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Regulations on State-owned Equity Transactions

  Chapter I General provisions

  

  Article 1 To regulate state-owned equity transactions, the Regulations on State-owned Equity Transactions of Enterprises are prepared in accordance with the Law of the People’s Republic of China on State-owned Assets of Enterprises, Interim Regulations on the Supervision and Administration of State-owned Assets of Enterprises (No. 378 Decree of the State Council), Interim Measures for the Administration of the Transfer of State-owned Equities of Enterprises (No. 3 Decree of the SASAC and the Ministry of Finance) and other relevant regulations.

  

  Article 2 The regulations shall be applicable to the transactions of state-owned assets of conducted by the equity exchange institution (hereinafter called equity exchange institution) selected by the state-owned assets supervision and administration commission above provincial level.

  

  Article 3 State-owned equity transactions of enterprises mentioned herein refer to the activity where the transferor of the state-owned equity (hereinafter collectively called transferor), upon performance of relevant decision-making and approval process, release equity transfer information through equity transaction institution, and publicly transfer enterprise state-owned equity through open outcry.

  

  Article 4 Enterprise state-owned equity transactions shall be based on the principle of equal value exchange, openness, fairness, justness and competitiveness. Equity transaction institution shall, in accordance with the regulations, organize enterprise state-owned equity transactions, consciously accept the supervision by state-owned assets supervision and management institutions, strengthen self-regulation management, maintain market order, and ensure normal operation of equity transactions.

  

  Chapter II Accepting transfer applications

  

  Article 5 Acceptance of equity transfer applications shall be the responsible of equity transaction institution. The equity transaction institution adopting membership system shall publish on their websites the list of its members for transferor to choose from independently and establish principal-agent relationship.

  

  Article 6 The transferor shall submit to equity transaction institution relevant materials required by transfer announcement, and shall be responsible for the authenticity, integrity, and validity of the said materials. For transfer projects for which equity transfer information shall be filed prior to the transfer according to relevant regulations, the transferor shall fulfill corresponding filing procedures.

  

  Article 7 For the materials submitted by the transferor are complete, the equity transaction institution shall receive and register them.

  

  Article 8I Equity transaction institution shall establish the system for the review of transfer information announcement of enterprise state-owned assets, and conduct compliance review of the accuracy and completeness of information disclosure pertinent to transfer target, the justness and fairness in setting transaction conditions and transferee eligibility, and open outcry. For transferor in compliance with information announcement requirements, the equity transaction institution shall accept and issue announcement of acceptance; in case of failure to meet the information announcement requirements, the equity transaction institution shall promptly give written review comments to the transferor.

  

  Article9 The transferor shall disclose in the transfer announcement the basic information of the transfer target, transaction conditions, transferee eligibility, relevant information having significant impact on equity transactions, selection of auction ways, and transaction deposit setting.

  

  Article 10 Equity transfer announcement shall disclose the basic information of the transferor and transfer target enterprise, including but not limited to:

  a. Names of the transferor, target, and entrusted broker members;

  b. Enterprise ownership, date of establishment, place of registration, industry, core business, registered capital, and number of employees of the transfer target;

  c. Enterprise ownership of the transferor and contribution ratio in the transfer target enterprise;

  d. Top 10 contributors and contribution ratio of the transfer target enterprise;

  e. Major financial indicator data, including the owner’s equity, liabilities, business revenue, and net profit etc. in the target enterprise’s audit report for the recent one year and the financial statements for recent one period.

  f. Record of asset appraisal (or approval information) of the transfer target, valuation of total assets, total liabilities, and net assets in the asset appraisal reports, and the corresponding book values upon audit;

  g. Internal decision-making and approval status relevant to equity transfer.

  

  Article 11 The transferor shall specify in the equity transfer announcement the major transaction conditions to be accepted by the transferee, including but not limited to:

  (A) Listed price, price payment method and time limit requirements;

  (B) Whether there are requirements for continuity in employment of employees of the transfer target enterprise;

  (C) Requirements for disposal of creditor’s rights and debts involved in the transfer;

  (D) Requirements for the target enterprise’s survival.

  

  Article 12 Transferor may, according to the actual situation of the target enterprise, reasonably set the transferee eligibility. Transferee eligibility may include transferee qualifications, management capabilities, and asset scale etc, but there shall be no contents with clear directivity or in violation of fair competition. Where necessary, the equity transaction institution may request the transferor to provide written explanation or specific remarks on the criteria for determining the qualifications of the transferee, and shall publish in the equity transfer announcement.

  

  Article 13 The transferor shall, in the equity transfer announcement, fully disclose relevant information having significant impact on the equity transactions, including but not limited to:

  (A) Whether there are qualified opinions or important prompts in the audit reports and appraisal reports;

  (B) Where the management and its related parties intend to accept, they shall disclose the ratio of equity of the target enterprise that they hold at present, the name of the transferee or the transferee company intending to accept the state-owned equity, and the intended transferee ratio;

  (C) Whether other shareholders of limited liability companies or other parties of Sino-foreign joint ventures waive pre-emptive right.

