Laws and Regulations
Regulations Of The State Council On Foreign-Oriented Stocks For Domestic Listing By Joint Stock Limited Companies
Article 1 These Regulations are hereby formulated in accordance with relevant stipulations in the Company Law of the People's Republic of China (hereinafter referred to as the Company Law) for the purpose of standardizing the issuing and trading of foreign-oriented stocks for domestic listing by joint-stock limited companies and safeguard the legitimate rights and interests of investors.
Article 2 With approval from the Securities Committee of the State Council, share-holding companies (hereinafter referred to as the company) may issue foreign-oriented stocks for domestic listing. Where the total face value of the foreign-oriented stocks to be issued for domestic listing exceeds US$30 million, however, the Securities Committee of the State Council shall report the case to the State Council for approval.
The foreign-oriented stocks to be issued by the company for domestic listing as referred to in the preceding paragraph shall include the foreign-oriented stocks for domestic listing to be issued by the company established by stock offer and those to be issued by the company in increasing its capital.
The total amount of foreign-oriented stocks for domestic listing to be issued with approval from the Securities Committee of the State Council shall be kept within the aggregate size of stocks fixed by the State.
Article 3 The foreign-oriented stocks to be issued by the company for domestic listing shall take the form of registered stocks, use the Renminbi yuan to mark their face value, be purchased and traded in foreign currencies, and listed and traded at stock exchanges inside China.
The foreign-oriented stocks for domestic listing to be issued by the company to domestic investors (hereinafter referred to as domestic-oriented stocks) shall take the form of registered stocks.
Article 4 Investors in foreign-oriented stocks for domestic listing shall be limited to
1. Foreign natural persons, legal persons, and other organizations.
2. Natural persons, legal persons and other organizations in Hong Kong, Macao, and Taiwan.
3. Chinese citizens resided in foreign countries.
4. Other investors in foreign-oriented stocks for domestic listing specified by the Securities Committee of the State Council.
Investors in foreign-oriented stocks for domestic listing shall produce valid documents certifying their identification and qualification when they purchase or trade foreign-oriented stocks for domestic listing.
Article 5 Shareholders of the same kind of foreign-oriented stocks for domestic listing shall enjoy rights and fulfill obligations equal to those of shareholders of domestic-oriented stocks, as stipulated in the Company Law.
The company may provide in its articles of incorporation for special matters concerning the exercise of rights and performance of duties by its shareholders.
Article 6 The company's articles of incorporation are binding on the company itself and its shareholders, directors, supervisors, managers, and other senior management.
The directors, supervisors, managers and other senior management of the company shall discharge their duties in good faith and with due diligence.
The other senior management as mentioned in the preceding two paragraphs of this article includes the chief financial officer of the company, the secretary of its board of directors, and other people listed in the company's articles of incorporation.
Article 7 The Securities Committee of the State Council and its supervision and regulation organ- China Securities Regulatory Commission (hereinafter referred to as CSRC) - shall exercise, in accordance with stipulations in laws and administrative decrees, regulation and supervision of the issuance, trading and other related activities of foreign-oriented stocks for domestic listing.
Article 8 The company established by stock offer shall meet the following qualifications, where it applies for issuance of foreign-oriented stocks for domestic listing:
1. Use of the funds that it raises in line with State industrial policies.
2. Observance of relevant State regulations on the establishment of fixed asset investment projects.
3. Observance of relevant State regulations on the utilization of foreign capital.
4. Purchase of shares by the promoter no less than 35 per cent of the total amount of the capital stocks that the company plans to issue.
5. Investment by the promoter of no less than 150 million Renminbi yuan.
6. The shares for public offering amounting to more than 25 per cent of the total amount of the company's stocks, or more than 15 per cent of the total amount of the company's stocks, where the total stocks it plans to issue exceed 400 million Renminbi yuan in value.
7. Freedom from any material illegal acts in the last three years on the part of the original enterprise reorganized and transformed into the company or the State-owned enterprise which is the major promoter of the company.
8. Profitability for the past three years running on the part of the original enterprise reorganized and transformed into the company or the State-owned enterprise which is the major promoter of the company.
