Measures for the Supervision and Administration of Non-listed Public Companies

 

    Chapter I General Provisions

 

    Article 1 To regulate the stock transfer and issuance of non-listed public companies, protect the lawful rights and interests of investors and maintain public interest, these Measures are formulated in accordance with the Securities Law, Company Law, and relevant laws and regulations.

 

    Article 2 For the purposes of these Measures, “non-listed public company” (hereinafter referred to as a “public company”) means a joint-stock limited company which falls under any of the following circumstances and whose stock is not listed and traded on a stock exchange:

(1) The accumulated number of shareholders of the company exceeds 200 as a result of stock issuance or transfer to specific parties.

(2) The stock of the company is transferred to the general public in a public manner.

 

    Article 3 A public company shall, in accordance with laws, administrative regulations, these Measures and company bylaws, ensure a clear structure of stock equity, operate business in compliance with laws and regulations, have sound corporate governance mechanisms, and perform its information disclosure obligations.

 

    Article 4 The stock of a public company shall be subject to the centralized registration and deposit with China Securities Depository and Clearing Company Limited, and any public transfer of its stock shall be conducted on a legally established stock exchange.

 

    Article 5 Securities companies, law firms, accounting firms and other securities service institutions which issue specialized documents for companies shall diligently and honestly perform their duties, fulfill their prudential review obligations, issue professional opinions in accordance with legally established business rules, industry practice norms and codes of professional ethics, ensure the truthfulness, accuracy and integrity of the documents issued, and accept supervision and administration by the China Securities Regulatory Commission (“CSRC”).

 

    Chapter II Corporate Governance

 

    Article 6 A public company shall develop its bylaws in accordance with law. 

The CSRC shall, in accordance with law, make specific provisions on the required clauses of the bylaws of public companies and regulate the development and amendment of the bylaws of public companies. 

 

    Article 7 A public company shall establish rules for shareholders’ meeting, board of directors and board of supervisors which take into account both the characteristics of the company and the basic requirements of corporate governance mechanisms to specify duties and responsibilities and rules of procedure.

 

    Article 8 The governance structure of a public company shall ensure that all its shareholders, especially minority shareholders, fully exercise their lawful rights vested by laws, administrative regulations and company bylaws.

 

Shareholders shall have the right to know and right to participate in the major matters of the company prescribed by laws, administrative regulations and company bylaws. 

 

A public company shall establish and improve investor relationship management to protect the lawful rights and interests of investors.

 

    Article 9  The convening of the shareholders’ meeting, board of directors and board of supervisors of a public company, deliberation of proposals, time of notice, convening procedures, proxy, voting, resolution and other matters shall comply with the provisions of laws, administrative regulations and company bylaws; and meeting minutes shall be complete and preserved safely.

Deliberation of proposals at the shareholders' meeting shall comply with procedures, and shareholders’ right to know, right to participate, right to inquiry and right to vote shall be protected. The board of directors shall, within the extent of its functions and extent of authorization by the shareholders’ meeting, make resolutions on the deliberated matters and shall not make resolutions in lieu of the shareholders’ meeting on matters beyond the extent of functions and extent of authorization.

 

    Article 10 The board of directors of a public company shall fully discuss and evaluate whether the company’s corporate governance mechanisms have provided appropriate protection and equal rights for all shareholders and other issues.

 

    Article 11 A public company shall strengthen internal management and establish an accounting system and financial management, risk control and other rules according to the relevant provisions to ensure that its financial reports are truthful and reliable and its activities are in compliance with laws and regulations. 

 

    Article 12   A public company shall conduct affiliated transactions under the principles of “equality, free will and compensation for equal value” to ensure fair trading and protect its lawful rights and interests and, in accordance with laws, administrative regulations, provisions of the CSRC and company bylaws, fulfill the corresponding deliberation procedures.

 

    Article 13 A public company shall take effective measures to prevent shareholders and their affiliated parties from taking over or transferring funds, assets and other resources of the company.

 

    Article 14 When carrying out merger, acquisition or reorganization, a public company shall, in accordance with laws, administrative regulations, the provisions of the CSRC and company bylaws, go through corresponding decision-making procedures, and hire a securities company and relevant securities service institution to issue professional opinions.

 

No entity or individual may damage the lawful rights and interests of a public company and its shareholders by taking advantage of merger, acquisition or reorganization.

 

    Article 15 An acquirer or its actual controller shall have sound corporate governance mechanisms and good integrity records to acquire a public company. An acquirer shall neither obtain financial assistance from the acquired company in any form, nor damage the lawful rights and interests of the acquired company and its shareholders by taking advantage of the acquisition activities.

