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2010-12-06 10:13:22

Chapter 1 General Provisions

Article 1 These Measures are formulated in accordance with the Securities Law and the Company Law for the purposes of regulating the initial public offering (hereinafter, IPO) and listing of shares, protecting investors’ legitimate rights and interests and safeguarding public interests.

Article 2 These Measures shall apply to the IPO and listing of shares within the jurisdiction of the People’s Republic of China.

These measures shall not apply to any subscription or trading of stocks of a domestic company in foreign currency.

Article 3 The IPO and listing of shares shall meet the requirements set forth in the Securities Law, the Company Law and these Measures.

Article 4 The information disclosed by an issuer in accordance with law shall be true, accurate and complete, and shall not contain any false representations, misleading statements or material omissions.

Article 5 Sponsors and their representatives shall perform their duties with due diligence and in good faith, fulfill their obligations of prudent examination and coaching seriously, and be responsible for the truth, accuracy and completeness of the documents issued by them.

Article 6 Securities service providers and individuals issuing documents for the offering of securities shall, in line with the business standards and code of ethics generally accepted by the industry, strictly perform their statutory duties and be responsible for the truth, accuracy and completeness of the documents issued by them.

Article 7 The approval granted by China Securities Regulatory Commission (hereinafter referred to as CSRC) to an issuer’s IPO does not indicate its substantial judgment or guarantee as to the investment value of the IPO shares or the return on investment for investors. After the shares are offered in accordance with law, investment risk arising from any changes in the issuer’s business operations and earnings shall be borne by investors themselves.

Chapter 2 Offering Conditions

Section 1 Qualification of the Issuer

Article 8 The issuer must be a duly incorporated company limited by shares and remain in operation in accordance with law.

With the approval of the State Council, where a company limited by shares is transformed from a limited liability company, it can initiate the public offering of shares by the offer method.

Article 9 The issuer must have been in operation for more than 3 consecutive years after the establishment of the company limited by shares. Unless it is approved by the State council.

For any company limited by shares which has been transformed as a whole from a limited liability company by converting its original book value of net assets into shares, the required operation period may be counted from the date of establishment of the limited liability company.

Article 10 The issuer shall have paid the registered capital in full amount and have completed the procedures for the transfer of ownership to the assets contributed as capital by promoters or shareholders. There is no major dispute over the ownership of the issuer’s main assets.

Article 11 The production and business operations of the issuers shall conform to laws, administrative regulations and its articles of association as well as the national industrial policies.

Article 12 In the most recent three years, there must have been no significant changes in the principal business, directors and senior management of the issuer, nor any change of its de facto controller.

Article 13 The equity interests in the issuer must be clearly defined and there shall be no major ownership dispute over the shares held by the controlling shareholder and by the shareholders under the control of the controlling shareholder or de-facto controller.

Section 2 The quality of independence

Article 14 The issuer shall have a complete business structure and the capability to operate independently in the market.

Article 15 The issuer shall maintain the integrity of its assets. Production enterprises shall, in accordance with law, own production system, auxiliary production system, facilities as well as land, plant, machinery, trade mark, patent, ownership or use right of non-patented technology related to the production and operation. They shall also have independent system for procurement of raw material and sales of production. Non-production enterprises shall own business system and relevant assets related to operation.

Article 16 The personnel of the issuer shall be independent. Such senior management of the issuer as general manager, deputy general manager, financial officer and board secretary shall not occupy other positions excluding directors and supervisors or get salaries in controlling shareholders, de facto controller or any other enterprises under the control thereof. The financial officer of the issuer shall not take a part-time job in controlling shareholder, de facto controller or any other enterprise under the control thereof.

Article 17 The finance of the issuer shall be independent. The issuer shall establish independent accounting system which can make financial decision on its own. The issuer shall also have standardized finance and accounting system and system on the financial management of its branches and subsidiaries. The issuer shall not share the bank account with any controlling shareholder, de facto controller or other enterprise under the control thereof.

Article 18 The organization of the issuer shall be independent. The issuer shall establish sound internal operating and administrative organizations so that it can exercise the rights of operation and administration independently. Sharing of institutions with controlling shareholder, de facto controller or any other enterprise under the control thereof is prohibited.

