Enterprise State-owned Assets Law of the People's Republic of China

Order of the President of the People's Republic of China No. 5

October 28, 2008

Adopted at the Fifth Session of the Standing Committee of the Eleventh National People's Congress on October 28, 2008, the Enterprise State-owned Assets Law of the People's Republic of China is hereby promulgated and comes into effect on May 1, 2009.

Hu Jintao, President of the People's Republic of China

Appendix: The Enterprise State-owned Assets Law of the People's Republic of China

(Adopted at the Fifth Session of the Standing Committee of the Eleventh National People's Congress on October 28, 2008)

Contents
Chapter I General Provisions
Chapter II Organs That Perform the Duties of an Investor
Chapter III State-invested Enterprises
Chapter IV Selection and Evaluation of Managers of State-invested Enterprises
Chapter V Major Matters Concerning the Rights and Interests of Investors in State-owned Assets
Section I General Rules
Section II Enterprise Restructuring
Section III Associated Party Transactions
Section IV Asset Assessments
Section V Transfers of State-owned Assets
Chapter VI Operating Budgets for State-owned Capital
Chapter VII Supervision of State-owned Assets
Chapter VIII Legal Liability
Chapter IX Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is enacted in order to maintain the basic economic regime of the State, to consolidate and develop the state-owned economy, to strengthen the protection of state-owned assets, to enable the state-owned economy to play a leading role in the national economy, and to promote the socialist market economy.

Article 2 The term "enterprise state-owned assets" (hereinafter referred to as state-owned assets) as used in this Law refers to rights and interests arising from the State's capital contributions of all types to enterprises.


Article 3 State-owned assets belong to the State, i.e., are owned by the whole people. The State Council is to exercise the ownership of state-owned assets on behalf of the State.

Article 4 The State Council and local people's governments are to, in accordance with laws and administrative regulations, perform the duties of an investor and exercise the rights and interests of an investor in state-invested enterprises respectively on behalf of the State.
With regard to large state-invested enterprises which are recognized by the State Council as enterprises that affect the lifeline of the national economy and national security, or state-invested enterprises in the fields such as key infrastructure and vital natural resources, the duties of an investor shall be performed by the State Council on behalf of the State. The duties of an investor for other state-invested enterprises shall be performed by local governments on behalf of the State.

Article 5 The term "state-invested enterprises" as used in this Law refers to wholly state-owned enterprises or companies to which the State contributes capital, as well as companies controlled or participated in by state-owned capital.


Article 6 The State Council and local people's governments shall, in accordance with the separation of the functions of the government from those of enterprises, the separation of public administrative functions from the functions of state-owned asset investors, and respecting the lawful and independent operation of enterprises, perform the duties of an investor in accordance with the law.

Article 7 The State is to take measures to support the concentration of state-owned capital on vital sectors and key fields affecting the lifeline of the national economy and national security, optimize the layout and structure of the state-owned economy, promote the reform and development of state-owned enterprises, improve the overall quality of the state-owned economy, and strengthen its control and influence over the state-owned economy.


Article 8 The State is to establish and improve the state-owned assets administration and supervision system commensurate with the development of the socialist market economy, establish and improve the evaluation and accountability system for maintaining and increasing the value of state-owned assets, and designate the responsibilities for maintaining and increasing the value of state-owned assets to specific persons.


Article 9 The State is to establish and improve the basic management system for state-owned assets, the specific measures for which shall be formulated in accordance with the requirements of the State Council.

Article 10 State-owned assets are protected by law, and no entity or individual may infringe such assets.

Chapter II Organs That Perform the Duties of an Investor

Article 11 The State-owned Assets Supervision and Administration Commission under the State Council and state-owned assets supervision and administration organs established by local governments in accordance with the requirements of the State Council shall, subject to the authorization of the government at the same level, perform the duties of an investor for state-invested enterprises on behalf of the governments at the same level.
The State Council and local people's governments may, where necessary, authorize other departments and organs to perform the duties of an investor for state-invested enterprises on behalf of the government at the same level.
Organs and departments that perform the duties of an investor on behalf of the government at the same level are hereinafter referred to as organs that perform the duties of an investor.