 

In the acquisition of a public company, the acquirer shall not transfer the shares it holds in the acquired company within 12 months after the completion of the acquisition.

 

    Article 16 If a public company conducts a material asset reorganization, the relevant reorganized assets shall have a clear ownership and fair price, and the public company after the reorganization shall have sound corporate governance mechanisms and shall not damage the lawful rights and interests of the public company and its shareholders.

 

    Article 17 A public company shall, in accordance with laws and its actual circumstances as well, include a voting disqualification system in its bylaws.

 

    Article 18 A public company shall include a dispute resolution mechanism in its bylaws. Shareholders shall have the right to protect their lawful rights and interests through arbitration, civil action or any other legal means in accordance with the provisions of laws, administrative regulations and company bylaws.

 

    Chapter III Information Disclosure

 

    Article 19 A company and other parties with information disclosure obligations shall, in accordance with laws, administrative regulations and provisions of the CSRC, disclose information in a truthful, accurate, complete and timely manner and ensure that the information disclosed contains no false records, misleading statements or major omissions. A company and other parties with information disclosure obligations shall publicly disclose information to all investors at the same time. 

 

Directors, supervisors and senior managers of a company shall faithfully and diligently perform their duties and ensure that truthful, accurate, complete and timely information is disclosed by the company. 

 

    Article 20 Documents to be disclosed shall mainly include a public transfer statement, a private transfer statement, private placement statement, a statement on issuance, periodic reports, and ad hoc reports. The specific content and format, preparation rules and disclosure requirements shall be developed separately by the CSRC. 

 

    Article 21 A public company conducting public transfer or private placement shall, within two months after the end of the first half of each fiscal year, disclose a semi-annual report with contents required by the CSRC and, within four months after the end of each fiscal year, disclose an annual report with contents required by the CSRC. The financial report in the annual report shall be audited by an accounting firm qualified for the relevant securities and futures business.

A public company whose accumulated number of shareholders exceeds 200 as a result of transfer of its stock to specific parties shall, within four months after the end of each fiscal year, disclose an annual report with contents required by the CSRC. The financial report in the annual report shall be audited by an accounting firm.

 

    Article 22 Directors and senior managers of a public company shall provide written confirmation opinions on a periodic report, and those raising any objection to the contents of the report shall provide reasons separately, which shall be disclosed along with the periodic report. No public company shall disclose a periodic report not within the prescribed time limit on the excuse of any objection raised by any of its directors and senior managers to the content of the periodic report. 

 

The board of supervisors of a public company shall review a periodic report prepared by the board of directors and provide written review opinions, explaining whether the preparation of the periodic report by the board of directors and the review procedures comply with laws, administrative regulations, provisions of the CSRC and company bylaws and whether the contents of the report is able to reflect the actual condition of the company in a truthful, accurate and complete manner.

 

    Article 23 The documents issued by securities companies, law firms, accounting firms and other securities service institutions, and other relevant important documents shall be disclosed as documents for future reference.

 

    Article 24 Where any major event which may have a significant impact on the stock price occurs and investors are still not aware of the event, the public company shall immediately submit an ad hoc report on the event and issue an announcement to explain the cause of the event, current state, and possible consequences.

 

    Article 25 Where a public company conducts merger, acquisition or reorganization, the relevant parties with information disclosure obligations shall fulfill the obligation of announcement in strict accordance with law, and inform the public company of relevant information in a timely and accurate manner, and cooperate with the public company in a timely, accurate and complete information disclosure.

 

The relevant entities and personnel participating in the merger, acquisition or reorganization shall have the obligation of keeping confidential the information about merger, acquisition or reorganization prior to the disclosure of such information in accordance with law, and shall be prohibited from using such information for insider trading.

 

    Article 26 A public company shall develop management rules for information disclosure affairs and designate persons with relevant expertise to be responsible for information disclosure affairs.

 

    Article 27 Except announcements of the board of supervisors, the information disclosed by a public company shall be published in the form of announcements of the board of directors. Without written authorization by the board of directors, no director, supervisor or senior manager may publish any information that has not been disclosed.

 

    Article 28 The information disclosed by a company and other parties with information disclosure obligations in accordance with law shall be published on an information disclosure platform specified by the CSRC. A company and other parties with information disclosure obligations may publish information that must be disclosed under these Measures on the company's website or other public media, but the contents of disclosure shall be identical and such information shall not be disclosed earlier than the time of disclosure on the information disclosure platform specified by the CSRC.