Article 19 The business of the issuer shall be independent. The issuer’s business shall be independent of that of the controlling shareholder, de facto controller or any other enterprise under the control thereof. There must be no intra-industry competition or any related-party transaction between the issuer and its controlling shareholder, de facto controller or any other enterprise under the control thereof.

Section 3 Standardized Operation

Article 21 The issuer shall have established such sound systems in accordance with law as the shareholders' general meeting, board of directors, board of supervisors as well as independent directors and board secretaries. The relevant internal bodies and personnel shall be capable of performing their duties in accordance with law.

Article 22 The directors, supervisors and senior management of the issuer shall know well the laws and regulations related to the offering and listing of shares and the statutory obligation and responsibility of the listed companies as well as their directors, supervisors and senior management.

Article 23 The directors, supervisors and senior management of the issuer shall have the professional qualifications required by laws, administrative regulations and rules, and shall not fall under any of the following circumstances:

(1) Being banned from the securities market by the CSRC and the ban is still valid;

(2) Having been subject to any administrative sanction by the CSRC in the most recent 36 months, or any public censure by the stock exchange in the most recent 12 months; or

(3) Being under the investigation initiated by the judicial authority for suspected crimes or under the investigation initiated by the CSRC for suspected irregularities, and there has been no conclusive opinion yet.

Article 24 The sound internal controlling system of the issuer which can reasonably guarantee the liability of financial reports, the legitimacy of production and operation as well as the efficiency and effect of operation  shall be effectively implemented.

Article 25 the issuer shall not fall under any of the following circumstances:

(1) Having made public offering or disguised public offering of securities in the most recent 36 months without approval of the statutory authority, or, although a relevant illegal act was committed 36 months ago, it is  continuing presently.

(2) Having received administrative punishment by violating industrial and commercial law, taxation law, land law, environmental law, customs law and other laws or administrative regulations, and the circumstance is serious.

(3)The offering application documents that have been submitted to the CSRC by the issuer in the most recent 36 months contain false representations, misleading statements or material omissions, or the issuer does not meet the offering conditions but obtains approval for offering by fraudulent means, or the issuer interferes with the review work of the CSRC and the Public Offering Review Committee by improper means, or the signature or seal of the issuer or any of its directors, supervisors, senior management members is forged or altered .

(4) There exist false records, misleading statements or material omissions in the present offering application documents.

(5) Being under the investigation initiated by the judicial authority for suspected crimes, and there has been no conclusive opinion yet.

(6) Other circumstances that seriously damage the investor’s legitimate rights and interests as well as the public interests.

Article 26 The articles of association of the issuer shall have set forth the approval authority and deliberation procedure for external guarantees and no illegal guarantee shall have been provided to its controlling shareholder, de facto controller or any other enterprises under the control thereof.

Article 27 The issuer shall have a rigorous fund management system and its funds shall not be appropriate by the controlling shareholders, de facto controller or any other enterprise under the control thereof by way of loans, repayment of debts, advance payment or otherwise.

Section 4 Finance and Accounting

Article 28 The issuer shall have a good asset quality, a reasonable asset liability structure, a strong capability of profit-earning as well as normal cash flows.

Article 29 The internal control system of the issuer shall be effectively implemented in all material respects, and a certified public accountant has issued an assurance report on its internal controls expressing an unqualified opinion.

Article 30 The issuer's basic accounting work shall be legally compliant, its financial statements shall present fairly, in all material respects, its financial position, financial performance and cash flow in accordance with the accounting standards for business enterprises and other relevant accounting rules, and a certified public accountant has issued an unqualified audit report.

Article 31 The issuer shall prepare the financial statements based on the transactions or events actually occur and shall be prudent when conducting accounting confirmation, accounting measurement and accounting reports. The consistent accounting policy shall be adopted to deal with the same or similar business and shall not be arbitrary changed.

Article 32 The issuer shall completely disclose the relationship with the related parties and the related transaction in accordance with the materiality principle. The price of related transactions shall be fair and no circumstance as manipulating profits through any related transactions is allowed.

