Laws and Regulations
Detailed Rules For Regulations Of The State Council On Foreign-oriented Stock Domestic Listing
CHAPTER I GENERAL PROVISIONS
Article 1 This set of Detailed Rules has been formulated pursuent to the State Regulations of the State Council on Domestically-listed Shares for Overseas Investors (hereinafter referred to as the Regulations), so as to strengthen the supervision and administration of the issuing and trading of such shares (hereinafter referred to as B shares) and related activities to protect the legal rights of the investors.
Article 2 The Regulations and this set of Detailed Rules shall be followed in the issuance and trading of B shares and related activities.
Areas not covered by the Regulations and this set of Detailed Rules shall be governed by related provisions as set in the State's laws and regulations related to securities.
Article 3 With the approval of the Securities Committee of the State Council (hereinafter referred to as the Committee) or with the approval of the State Council via the Committee, joint stock limited companies (hereinafter referred to as companies) may offer shares to specified or unspecified investors in B shares and list the shares on domestic market.
The Companies referred to in the previous paragraph should be considered as the companies that have been established or have been approved to be established.
CHAPTER II ISSUING AND LISTING OF B SHARES
Article 4 Companies which apply for issuing B shares on the domestic markets for the first time shall submit applications to the people's governments of the provinces, autonomous regions or municipalities directly under the Central Government, or to the responsible departments under the State Council.
The people's governments and the responsible departments, after examining the applications and finding the companies meet the requirements for issuing B shares in domestic markets as laid sown in the Regulations, shall recommend to the Committee with the following documents:
1. recommendation letters;
2. application forms completed by the companies concerned;
3. papers and related materials to show that the companies comply with the requirements for issuing B shares in domestic markets as laid down in the Regulations;
4. feasibility reports on use of the funds raised;
5. the companies' balance sheets and earnings statements, which have been certified by Chinese certified public accountants qualified for practice in securities market;
6. projections of the after-tax profits of the companies for the current year;
7. for companies to be established, evaluation reports on assets of the companies as prepared by the companies' promoters;
8. analytical reports on the prospects of the issuing by securities firms licenced to underwrite shares;
9. other documents as required by the Committee.
Article 5 Upon receipt of the application documents as specified in Article 4 of this set of Detailed Rules, the Committee may, after consultation with relevant departments under the State Council, determine on which companies may issue B shares and notify the decisions to the people's governments of the provinces, autonomous regions and municipalities directly under the Central Government, or the responsible departments under the State Council.
Article 6 Companies with approval to issue B shares shall present the required documents as specified in Article 11 and Article 12 of the Regulations to the People's governments of the provinces, autonomous regions and municipalities directly under the Central Government, or to the responsible departments under the State Council, and through them, onto the China Securities Regulatory Commission (hereinafter referred to as the CSRC) for verification.
Article 7 Applications for issuing B shares for the second time by companies that have already issued B shares (except for offering to current shareholders), shall submit documents specified in Article 12 of the Regulations to the people's governments of the provinces, autonomous regions and municipalities directly under the Central Government, or to the responsible departments under the State Council, and through them, onto the CSRC for verification.
Article 8 The companies shall present professional documents prepared by foreign firms of professionals such as accountants, lawyers, appraisers on the issuing of B shares when they submit the application documents as specified in Articles 6 and 7.
The firms mentioned in the previous paragraph shall meet qualifications as set by the State, if there are any.
Article 9 The agreements on underwriting and prospectuses that are required under Articles 6 and 7 of this set of Detailed Rules to be presented may be only initialed, or be confirmed by the parties involved if no signature or seal thereon.
Article 10 Upon verifying and approving the companies' applications presented and examined by the people's governments of the provinces, autonomous regions and municipalities directly under the Central Government, or to the responsible departments under the State Council, the CSRC shall present them to the Committee for further approval. Where the total face value of the B shares to be issued exceeds US$30 million, the Committee shall report the case to the State Council for approval.
Before issuing their B shares, the companies shall submit to the CSRC the officially signed underwriting agreements and prospectuses. Then they receive approval documents, upon when the shares may be issued.
Article 11 The prospectuses referred to in the Regulations and this set of Detailed Rules may be information memoranda or other expository materials on the issuing of the shares.