A public company whose accumulated number of shareholders exceeds 200 as a result of transfer of its stock to specific parties may include other manners of information disclosure in company bylaws; and if the relevant information is disclosed on an information disclosure platform specified by the CSRC, the requirements of the preceding paragraph hereof shall be complied with.

 

    Article 29 A company and other parties with information disclosure obligations shall place the texts of information disclosure announcements and other relevant documents for future reference at the domicile of the company for consultation by the general public.

 

    Article 30 A company shall cooperate with the securities companies which provide service for it and securities service institutions including law firms and accounting firms, provide the required information and shall neither require the securities companies or securities service institutions to issue a document inconsistent with the objective facts nor obstruct the work of them.

 

    Chapter IV Stock Transfer

 

    Article 31 A joint-stock limited company whose accumulated number of shareholders exceeds 200 as a result of transfer of its stock to specific parties shall, within three months from the date of occurrence of the transfer, prepare application documents according to the relevant provisions of the CSRC, which shall include, but not be limited to, a private transfer statement, legal opinions issued by a law firm, and an audit report issued by an accounting firm. The joint-stock limited company shall apply to the CSRC for confirmation on the basis of the application documents. Before submitting application documents, the joint-stock limited company shall notify all shareholders of the relevant information.

If the number of shareholders drops to less than 200 within three months, the company is not required to file the application.

Stock shall be transferred to specific parties by agreement in a non-public manner. If an application for public transfer of stock to the general public is filed, Articles 32 and 33 of these Measures shall apply.

 

    Article 32 Where a company applies for public transfer of its stock to the general public, the board of directors shall make a resolution on the specific plan for the public transfer of stock in accordance with law and submit it to the shareholders' meeting for approval, and the resolution of the shareholders' meeting must be adopted by 2/3 or more of the voting rights held by shareholders present at the meeting.

The resolutions of the board of directors and the shareholders' meeting shall also include:

(1) amending company bylaws according to the relevant provisions of the CSRC; 

(2) establishing and improving corporate governance mechanisms in accordance with the provisions of laws, administrative regulations and company bylaws; and

(3) fulfilling information disclosure obligations and disclosing a public transfer statement, an annual report, a semi-annual report and other contents according to the relevant provisions.

 

    Article 33 A company which applies for public transfer of its stock to the general public shall, according to the relevant provisions of the CSRC, prepare application documents for public transfer, which shall include, but not be limited to, a public transfer statement, legal opinions issued by a law firm, an audit report issued by an accounting form qualified for the relevant securities and futures business, recommendation documents issued by a securities company, and review opinions issued by a stock exchange. The company shall apply to the CSRC for confirmation on the basis of the application documents.

The public transfer statement shall be disclosed before public transfer. 

 

    Article 34  The CSRC shall, after accepting the application documents, review the corporate governance and information disclosure in accordance with law, decide whether to confirm the application, and issue the relevant documents.

 

    Article 35 A company and its directors, supervisors and senior managers shall provide written confirmation opinions on the public transfer or private transfer statement to ensure that truthful, accurate and complete information is disclosed.

 

    Chapter V Private Placement

 

    Article 36 For the purposes of these Measures, “private placement” includes two circumstances: the accumulated number of shareholders exceeds 200 as a result of issuance of stock to specific parties and a public company whose number of shareholders exceeds 200 issues stock to specific parties.

The scope of “specific parties” as mentioned in the preceding paragraph shall include the following institutions and natural persons:

(1) Shareholders of the company.

(2) Directors, supervisors, senior managers and core employees of the company.

(3) Investors who are natural persons, legal persons and other economic organizations meeting the investor eligibility management provisions.

When the company determines the parties to which stock is issued, the total number of investors as mentioned in paragraph 2 (2) and (3) hereof shall not exceed 35. 

The core employees shall be nominated by the board of directors of the company, announced to all staff for comments, and be deliberated and approved by the shareholders’ meting after the board of directors issues clear opinions.

 

The investor eligibility management provisions shall be developed separately by the CSRC. 

 

    Article 37 A company shall identify the parties to which stock is issued to ensure that there are sufficient reasons for the company to believe that such parties meet relevant provisions of these Measures and the company.

A company shall enter into subscription agreements containing risk disclosure clauses with the parties to which stock is issued.