9. Other conditions specified by the Securities Committee of the State Council.
Article 9 The company that applies for issuing foreign-oriented stocks for domestic listing to increase its capital, shall meet the following qualifications besides those specified in the first three clauses of Article 8:
1. Full subscription of the previously offered stocks, conformity of the actual use of the funds raised there from with that fixed at the time when they were raised, and good returns from the use of these funds.
2. Company possession of total net assets no less than 150 million Renminbi yuan in value.
3. Freedom on the part of the company from any material illegal acts during the time from the previous offering of stocks to the current application.
4. Profitability on the part of the company for the last three years running (in case of a company reorganized from an existing enterprise or whose major promoter is a State-owned enterprise, the profitable years of this enterprise or State-owned enterprise may be taken into account).
5. Other conditions specified by the Securities Committee of the State Council.
To increases its capital for the first time, the company established via promotion shall also comply with stipulations in Clause 6 of Article 8 of these Regulations when it applies for issuing foreign-oriented stocks for domestic listing.
Article 10 Applications for the issuance of foreign-oriented stocks for domestic listing shall be handled through the following procedures:
1. Application by the promoter or the company to the people's government of a province, autonomous region or municipality directly under the Central Government or the relevant departments under the State Council in charge of enterprise supervision and recommendation by the people's government of a province, autonomous region or municipality or the relevant departments under the State Council in charge of enterprise supervision to the Securities Committee of the State Council.
2. Selection by the Securities Committee of the State Council after consultation with relevant departments under the State Council of companies for issuance of foreign-oriented stocks for domestic listing.
3. Submission by the chosen companies of the documents listed in articles 11 and 12 of these Regulations to CSRC for examination.
4. Report by CSRC of qualified companies to the Securities Committee of the State Council for approval or to the State Council for approval as stipulated in the first paragraph of Article 2 of these Regulations before issuing by these companies of foreign-oriented stocks for domestic listing.
Article 11 The company established by stock offer shall present the following documents to CSRC if it applies for issuing foreign-oriented stocks for domestic listing:
1. An application report.
2. The name of the promoter, the number of shares to be subscribed by the promoter, the kind of its investment, and certificate of capital verification.
3. Resolutions of agreement reached at the meeting of the promoters on the public offering of foreign-oriented stocks for domestic listing.
4. Documents issued by departments authorized by the State Council or the people's government of a province, autonomous region or municipality to approve the establishment of the company.
5. Recommendations by the people's government of a province, autonomous region or municipality or the relevant department under the State Council in charge of enterprise supervision.
6. The Notice of Pre-verification of Enterprise Name issued by a company registration department.
7. The draft of the articles of incorporation of the company.
8. The prospectus.
9. Feasibility report on the use of funds, and document of approval of the establishment of the fixed asset investment project if the funds to be raised are to be used for fixed asset investment in a project whose establishment requires approval.
10. Financial statements for the last three years of the original enterprise or of the State-owned enterprise who is the major promoter that have been audited by certified public accountants (CPAs) and their accounting firms with auditing reports signed and sealed by more than two CPAs and their accounting firms.
11. Asset evaluation reports signed and sealed by more than two professional evaluators and their firms, and documents of verification and documents of approval of State ownership of stocks from State assets supervision departments if State assets are involved.
12. Legal opinions on relevant matters signed and sealed by more than two lawyers and their firms.
13. Plans and contracts on the underwriting of stocks.
14. Other documents required by CSRC.
Article 12 The company that applies for issuing foreign-oriented stocks for domestic listing to increase capital shall present the following documents to CSRC:
1. An application report.
2. Resolutions of agreement reached at the meeting of the promoters on the public offering of foreign-oriented stocks for domestic listing.
3. Documents issued by departments authorized by the State Council or the people's government of a province, autonomous region or municipality to approve the issuance of new stocks through capital multiplication.
4. Recommendations by the people's government of a province, autonomous region or municipality or the relevant department under the State Council in charge of enterprise supervision.
5. The business license of the company issued by a company registration department.
6. The articles of incorporation of the company.
7. The prospectus.
8. Feasibility report on the use of funds, and document of approval of the establishment of the fixed asset investment project if the funds to be raised are to be used for fixed asset investment in a project whose establishment requires approval.