Article 33 The issuer shall meet the following conditions:

(1) The number of the net profit in the most recent three fiscal years shall be positive and no less than RMB 30 million. Net profit shall be calculated based on the amount before or after deducting non-recurring profits and losses, whichever is smaller.

(2) The accumulated net cash flow from operating activities of the most recent three fiscal years shall be more than RMB 50 million, or the accumulated revenue of the most recent three fiscal years shall be more than RMB 300 million.

(3) The total share capital before issuing is no less than RMB 30 million.

(4) The intangible assets (after deducting the right of land-use, water culture and mining) account for no more than 20% of the net assets at the end of the most recent accounting period.

(5) No uncovered losses exist at the end of the most recent accounting period.

Article 34 The issuer shall pay taxes in accordance with law and enjoy tax benefits in compliance with applicable laws and regulations. The issuer’s performance results shall not be heavily reliant on tax benefits.

Article 35 The issuer shall be free from any serious debt service risk and shall not be involved in any guarantee, litigation, arbitration or other significant contingent that may affect its ability to continue as a going concern.

Article 36 The application documents of the issuer shall not fall under any of the following circumstances:

(1) Omitting or fabricating transactions, events or any other important information on purpose. 

(2) Abusing accounting policy or accounting estimate.

(3) Minutes of meeting or other relevant documents which are regarded as the evidence for manipulating, fabricating or falsifying the financial statements.

Article 37 The issuer shall not fall under any of the following circumstances which have impact on its sustainable profitability.

(1) Its business model or its mix of products or services has undergone or will undergo a material change which has or will have a significant adverse impact on its sustainable profitability;

(2) Its position in the industry or the business environment for its industry has undergone or will undergo a material change which has or will have a significant adverse impact on its sustainable profitability;

(3) Its revenues or net profits of the most recent fiscal year are heavily reliant on any related party or any client susceptible to great uncertainty;

(4) Its net profits of the most recent fiscal year are derived mainly from investment returns off its consolidated financial statements;

(5) There is a risk of material adverse change in the availability or use of the important assets or technologies being used by the issuer, such as trademarks, patents, proprietary technology and franchise rights; or,

(6) Other circumstances that would have a significant adverse impact on its sustainable profitability.

Section 5 The Use of Proceeds

Article 38 Proceeds raised by the issuer shall have specific purposes. They shall be used for the issuer’s principal business in principle. Apart from financial enterprises, the proceeds project shall be neither tradable financial assets, available-for-sale financial assets, nor such financial investments as lending to others and trust financing. It also shall not directly or indirectly invest enterprises whose main business is trading securities.

Article 39 The amount of the proceeds and the project to be funded by the proceeds shall be commensurate with the issuer’s current production and operation scale, financial position, technical level and management capability, etc.

Article 40 The project to be funded by the proceeds shall be consistent with the state industrial policy, investment management, environmental protection, land management or other laws, rules and regulations.

Article 41 The board of directors of the issuer shall analyze the feasibility of the project to be funded carefully, shall ensure that the project has a promising market prospect and profitability, and shall prevent investment risks effectively as well as improve the efficiency of the proceeds.

Article 42 There must be no intra-industry competition or adverse impact on the independence of the issuer after the implementation of the project to be funded.

Article 43 The issuer shall establish a special deposit account system for the proceeds raised and deposit the proceeds in the special account determined by its board of directors.

Chapter 3 Offering Procedures

Article 44 The board of directors of the issuer shall, in accordance with law, adopt a resolution on the specific plan of the proposed share offering, the feasibility of the use of the proceeds and other relevant issues that must be prescribed and submit the resolution to the shareholders’ general meeting for approval.

Article 45 The shareholders’ general meeting of the issuer shall adopt a resolution on the proposed share offering, covering at least the following:

(1) The type and quantity of the shares to be offered;

(2) The investors to whom the shares will be offered;

(3) Price range or pricing method;

(4) The purpose of the proceeds from the offering;

(5) The distribution plan for accumulated profits prior to the offering;

(6) The validity period of the resolution;

(7) The authorization to the board of directors for handing specific issues for the offering; and

(8) Other matters that must be prescribed.