Article 12 Organs that perform the duties of an investor enjoy investors' rights to state-invested enterprises, including the rights to profit from their assets and to participate in the making of significant decisions and the selection of managers, on behalf of the government at the same level.
Organs that perform the duties of an investor shall, in accordance with laws and administrative regulations, formulate or participate in formulating the Articles of association of state-invested enterprises.
Organs that perform the duties of an investor shall report to the government at the same level for approval on major matters relating to performance of the duties of an investor which require the approval of the government at the same level in accordance with laws, administrative regulations and the regulations of the government at the same level.

Article 13 When participating in any shareholders' meeting or general meeting of shareholders held by a company controlled or participated in by state-owned capital, shareholders appointed by organs to perform the duties of an investor shall make proposals, express opinions, and exercise voting rights in accordance with the instructions of the appointing organs, and report to the appointing organs all information and results that relate to the performance of their duties in a timely manner.

Article 14 Organs that perform the duties of an investor shall, in accordance with laws, administrative regulations and enterprises' Articles of association, perform the duties of an investor, safeguard the rights and interests of an investor and prevent the loss of state-owned assets.
Organs that perform the duties of an investor shall protect the lawful rights of enterprises as market subjects and shall not intervene in enterprises' operations other than when performing the duties of an investor in accordance with the law.

Article 15 Organs that perform the duties of an investor shall be responsible to the government at the same level, report on their performance of the duties of an investor to the government at the same level, accept the supervision and evaluation of the government at the same level, and assume responsibilities for maintaining and increasing the value of state-owned assets.
Organs that perform the duties of an investor shall, in accordance with the relevant regulations of the State, submit a summary analysis on the total amount and structure of state-owned assets, along with any changes therein, profits derived therefrom and other information, to the government at the same level on a regular basis.

Chapter III State-invested Enterprises

Article 16 State-invested enterprises have the right to possess, utilize, profit from or dispose of their movable property, immovable property and other property in accordance with laws, administrative regulations and their Articles of association.
Independent operating rights and other legitimate rights and interests that state-invested enterprises enjoy legally are protected by law.

Article 17 State-invested enterprises that engage in operating activities shall abide by laws and administrative regulations, strengthen their operating management practices, enhance their profitability, accept the administration and supervision of the government and relevant departments and organs, as well as the supervision of the general public, and shall assume responsibilities to both society and investors.
State-invested enterprises shall establish and improve sound legal entity corporate governance practices, in addition to internal supervision and risk control systems, in accordance with the law.

Article 18 State-invested enterprises shall, in accordance with laws, administrative regulations and the requirements of the finance department under the State Council, establish and improve their financial and accounting systems, establish accounting books, and provide investors with authentic and complete financial and accounting information in accordance with laws, administrative regulations and their Articles of association.
State-invested enterprises shall distribute profits to investors in accordance with laws, administrative regulations and their Articles of association.

Article 19 Wholly state-owned companies or companies controlled or participated in by state-owned capital shall establish a board of supervisors in accordance with the Company Law of the People's Republic of China. The board of supervisors of any wholly state-owned enterprises shall be formed by supervisors designated in accordance with the relevant regulations of the State Council by organs that perform the duties of an investor.
The board of supervisors of all state-invested enterprises shall, in accordance with laws, administrative regulations and their Articles of association, supervise the activities of directors and senior management in performing their duties, and supervise and examine the financial position of the enterprise.

Article 20 State-invested enterprises implement democratic management practices through an employee congress or in another manner in accordance with the law.

Article 21 State-invested enterprises lawfully enjoy investors' rights to the enterprises to which they make capital contributions, including the right to profit from assets, the right to participate in the making of major decisions and the selection of managers.
State-invested enterprises shall, in accordance with laws and administrative regulations and by way of formulating or participating in formulating their Articles of association, establish internal supervision and risk control systems with defined powers and duties, in addition to effective checking mechanisms, for enterprises to which they make capital contributions, and shall protect the rights and interests of their investors.