 

    Article 38 The board of directors of a company shall make a resolution on the specific plan for the current stock issue in accordance with law and submit it to the shareholders’ meeting for approval, and the resolution of the shareholders’ meeting must be adopted by 2/3 or more of the voting rights held by shareholders present at the meeting.

For a joint-stock limited company which applies for issuance of stock to specific parties and whose accumulated number of shareholders exceeds 200 as a result of the issuance, the resolutions of the board of directors and the shareholders' meeting shall also include:

(1) amending company bylaws according to the relevant provisions of the CSRC; 

(2) establishing and improving corporate governance mechanisms in accordance with the provisions of laws, administrative regulations and company bylaws; and

(3) fulfilling information disclosure the obligations and disclosing a private placement statement, a statement on issuance, an annual report, a semi-annual report and other contents according to the relevant provisions.

 

    Article 39 A company shall, according to the relevant provisions of the CSRC, prepare application documents for private placement, which shall include, but not be limited to, a private placement statement, legal opinions issued by a law firm, an audit report issued by an accounting firm qualified for the relevant securities and futures business, and recommendation documents issued by a securities company. The company shall apply to the CSRC for confirmation on the basis of the application documents.

 

    Article 40 The CSRC shall, after accepting the application documents, review the corporate governance, information disclosure and the parties to which the stock is issued, decide whether to confirm the application, and issue the relevant documents. 

 

    Article 41 Where a company applies for private placement of stock, it may apply for confirmation of issuance in installments. The company shall complete the first installment of issuance within three months and complete the issuance of the remaining amount of stock within 12 months from the date of confirmation by the CSRC. If stock is not issued within the period of validity prescribed in the confirmation document, the company may issue the stock only after reconfirmation by the CSRC. The amount of the first installment of issuance shall not be less than 50% of the total amount of issuance, and the company shall, at its own discretion, determine the amounts of the remaining installments of issuance. The company shall file issuance information with the CSRC within five working days after completion of each installment of issuance.

 

    Article 42 Where the accumulated number of shareholders of a public company does not exceed 200 after issuance of stock to specific parties or the accumulated amount of funds raised by a public company from issuance of stock within 12 months is less than 20% of the net assets of the company, the company shall be exempt from application to the CSRC for confirmation, but the parties to which stock is issued shall comply with the provisions of Article 36 of these Measures and the company shall file issuance information with the CSRC within five working days after completion of each issuance.

 

    Article 43 After completion of a stock issue, a public company shall, according to the relevant requirements of the CSRC, prepare and disclose a statement on issuance. A public company applying for issuance in installments shall, after completion of each installment of issuance, disclose information according to the relevant requirements of the CSRC and, after completion of the entire issuance or after expiration of the period of validity prescribed in the confirmation document, prepare and disclose a statement on issuance according to the relevant requirements of the CSRC. 

A public company exempt from applying to the CSRC for confirmation of private placement shall, after completion of the issuance, prepare and disclose a statement on issuance according to the relevant requirements of the CSRC.  

 

    Article 44 A company and its directors, supervisors and senior managers shall provide written confirmation opinions on a private placement statement and a statement on issuance to ensure that truthful, accurate and complete information is disclosed.

 

    Article 45 The public companies’ purchase of assets through private placement shall be handled in accordance with the relevant provisions of this Chapter.

 

    Chapter VI Supervision and Administration

 

    Article 46 The CSRC shall, in conjunction with the relevant departments of the State Council and the local people’s governments, conduct continuous supervision and administration of public companies according to their respective functions in accordance with laws, regulations and relevant provisions of the State Council to prevent risks and maintain the order of the securities market.

 

    Article 47 The CSRC shall, in accordance with law, fulfill the duties of supervision and administration of the transfer of stock, private placement and information disclosure by companies and have the authority to take the measures as set out in Article 180 of the Securities Law against companies, securities companies and securities service institutions.

 

    Article 48 The Securities Association of China shall fully play its role in self-disciplinary management, supervise securities companies which provide stock transfer and private placement services, and urge them to diligently perform their due diligence and supervision responsibilities. If the Securities Association of China discovers that any securities company has violated any law, administrative regulation or relevant provisions of the CSRC, it shall report the violation to the CSRC and take self-disciplinary management measures.

 

    Article 49 The CSRC may require a company, other parties with information disclosure obligations, and their directors, supervisors and senior managers to provide an explanation or statement or provide relevant materials regarding relevant information disclosure issues and may require the company to provide professional opinions issued by a securities company or securities service institution.

Where the CSRC suspects the truthfulness, accuracy or integrity of the documents issued by a securities company or a securities service institution, it may require the relevant institution to provide an explanation or supplement and may consult the relevant institution's working draft.