Article 46 The issuer shall prepare application documents pursuant to relevant regulations of the CSRC, which shall be sponsored and submitted to the CSRC by the sponsor.

The issuer of particular industry shall provide relevant opinions of the administrative department.

Article 47 Within five working days of receipt of the application documents, the CSRC shall decide whether or not to accept the application.

Article 48 After the CSRC accepts the application; the application documents shall be subject to a preliminary review by relevant functional departments and then be reviewed by the Public Offering Review Committee.

Article 49 During the process of preliminary review, the CSRC shall seek out the opinions of the provincial people’s government of the issuer’s registration place for whether approve the share offering of the issuer, and shall seek out the opinion of the State Development and Reform Commission for whether the project to be funded by the proceeds is in line with the regulations of the state industrial policy and the investment management.

Article 50 The CSRC shall render its decision of approval or disapproval on the issuer’s application and issue relevant documents accordingly.

The issuer shall make the share offering within six months from the date of the CSRC’s approval. If the issuer fails to make the offering within such period, the approval document shall become null and void and the issuer may make the offering only after obtaining approval from the CSRC again.

Article 51 If a material event occurs on the part of the issuer after the approval of the offering application and before the completion of the share offering, the issuer shall withhold or suspend the sharing, report the same to the CSRC in a timely manner and fulfill information disclosure obligations. If such event affects the offering conditions, the approval procedure shall be conducted again.

Article 52 If the application is not approved, the issuer may file another share offering application six months after the date when the CSRC renders its decision of disapproval.

Chapter 4 Information Disclosure

Article 53 The issuer shall prepare and disclose the prospectus in accordance with relevant regulations of the CSRC.

Article 54 The standards prescribed by the CSRC on the content and format of a prospectus is the minimum requirements on information disclosure. All the information that may have a material effect on the investment decision of investors shall be disclosed, regardless of whether such standards expressly address the same.

Article 55 The issuer and all its directors, supervisors and senior management shall sign and seal the prospectus to ensure the truth, accuracy and completeness of the contents of the prospectus. The sponsor and the sponsor representatives shall verify the truth, accuracy and completeness of the contents of the prospectus and sign and seal their comments thereon.

Article 56 The financial statements contained in the prospectus shall be valid for six months from the end date of the most recent accounting period. Under special circumstances, the issuer may apply for an appropriate extension, but not more than one month at most. The end date for the financial statements shall be the last day of a year, half a year and a quarter.

Article57 The prospectus shall be valid for six months, which shall begin from the date when the prospectus is signed for the last time before the CSRC grants approval.

Article 58 After the CSRC accepts the application and before the Public Offering Review Committee commences review, the issuer shall disclose the prospectus (submission version) in advance on the website of the CSRC (www.csrc.gov.cn). The issuer may also post the prospectus (submission version) on its own website, provided that the information disclosed is identical and that such posting is not earlier than the disclosure on the website of the CSRC.

Article 59 The issuer and all its directors, supervisors and senior management shall ensure the truth, accuracy and completeness of the contents of the prospectus (submission version) disclosed in advance.

Article 60 The prospectus (submission version) disclosed in advance is not the official documents for the share offering and shall not contain any issue price information. The issuer shall not issue offering based on it.

The issuer shall make a statements in a prominent position of the prospectus (submission version) disclosed in advance: “The company’s offering application has not yet approved by China Securities Regulatory Commission. This prospectus (submission version) has no legal effect for share offering and is provided solely for the purpose of advance disclosure. Investors shall make investment decisions based on the officially published prospectus. ”

Article 61 The issuer shall, prior to the share offering, publish the abstract of the prospectus on at least one of the newspapers and magazines designated by the CSRC, and at the same time publish the full text of the prospectus on the websites designated by the CSRC. The issuer shall also make the prospectus available at the domiciles of the issuer, the stock exchange on which its shares are to be listed, the sponsor, the leading underwriter and other underwriters for public inspection.