Article 12 The companies that issue B shares shall disclose their prospectuses within the Chinese territory in accordance with the contents, forms and ways as set by related Chinese laws and regulations. Prospectuses sent to investors outside the Chinese territory, should be formulated and offered in accordance with requirements as set by Chinese laws and regulations, except otherwise provided in the laws of the territory where the issuance is made.
The prospectuses sent to investors both in and out of Chinese territory may not contradict with each other in contents, neither can they have loss of material information, misleading or false statements.
Article 13 The company that issue shares to the current shareholders shall comply with the CSRC’s provisions on such kind of issuances by listed companies.
Article 14 When submitting the required documents as specified in Article 7 and 13 of this set of Detailed Rules, the companies concerned should simultaneously present the following documents:
1. notices of the shareholders meetings and explanations on the notices;
2. detailed reports on the meetings of holders of the A and B shares and the results of their voting.
Article 15 With the approval of the Committee, the companies may set aside no more than 15% of the total amount of shares agreed to be underwritten in the current issuance upon agreements with the underwriters concerned. The shares set aside are deemed part of the current issuance.
Article 16 An underwriting period of B shares shall not exceed 90 days.
Article 17 Main underwriters of B shares shall, within 15 days after the sales of the shares, present their underwriting reports to the CSRC and the names of and amount of the shares held by the 10 largest shareholders. The report shall detail the process of the sale of the shares and the results.
Article 18 Domestic securities firms that hold B shares as a result of underwriting shall report the case to the CSRC and comply with regulations on disclosure of information.
Article 19 The relevant provisions of laws and regulations of the State are applicable to formation and execution of underwriting agreements and settlement of disputes arisen therefrom.
Article 20 The companies shall file the following documents with the CSRC, within 7 days upon completion of the documents:
1. certification reports for the capital raised that are signed and sealed by at least two Chinese certified public accountants qualified for securities practice and their firms;
2. the companies' business licenses (duplicates);
3. resolutions and articles of incorporation as passed at the companies' establishing meeting or shareholder meeting.
Article 21 Where it is necessary to apply for registration or recognition from foreign securities regulators for issuing B shares, the companies shall file with the CSRC the above application documents and the registration or recognition documents acquired.
Article 22 B shares issued by the companies may be traded at the stock exchanges.
Article 23 The companies shall comply with the relevant business rules of stock exchanges where their shares are traded.
CHAPTER III TRADING, REGISTRATION AND SETTLEMENT
Article 24 In purchasing and selling domestically listed B shares investors and agents of the shares shall comply with the relevant business rules of the stock exchanges and the stock registration and clearing institutions.
Article 25 For trading B shares, one has to open an account for such shares in accordance with related regulations of stock registration and clearinginstitutions.
Article 26 A holder of B shares may entrust an institution which has been recognized by the stock registration and clearing institutions to handle matters related to the shares on his/her behalf.
Article 27 Matters such as registration of the roster of the shareholders, deposit, transfer registration and clearing of B shares shall be handled by the stocks registration and clearing institutions designated by the stock exchange on which the shares are listed and traded.
The roster of the holders of B shares is a sufficient proof for ownership of shares by the holders listed in the roster, except otherwise proved to the contrary.
Article 28 Agents and depository institutions may, in accordance with related regulations of the stock registration and clearing institutions, apply for as members for clearing of B shares.
Article 29 liquidation of B shares by a clearing member should be made through a special foreign currency account.
Article 30 The clearing members shall pay certain risk capital and fees in accordance with related regulations of the stock registration and clearing institutions.
CHAPTER IV SECURITIES FIRMS
Article 31 Securities firms that underwrite B shares shall be recognized by the CSRC as qualified therefor.
Article 32 Domestic securities firms that trade B shares as brokers shall be recognized by the CSRC as qualified therefor.
Article 33 Foreign securities firms may sign commission agreements with domestic brokers or trade B shares as brokers through means as stipulated by the stock exchanges.
CHAPTER V DISCLOSURE OF INFORMATION
Article 34 Except otherwise stipulated by the Regulations and this set of Detailed Rules, companies issuing B shares shall comply with relevant laws, regulations of the State Council and of the CSRC on information disclosure. The companies shall also comply with rules on the information disclosure of listed companies as stipulated by the stock exchanges.
Article 35 The companies, in providing foreign language versions as Article 17 provides, shall ensure the accuracy of the versions. When there are discrepancies between the Chinese and the foreign language versions, the Chinese version shall prevail.