Chapter IV Selection and Evaluation of Managers of State-invested Enterprises

Article 22 Organs that perform the duties of an investor shall, in accordance with laws, administrative regulations and enterprise Articles of association, appoint, dismiss and propose the appointment or dismissal of the following state-invested enterprise personnel:
1. The appointment or dismissal of managers, assistant managers, personnel responsible for financial affairs and other senior managers of wholly state-owned enterprises;
2. The appointment or dismissal of the chairman of the board of directors, vice chairman of the board of directors, directors, chairman of the board of supervisors and supervisors of wholly state-owned companies; and
3. Proposing candidates for directors and supervisors of companies controlled or participated in by state-owned capital to the shareholders' meeting or general meeting of shareholders.
In state-invested enterprises, persons appointed to directors' and supervisors' posts which are to be held by employee representatives shall be elected by employees through democratic procedures in accordance with relevant laws and administrative regulations.

Article 23 Directors, supervisors and senior managers which organs that perform the duties of an investor appoint or propose to appoint shall meet the following requirements:
1. Having a record of good behavior;
2. Having expertise and ability commensurate with the requirements of the post;
3. Being physically capable of meeting the demands involved in performing the relevant duties; and
4. Other requirements specified by laws and administrative regulations.
Where any director, supervisor or senior manager no longer meets the requirements set out in the preceding paragraph or where any of the circumstances specified in the Company Law of the People's Republic of China occurs such that he or she may no longer serve as a director, supervisor or senior manager, the organ that performs the duties of an investor shall dismiss or propose that he or she be dismissed in accordance with the law.

Article 24 Organs that perform the duties of an investor shall evaluate directors, supervisors and senior manager candidates to be appointed or proposed for appointment in accordance with prescribed conditions and procedures and appoint or propose to appoint those deemed to be qualified within the scope of their powers.

Article 25 No director or senior manager of a wholly state-owned enterprise or company shall provide any service concurrently in another enterprise without obtaining the consent of the organ that performs the duties of an investor. No director or senior manager of a company controlled or participated in by state-owned capital shall hold any post concurrently in another enterprise that carries on business of the same type without obtaining the consent of the shareholders' meeting or the general meeting of shareholders.
No chairman of the board of directors of a wholly state-owned company shall serve as the manager of that company concurrently without obtaining the consent of the organ that performs the duties of an investor. No chairman of the board of directors of a company controlled by state-owned capital shall serve as its manager concurrently without obtaining the consent of the shareholders' meeting or the general meeting of shareholders.
No director or senior manager shall serve as a supervisor concurrently.


Article 26 Directors, supervisors and senior managers of state-invested enterprises shall abide by laws, administrative regulations and Articles of association and perform their duties of fidelity and due diligence to such enterprises, and shall not accept any bribe or obtain any other illegal income or benefit, embezzle or misappropriate enterprise assets, make decisions on major matters without authorization or in violation of procedures, or infringe the rights and interests of other investors in state-owned assets.

Article 27 The State shall establish an evaluation system for the operating performance of managers of state-invested enterprises. Organs that perform the duties of an investor shall evaluate the performance of the managers they appoint both annually and over the whole term of their appointments, and shall determine their awards or penalties according to the evaluation results.
Organs that perform the duties of an investor shall ascertain the remuneration levels for state-invested enterprise managers they appoint in accordance with the relevant regulations of the State.

Article 28 The main personnel in charge of wholly state-owned enterprises, wholly state-owned companies and state-controlled companies shall be subject to economic responsibility audits in respect of their respective terms of office.

Article 29 Where the State Council and local government require that the managers specified in Items 1 and 2 of Paragraph 1 of Article 22 of this Law be appointed and dismissed by the government at the same level, such requirements shall apply. Organs that perform the duties of an investor shall evaluate, reward or penalize such managers and determine their remuneration levels.

Chapter V Major Matters Concerning the Rights and Interests of Investors in State-owned Assets

Section I General Rules

Article 30 Major events involving state-invested enterprises, including but not limited to mergers, divisions, restructurings, listings, increases or reductions in registered capital, issuance of bonds, major investments, providing major guarantees to external parties, transfers of major assets, large-scale donations, profit distributions, dissolutions and applications for bankruptcy shall be carried out in accordance with laws, administrative regulations and Articles of association, and shall not damage the rights and interests of investors or creditors.