9. Financial statements of the company for the last three years that have been audited by CPAs or their accounting firms and auditing reports signed and sealed by more than two CPAs and their accounting firms.
10. Legal opinions on relevant matters signed and sealed by more than two lawyers and their firms.
11. Plans and contracts on the underwriting of stocks.
12. Other documents required by CSRC.
Article 13 The time between the issuance by the company of foreign-oriented and domestic-oriented stocks for domestic listing may be shorter than 12 months.
Article 14 The company shall engage registered accountants and their firms that meet State qualifications to audit or re-examine its financial statements.
Article 15 The company shall do accounting and compile financial statements in accordance with relevant State regulations.
Where the financial statements released by the company to the investors in foreign-oriented stocks for domestic listing should be readjusted as required by the accounting rules of other countries or regions, explanations shall be given on the relevant differences.
Article 16 The company that issues foreign-oriented stocks for domestic listing shall disclose information to the public and provide in its articles of incorporation the venue, form and other specific matters concerning such disclosure.
Article 17 The information-disclosing documents of the company issuing foreign-oriented stocks for domestic listing shall be produced in the Chinese language. Where copies in a foreign language are necessary, a commonly used foreign language shall be used. Where different interpretations of these Chinese and foreign copies arise, the Chinese copy shall prevail.
Article 18 The company that issues foreign-oriented stocks for domestic listing shall entrust a domestic securities firms set up with approval from the People's Bank of China and acknowledged by CSRC to serve as its principal underwriter or one of its principal underwriters.
Article 19 The company that issues foreign-oriented stocks for domestic listing shall open a foreign exchange account with a domestic bank qualified to handle foreign exchange business. Matters concerning the opening of such an account shall be handled in accordance with relevant State regulations on management of foreign exchanges.
The principal underwriter that underwrites foreign-oriented stocks for domestic listing shall transfer, within the time limit set in the underwriting agreement, the funds it raises into the foreign exchange account of the company issuing the foreign-oriented stocks for domestic listing.
Article 20 Agency transactions of foreign-oriented stocks for domestic listing shall be handled by securities organizations set up with approval from the People's Bank of China and acknowledged by CSRC.
Article 21 Shareholders of foreign-oriented stocks for domestic listing may entrust agents to exercise their rights as shareholders. The agent exercising the right of a shareholder on behalf of this shareholder shall produce valid documents verifying its qualifications.
Article 22 The equity holder of foreign-oriented stocks for domestic listing may register its shares in the name of a nominal holder.
The equity holder of foreign-oriented stocks for domestic listing shall disclose information about changes in the ownership of its shares in accordance with law.
Article 23 The trading, custody, liquidation and settlement, transfer, and registration shall abide by laws, administrative decrees and relevant rules of the Securities Committee of the State Council.
Article 24 With approval from the Securities Committee of the State Council, foreign-oriented stocks for domestic listing and their derivative forms may be circulated and transferred in foreign jurisdictions.
The derivative forms as referred to in the previous paragraph means stock warrants and foreign depositary receipt of stocks.
Article 25 The company that issues foreign-oriented stocks for domestic listing shall use Renminbi to calculate and announce the dividends and other items its pays to shareholders and pays them in foreign currencies. The management of the capital funds raised by the company and the foreign currencies needed by the company to pay dividends and other items shall be handled according to State regulations on the management of foreign exchanges.
Where the company's articles of incorporation provide that other agencies shall be entrusted to exchange currencies for payments to shareholders, the case may be handled accordingly.
Article 26 The dividends and other incomes from the foreign-oriented stocks for domestic listing may be remitted abroad after payment of taxes in accordance with law.
Article 27 The Securities Committee of the State Council may formulate implementing rules in accordance with these Regulations.
Article 28 The Regulations take effect as of the promulgation date. The Rules of Shanghai Municipality on Regulation of Special Renminbi Stocks promulgated by the People's Bank of China and the Shanghai Municipal Government on November 22, 1991 and the Provisional Regulations of Shenzhen City on Regulation of Special Renminbi Stocks promulgated by the People's Bank of China and the Shenzhen City People's Government on December 5, 1991 are repealed simultaneously.
(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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