategic investment;
3. Approval document issued by the Ministry of Commerce for alteration of shareholding structure of the listed company;
4. The certificate documents of relevant securities transactions issued by a securities brokerage institution.
Article 25 A listed company in which an investor holds less than 25 percent of its shares shall borrows foreign loans in accordance with the relevant provisions on foreign loans for domestic Chinese-funded enterprises.
Article 26 Staff of the relevant government organizations shall fulfill their duties according to law, shall not abuse their power to seek for improper interests, and shall have the confidential obligation on the business secrets they know.
Article 27 These Measures shall be applicable for the strategic investment made by the investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan Region.
Article 28 These Measures shall become effective 30 days after the date of promulgation.
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Appendix I:
Application Letter for Strategic Investment
I. Name of the investor
II. Name of the targeted listed company
III. Intent of investment
(Signature and Seal of the Investor and its Authorized Representative)
Date/Month/Year
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Appendix II:
Strategic Investment Scheme
I. Name and brief introduction of the investor (If a parent company makes strategic investment through its wholly-owned overseas subsidiaries, the relevant materials of the parent company shall also be submitted)
II. Name and business scope of the targeted listed company, the planned specific ways for acquiring the shares of the company, the amount of shares to be acquired and the proportion of shares acquired to outstanding shares of the listed company, and the time limit of the strategic investment
III. Continuous shareholding period
IV. Specifications on the affiliated relationship between the investor and the controlling shareholders of the targeted listed company
(Signature and Seal of the Investor and its Authorized Representative)
Date/Month/Year
(This English version by China Securities Investor Protection Fund Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)
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