Article 31 Decisions on mergers, divisions, increases or reductions in registered capital, issuance of bonds, profit distributions, dissolutions, applications for bankruptcy and other major events involving wholly state-owned enterprises and wholly state-owned companies shall be made by organs that perform the duties of an investor.

Article 32 Where any of the events listed in Article 30 occur in relation to a wholly state-owned enterprise or company, the relevant decisions shall be made by the persons in charge of the wholly state-owned enterprise, as applicable, or through collective discussions or by the board of directors of a wholly state-owned company, as applicable, unless decisions on the event in question are to be made by the organ that performs the duties of an investor in accordance with Article 31 and relevant laws, administrative regulations and the enterprise's Articles of association.

Article 33 Where any of the events listed in Article 30 occurs in relation to a company controlled or participated in by state-owned capital, the relevant decisions shall be made by the shareholders meeting, the general meeting of shareholders or the board of directors in accordance with laws, administrative regulations and the company's
Articles of association. Where such decisions are made by the shareholders meeting or the general meeting of shareholders, shareholder representatives designated by the organ that performs the duties of an investor shall exercise their rights in accordance with Article 13 of this Law.

Article 34 Any merger, division, restructuring, dissolution or application for bankruptcy involving a significant wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital, and any other major event required to be reported by organs that perform the duties of an investor to the government at the same level for approval in accordance with laws, administrative regulations and regulations of the government at the same level shall be reported by organs that perform the duties of an investor to the government at the same level for approval before any decision is made or any instructions are issued to their designated shareholder representatives to participate in the relevant shareholders meeting or general meeting of shareholders of the company controlled by state-owned capital in question.
Whether or not a wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital as specified in this Law is significant shall be determined in accordance with the relevant regulations of the State Council.


Article 35 When state-invested enterprises are involved in events such as issuing bonds or making investments and the relevant laws and administrative regulations require that such an event be submitted to the government or relevant government departments for approval, verification or filing, such rules shall apply.

Article 36 State-invested enterprises shall make investments in compliance with the industrial policy of the State and carry out feasibility studies in accordance with the relevant regulations of the State. Transactions with other entities shall be executed on a fair, non-gratuitous and reasonable basis.

Article 37 For any major event such as a merger, division, restructuring, dissolution or application for bankruptcy, state-invested enterprises shall consult with the trade union of the enterprise and listen to the opinions and advice of employees through the employee congress or in another format.


Article 38 Wholly state-owned enterprises, wholly state-owned companies and state-controlled companies shall perform the duties of an investor for enterprises to which they make capital contributions by reference to this Chapter, the specific measures for which shall be formulated by the State Council.

Section II Enterprise Restructuring

Article 39 The term "enterprise restructuring" as used in this Law refers to:
1. The restructuring of a wholly state-owned enterprise into a wholly state-owned company;
2. The restructuring of a wholly state-owned enterprise or a wholly state-owned company into a company controlled by state-owned capital or a company not controlled by state-owned capital; and
3. The restructuring of a company controlled by state-owned capital into a company not controlled by state-owned capital.

Article 40 Enterprise restructuring shall be carried out in compliance with statutory procedures and decisions thereon shall be made by organs that perform the duties of an investor or by the shareholders meeting or general meeting of shareholders.
In the restructuring of significant wholly state-owned enterprises, wholly state-owned companies and companies controlled by state-owned capital, organs that perform the duties of an investor shall submit the restructuring plan to the government at the same level for approval prior to making any decision or issuing instructions to their designated shareholder representatives to participate in the shareholders meeting or the general meeting of shareholders of the company controlled by state-owned capital.

Article 41 In enterprise restructuring, a restructuring plan shall be formulated which specifies the organizational form of the enterprise after restructuring, the proposal for dealing with the assets and creditors' rights and debts of the enterprise, the equity adjustment plan, the restructuring process, the selection and engagement of asset assessment and financial auditing agencies, and other particulars.
Where an enterprise restructuring involves a reallocation of employees, an employee reallocation plan shall be formulated and shall be adopted by the employee congress or the general meeting of employees.