  

  Article 14 The equity transfer announcement shall make it clear which open outcry transaction ways will be adopted to determine transferee when there are two or more eligible intended transferees. Where bidding method is adopted, bid evaluation methods and standards shall be disclosed at the same time.

  

  Article 15 The transferor may, in the equity transfer announcement, propose relevant matters pertinent to the payment of transaction deposit. Equity transaction institution shall specify the means of disposal of the said deposit.

  

  Chapter III Release of transfer information

  

  Article 16 Transfer information of enterprise state-owned equity transfer shall be published on the website of the equity transaction institution and in economic or financial newspapers and journals released above the provincial level.

  Central enterprise equity transfer information shall be released by relevant equity transaction institution in their jointly selected newspapers and journals, as well as their websites, and in economic or financial newspapers and journals with large coverage in the place of registration of the target enterprise or the place where the major assets of the target enterprise are located.

  

  Article 17 The transferor shall specify the time limit for the equity transaction announcement. The time limit for the initial information announcement shall not be less than 20 working days, and the starting day shall be the initial information announcement day on the newspapers and journals above the provincial level.

  

  Article 18 Information announcement period shall be measured on working day basis; in case of statutory public holidays, actual working days announced by relevant government department shall prevail. The date published on the website of the equity transaction institution shall not be later than that announced in the newspapers and journals.

  

  Article 19 During the information announcement period, the contents and conditions published in the equity transfer announcement shall not be changed without permission. In case of need to change such contents due to special reasons, equity transfer approval institution shall issue relevant document and make an announcement in the original information release channels, and re-measure the announcement period.

  

  Article 20 Where there are no eligible intended transferees solicited within the prescribed announcement period, and no information announcement contents are changed, the transferor may, in accordance with the stipulations in the equity transfer announcement, extend the information announcement period, and each extension shall be no less than 5 working days. Where the extension of the information announcement period is not specified in the equity transfer announcement, information announcement shall terminate automatically upon expiration.

  

  Article 21 For the transfer of enterprise state-owned equity, the listed price at the time of the initial information announcement shall not be lower than that in the filed or approved transfer target asset appraisal result. In case that there are no intended transferees solicited within the prescribed announcement period, the transferor may, within the range of no less than 90% of the appraisal result, set new listed price before announcement. In case the new listed price is lower than 90% of the appraisal result, the transferor shall obtain approval from equity transfer approval institution before publishing equity transfer announcement.

  

  Article 22 During the information announcement period, in case of any circumstance that affects the normal transactions, or after relevant party proposes written application and related materials for suspension of information announcement, the equity transaction institution may make the decision on the suspension of information announcement.

  

  Article 23 The time limit of the suspension of the information announcement shall be determined by the equity transaction institution in accordance with actual situations, and shall not be more than one month. The equity transaction institution shall, during the suspension period, make a survey and verification of the application or disputed matters, and may also submit to relevant departments for investigation and verification, and make prompt decision on restoration or termination of the information announcement. For restoration of information announcement, the cumulated announcement period on the website of the equity transaction institution shall not be less than 20 working days, and the renewed announcement period shall not be less than 10 working days.

  

  Article 24 In case of circumstances causing the transactions to fail to operate normally during the information announcement period, and the case cannot to be terminated upon investigation and verification, the equity transaction institution may make a decision on terminating the information announcement.

  

  Chapter IV Registration of transferee intention

  

  Article 25 During the information announcement period, intended transferees shall give transferee application to the equity transaction institution, and submit relevant documents. The equity transaction institution shall make registration of intended transferees one by one.

  

  Article 26 Intended transferees may consult the equity transaction institution for information and documents relevant to the equity transfer target.

  

  Article 27 Equity transaction institution shall review the completeness and compliance of the applications and documents submitted by the intended transferees, and shall, within five working days upon expiration of the announcement period, give the transferor the written notice on registration and eligibility confirmation of the intended transferees.

  

  Article 28 After receipt of the qualification confirmation from the equity transaction institution, the transferor shall, within five working days, give a written reply. In case of any disagreement on the eligibility of the transferee, the transferor shall give an explanation of the reasons in the written opinions, and submit the relevant supporting documents. Overdue response shall be deemed to agreement on the eligibility confirmation opinions of the equity transaction institution.

  

  Article 29 Upon solicitation of the opinions of the transferor, the equity transaction institution shall, in writing form, inform the transferee of the eligibility confirmation results, and copy to the transferor.

  

  Article 30 Where the transferor disagrees with the intended transferee’s eligibility recognized by the equity transaction institution, the transferor shall consult with the said institution, and if necessary, may solicit state-owned assets supervision and administration institution for opinions on relevant controversial issues.

  

  Article 31 The intended transferees in compliance with eligibility confirmation shall, within the predetermined time limit, pay transaction deposit (reaching the account designated by the equity transaction institution), and then become eligible for open outcry transactions. Overdue payment of transaction deposit shall deem to waive the intention to accept.