 

    Article 50 When providing stock transfer, private placement and other services, a securities company shall, according to the relevant provisions of the CSRC, diligently conduct due diligence, fulfill the standard procedures for internal review, carefully prepare the relevant documents, and continuously supervise the recommended companies in fulfilling information disclosure obligations in a timely manner and improving corporate governance.

 

    Article 51 A securities service institution which issues audit reports, asset appraisal reports, legal opinions and other documents for the transfer of stock, private placement and other activities of companies shall strictly perform its statutory duties, adhere to the principles of diligence, honesty and good faith, conduct sufficient review and validation regarding the truthfulness, accuracy and integrity of the competency, capital stock, standardized operations, financial condition, corporate governance, information disclosure and other aspects of companies, and ensure that the documents issued contain no false records, misleading statements or major omissions.

 

    Article 52 When the CSRC conducts a supervisory inspection or investigation of a company in accordance with law, the company shall have the obligation to provide relevant documents. If any problems with the company are discovered, the CSRC may take regulatory measures, such as ordering correction, holding a regulatory interview, ordering a public explanation, and issuing a letter of warning, and record the problems in the integrity file. If the company is suspected of any violation of law or a crime, the CSRC shall initiate an official investigation or transfer the case to the judicial authority.

    Chapter VII Legal Liability

 

    Article 53 Where a company obtains confirmation by fraudulent means, or submits a report containing any false records, misleading statements or material omissions, in addition to punishment according to the relevant provisions of the Securities Law, the CSRC may take the regulatory measure of terminating examination and refusing to accept the company's applications for stock transfer and private placement within 36 months from the date of confirmation of the aforesaid violation.

 

    Article 54 A company which fails to transfer or issue stock in accordance with Articles 31, 33 and 39 of these Measures shall be punished in accordance with Article 188 of the Securities Law. 

 

    Article 55 Where a securities company or securities service institution issues documents containing any false records, misleading statements or major omissions, in addition to punishment according to the provisions of the Securities Law and relevant laws and regulations, the CSRC may, according to the severity of the circumstances, take the regulatory measures of refusing to accept the relevant specialized documents issued by the institution within three or 12 months from the date of confirmation of the aforesaid violation and refusing to accept the specialized documents issued by the relevant signatories within 36 months.

 

    Article 56 Companies and other parties with information disclosure obligations which fail to disclose information as required or which disclose information containing any false records, misleading statements or major omissions shall be punished under Article 193 of the Securities Law.

 

    Article 57 Where a company issues stock to investors who do not meet the conditions prescribed in these Measures, the CSRC may order it to make correction and may refuse to accept its applications within 36 months from the date of confirmation of the said violation.

 

    Article 58 Where any party with information disclosure obligations, any of the directors, supervisors and senior managers of the party, the controlling shareholder or actual controller of a company, a securities company or securities service institution issuing specialized documents for a party with information disclosure obligations, or any of the staff members of the securities company or securities service institution commits any violation of the Securities Law, administrative regulations and the relevant provisions of the CSRC, the CSRC may take regulatory measures such as ordering correction, holding a regulatory interview, issuing a letter of warning, and identifying a person as unfit for a position, and record the violation in the integrity file; and if the circumstances are serious, the CSRC may take the measure of prohibition from access to the securities market against the relevant liable persons.

 

    Article 59 If a person having access to insider information of a public company or a person illegally obtaining insider information discloses such information, or purchases or sells, or advices others to purchase or sell the stock after the disclosure of the information having a significant impact on the stock price of the public company, he or she shall be punished under Article 202 of the Securities Law.

 

    Chapter VIII Supplementary Provisions

 

    Article 60 A public company which publicly issues stock to unspecific parties shall comply with the Securities Law and the relevant provisions of the CSRC. 

A public company applying for listing on a stock exchange shall comply with the relevant provisions of the CSRC and the stock exchange.

 

    Article 61 A joint-stock limited company whose number of shareholders exceeds 200 before these Measures come into force may apply for approval in accordance with relevant provisions of these Measures after making regulation in accordance with relevant laws and regulations and being confirmed by the CSRC.

 

    Article 62 For the purposes of these Measures, “joint-stock limited company” means a joint-stock limited company which initially applies for the transfer of stock or private placement, and “companies” mean non-listed public companies and joint-stock limited companies initially applying for the transfer of stock or private placement. 

 

    Article 63 These Measures come into force on January 1, 2013.