Article 36 The companies, in making their mid-term or annual statements, may provide financial reports adjusted in accordance with international accounting principles or accounting principles of foreign jurisdictions where the majority of the offering is made, in addition to those formed pursuant to the Chinese accounting principles,. Material differences between financial statements under these two kinds of accounting principles shall be addressed clearly in the statements.
Annual adjusted financial statements referred to in the preceding paragraph should be audited by accounting firms.
The companies may also retain foreign accounting firms that are qualified under State regulations or requirements to examine and audit the aforesaid adjusted financial statements. But when disclosing the examination or auditing reports of the companies' financial statements within Chinese jurisdiction, the reports shall be signed by Chinese certified public accountants and their firms.
Article 37 Information disclosed by a company should be published through domestic and overseas press or other means permitted by the CSRC so as to reach domestic and overseas investors at the same time, and the contents of the domestic and overseas versions should be generally the same.
The disclosure of prospectuses shall be governed by provisions as laid down in Article 12 of this set of Detailed Rules.
Article 38 Shareholders that directly or indirectly increase their B shares to 5% of the total shares of a company shall report the fact and their intention to the CSRC, the stock exchanges and the company within three business days starting from the date of the fact while making announcements to the public to that effect. Similar reports and announcements shall also be made when their shares increase or decrease by 2% of the total shares.
Before or on the date of making the reports and announcements, the shareholders concerned may not purchase the shares directly or indirectly.
CHAPTER VI ACCOUNTING AND AUDITING
Article 39 The companies shall do accounting and compile their financial statements in accordance with the Enterprise Accounting Rules and other State accounting laws, regulations and provisions and retain Chinese certified public accountants qualified to practice in securities market and their firms within Chinese territory to audit or re-examine the statements in accordance with Article 14 of the Regulations.
Article 40 Before distributing dividends, the companies shall set aside statutory surplus reserves and statutory welfare fund in accordance with related State regulations. In distributing dividends, the companies shall base their decision on the amount of after-tax distributable profits, which should be the smaller of the following two figures:
1. the sum of after-tax profits available for distribution as listed in the financial statements compiled in accordance with China's accounting rules and audited by accounting firms;
2. the sum of after-tax profits available for distribution as listed in the audited financial statements compiled on the basis of China's accounting rules but having been adjusted in accordance with international accounting principles or accounting principles of foreign jurisdictions where the majority of the offering is made.
Article 41 The dividends should be converted to foreign currency at exchange rates as determined in accordance with stipulations, as set in the articles of incorporation or resolutions passed at general meetings of shareholders of the companies. Without such stipulations, the rates should be the median as announced by Chinese People's Bank for the currencies involved on the business day immediately following the date of the passage of the last resolution of the general meeting of shareholders.
Article 42 Besides retaining domestic accounting firms with qualifications for securities businesses, the companies, if necessary, may also retain overseas accounting firms that are qualified under the relevant State regulations to audit or examine their financial statements.
Article 43 Retainment or dismissal of accounting firms should be determined by the general meeting of shareholders and reported to the CSRC for the record.
The term of the retainment of accounting firms shall start at the date of the conclusion of the current general meeting of the shareholders and end at the date of the end of the next shareholders' meeting.
For a company to be incorporated upon approval that issues B shares, retainment of accounting firms shall be decided by the key promoters of the company or its reorganizing precedent.
Article 44 The companies shall notify the accounting firms in advance of the decision of their retainment or dismissal. The accounting firms are entitled to put forward their opinions before the general meeting of the shareholders.
The accounting firms, when they resign, shall explain before the general meeting of shareholders whether there are any improper circumstances or not.
CHAPTER VII APPENDIX
Article 45 Disputes between B shareholders and the companies, between B shareholders and directors, supervisors and other senior managerial personnel of the companies, between the holders of B shares and A shares (for domestic investors) of the same companies relating to contents specified in the articles of incorporation or other related affairs should be governed by the laws of the People's Republic of China.
Article 46 State Council-approved separately planning cities may refer to provisions of the Regulations and Detailed Rules concerning people's governments of the provinces, autonomous regions and municipalities directly under the Central Government.
Article 47 The CSRC may issue its own special rules pursuant to this set of Detailed Rules.
Article 48 This set of Detailed Rules takes effect as of the date of its promulgation.
(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.)
- © China Securities Investor Protection Fund Corporation Limited All Rights Reserved
- 京ICP备12035868号-1