  

  Chapter V Organization of contract signing for transactions

  

  Article 32 Where, upon expiration of equity transfer announcement period, there are two or more eligible intended transferees, the equity transaction institution shall organize the implementation of open outcry in accordance with outcry method mentioned in the announcement; where there is only an eligible intended transferee, the equity transaction institution shall organize the parties to the transaction to directly sign contracts according to the principle of listed price and buyer’s quoted price, whichever is higher. Under the circumstance where other shareholders of the target enterprise enjoy pre-emption right at the same condition according to the law, relevant legal provisions shall be implemented.

  

  Article 33 Open outcry methods include auction, bidding, online outcry, and other ways of outcry.

  

  Article 34 Equity transaction institution shall, within three working days as of the following day on which the transferee is determined, organize both parties to the transaction to sign an equity transaction contract.

  

  Article 35 An equity transaction contract includes but not limited to:

  (A) Name and domicile of both parties;

  (B) Basic situation of the target enterprise;

  (C) Way of equity transfer;

  (D) Whether there are matters concerning the employment of the employees of the target enterprise, and how to deal with the matters if any;

  (E) Target enterprise’s creditor’s rights and debt disposal;

  (F)Transfer price, payment method and payment deadline;

  (G) Equity settlement matters;

  (H) Conditions for the effectiveness of the contract;

  (I) Contract dispute resolution methods;

  (J) Both parties’ liabilities for breach of contract;

  (K) Conditions for contract changes and cancellation.

  

  Article 36 The equity transaction institution shall, based on the relevant provisions of the laws and regulations, review equity transaction contracts according to equity transfer contents and the results of outcry transactions.

  

  Article 37 Where the equity transactions involve inspection of right as principal, anti-monopoly review, and other cases, and where the effectiveness of the equity transaction contracts shall be approved by relevant government department, both parties to the transaction shall submit to the said department the contracts and relevant materials, and the equity transaction institution shall issue transaction evidence documents required for examination and approval by relevant government department.

  

  Chapter VI Settlement of transaction funds

  

  Article 38 Equity transaction funds include transaction deposit and equity transaction price, generally measured in RMB.

  Equity transaction institution shall adopt unified on-floor settlement system, set independent settlement accounts, organize collection and payment of transactions funds, and ensure the safety of transaction funds in the settlement funds accounts, and the funds shall not be used for other purposes.

  

  Article 39 The transferee shall, within the prescribed time limit set forth in the equity transaction contract, pay the equity transaction price to the settlement account of the equity transaction institution. For payment by installments set forth in the contract, the down payment shall not be less than 30% of the turnover.

  

  Article 40 After the transferee pays the equity transaction price to the said account, the equity transaction institution shall transfer to the transferor the transaction price. After the transferor receives the said price, it shall issue receipt to the said institution.

  

  Article 41 Where both parties to the transaction are the same actual controller, and after the case is verified by the equity transaction institution, over-the-counter settlement shall be adopted for transaction funds.

  

  Article 42 Charging standards for equity transactions shall be consistent with relevant regulations of local government price authority in the place where the equity transaction institution is located, and shall be published on the workplaces and information platform of the said institution.

  Both parties shall, in accordance with the charging standards of the equity transaction institution, pay transaction service charges, and after receiving service charges, the said institution shall issue receipt.

  

  Chapter VII Issuing transaction receipt

  

  Article 43 After both parties to the equity transaction sign equity transaction contract, the transferee shall, according to the contract stipulations, pay the transaction price to the settlement account of the equity transaction institution, and after both parties pay transaction service charges, the said institution shall, within three working days, issue equity transaction receipt.

  

  Article 44 Where equity transactions involve the review of right as principals, anti-monopoly review, and other cases, the equity transaction institution shall issue equity transaction receipt after the transaction behavior is approved by relevant government department.

  

  Article 45 Equity transaction receipt shall contain such contents as project number, date of signing, beginning and ending date of listing, full name of the transferor, transferee, and transfer target, way of transactions, trading methods, appraisal result of the transfer target, transfer price, transaction price payment method, and review conclusions of the equity transaction institution.

  

  Article 46 Equity transaction receipt shall be printed in uniform format, and shall not be hand-written or altered.

  

  Chapter VIII Supplementary provisions

  

  Article 47 In case of any dispute in the process of equity transactions, the parties concerned may submit the dispute to the equity transaction institution for mediation. Where the dispute involves the equity transaction institution, the parties concerned may submit application to the regulatory body of the equity transaction institution for mediation, and may also submit the dispute to an arbitration institution for arbitration or to a people’s court for litigation.

  

  Article 48 In case of involvement in the infringement of the legitimate rights and interests of state-owned assets in the process of the state-owned equity transfer, the state-owned assets supervision and administration authority may require the equity transaction institution to terminate the equity transactions.

  

  Article 49 In case of suspension and termination in the transaction process, it shall be published on the website of the equity transaction institution.

  

  Article 50 The regulations come into force as of July 1, 2009.