Article 62 The sponsorship letter issued by the sponsor for the offering, the relevant documents issued by securities service providers shall be regarded as reference documents of the prospectus and disclosed on the websites designated by the CSRC. The issuer shall also make them available at the domiciles of the issuer, the stock exchange on which its shares are to be listed, the sponsor, the leading underwriter and other underwriters for public inspection.

Article 63 The issuer may publish the abstract of the prospectus, the full text of the prospectus as well as other reference documents on other newspapers, magazines and websites, provided the content is absolutely consistent with each other and the publishing time is no earlier than that in the newspapers, magazines and websites designated by the CSRC.

Chapter 5 Supervision and Punishment

Article 64 If the offering application documents submitted to the CSRC by the issuer contain any false representations, misleading statements or material omissions, or any issuer does not meet the offering conditions but obtain approval for offering by fraudulent means, or the issuer interferes with the review work of the CSRC and the Public Offering Review Committee by improper means, or the signature or seal of the issuer or any of its directors, supervisors or senior managements members is forged or altered, except for imposing punishment in accordance with the Securities Law, the CSRC shall also take the regulatory measure of terminating the review process and rejecting the issuer’s further shall offering application for a period of 36 months.

Article 65 If the sponsorship letter issued by the sponsor contains any false representation, misleading statements or material omissions, or the sponsor interferes with the review work of the CSRC and the Public Offering Review Committee by improper means, or the signatures or seal of the sponsor or any of its relevant signatories is forged or altered, or the sponsor does not perform other statutory duties, the sponsor and relevant individuals shall be dealt with in accordance with relevant provisions of the Securities Law and the sponsorship regulations.

Article 66 If a securities service provider fails to act with due diligence and as a result, any document prepared and issued by it contains any false representations, misleading statements or material omissions, except for imposing punishment in accordance with the provisions of the Securities Law and other applicable laws, administrative regulations and rules, the CSRC shall also take the regulatory measure of rejecting any professional document for securities offering issued by such agency for a period of 12 months and rejecting any professional document for securities offering issued by relevant signatories for a period of 36 months.

Article 67 If an issuer, sponsor or securities service provider prepares or issues an document that fails to comply with requirements and modifies without authorization any document already submitted, or it refuses to respond to relevant questions raised by the CSRC in the course of review, the CSRC shall, depending on the seriousness of the case, take such regulatory measures against relevant institutions and responsible persons as holding supervisory talks and ordering rectification and have the same recorded in the credibility record system and published. If the case is particularly serious, a warning shall be issued.

Article 68 If the issuer discloses a profit forecast but the amount of realized profit fails to reach 80% of the forecast figure, unless due to force majeure, the legal representative of the issuer and the certified public accountant signing the profit forecast audit report shall give a public explanation and apology at the shareholders’ general meeting and in the newspapers and magazines designated by the CSRC. The CSRC may issue a warning to the legal representative.

If the amount of realized profit fails to reach 50% of the forecast figure, unless due to force majeure, the CSRC shall reject such company’s further applications for public offering of securities for a period of 36 months.

Chapter 6 Supplementary Provisions

Article 69 The CSRC shall prescribe separate administrative measures for IPO of Stocks but not list within the territory of People’s Republic of China.

Article 70 These measures shall take effect as of May 18, 2006. “Circular on Several Provisions of the Work of Share Offering” (No.12 ［1996］CSRC), “Circular on Making efforts to Accomplishing the Work of Share Offering in 1997” (No.13 ［1997］CSRC), “Supplementary Circular on Several Issues Concerning the Work of Share Offering” (No.8 ［1998］ CSRC), “Circular on Launching Investigations over the Reformation of Enterprises Planning Share Offering and Listing” (No.259［1998］CSRC),

“Circular on Launching Investigations over the Reformation of Enterprises Planning Public Offering of Shares” (No.4［2000］CSRC), “Circular on Issues Concerning Hiring Audit Institutions by Enterprises Planning Share Offering” (No.131 ［2000］CSRC), and “Circular on the Work of Further Standardizing IPO of Stocks” (No.116［2003］ CSRC) shall be invalided on the same day.

(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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