Article 42 An enterprise to be restructured shall, as required, carry out capital settlements, financial audits and asset assessments, accurately define and verify assets, and ascertain the values of such assets in an objective and fair manner.
Where materials, intellectual property rights, land use rights or other non-monetary assets need to be converted into state-owned capital contributions or shares in the course of an enterprise restructuring, the property to be converted shall be evaluated in accordance with relevant regulations and the amount of state-owned capital contributions or shares shall be determined on the basis of the evaluated price. Conversions of property into shares at an unreasonable price and other violations of the rights and interests of investors are prohibited.

Section III Associated Party Transactions

Article 43 No party associated with a state-invested enterprise shall acquire any illegal interest or damage the rights and interests of the state-invested enterprise by taking advantage of transactions therewith.
The term "associated parties" as used in this Law refers to directors, supervisors and senior managers of enterprises, their close relatives, and enterprises owned or effectively controlled by such persons.

Article 44 No wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital shall provide any associated party with funds, products, services or other assets for free, nor conduct any transaction with an associated party at an unfair price.

Article 45 No wholly state-owned enterprise or company may engage in any of the following activities without obtaining the consent of the organ that performs the duties of an investor:
1. Enter into an asset transfer agreement or lending agreement with an associated party;
2. Provide a guarantee to an associated party; or
3. Invest in the establishment of an enterprise in conjunction with an associated party or make an investment in any enterprise owned or effectively controlled by any director, supervisor or senior manager of an associated party or any of their close relatives.

Article 46 Decisions on transactions between companies controlled or participated in by state-owned capital and their associated parties shall determined by the shareholders meeting, the general meeting of shareholders or the board of directors in accordance with the Company Law of the People's Republic of China and other administrative regulations, in addition to the company's Articles of association. Where such decisions are made by the shareholders meeting or the general meeting of shareholders, the shareholder representatives designated by the organ that performs the duties of an investor shall exercise their rights in accordance with Article 13 of this Law.
When the board of directors makes a resolution on an associated party transaction, no director involved in the transaction shall exercise his or her voting right or vote on behalf of any other director.

Chapter IV Asset Assessments

Article 47 Where a wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital is to be merged with another company, divided into two or more companies or restructured, or where a substantial proportion of its assets are to be transferred, an investment is to be made with any non-monetary property, or the company is to go into liquidation or falls under any other circumstances in which an asset assessment is required by laws, administrative regulations or its Articles of association, an evaluation of the relevant assets shall be carried out in accordance with relevant provisions.

Article 48 Wholly state-owned enterprises, wholly state-owned companies and state-controlled companies shall authorize qualified asset assessment institutions established legally to carry out asset assessments; where the situation involves any matter to be reported to the relevant organ that performs the duties of an investor for decision, the details of the authorized asset assessment institution shall be reported to that organ.

Article 49 Wholly state-owned enterprises, wholly state-owned companies and state-controlled companies, in addition to their directors, supervisors and senior managers, shall provide asset assessment institutions they engage with genuine relevant particulars and information and shall not collude with any such asset assessment institution on the setting of asset values in the course of asset assessment activities.

Article 50 Any asset assessment institution or any staff member thereof that is authorized to make an evaluation of relevant assets shall, in compliance with laws, administrative regulations and evaluation practice standards, do so in an independent, impartial and equitable manner. Asset assessment institutions shall be responsible for the asset assessment reports they issue.

Chapter V Transfers of State-owned Assets

Article 51 The term "transfer of state-owned assets" as used herein means any course of action by which any interest in an enterprise owned by the State as a result of any capital contribution thereto made by the State is assigned to another entity or individual in accordance with the law, other than a gratuitous assignment of state-owned assets made in accordance with relevant provisions of the State.

Article 52 Any transfer of state-owned assets shall be conducive to the strategic adjustment of the distribution and structure of the State sector of China's economy, shall prevent any loss of state-owned assets, and shall not harm the legitimate interests of any party to the transfer.

Article 53 Any organ that performs the duties of an investor shall make a decision on whether or not to transfer state-owned assets. Where any such organ decides to transfer all of the state-owned assets in question, or decides to transfer part of the state-owned assets in question which will lead to the loss of controlling shareholder status on the part of the State for the enterprise in question, it shall report the matter to the people's government at the same level for approval.

Article 54 The principles of equal-value exchange, openness, fairness and impartiality shall be observed in any transfer of state-owned assets.
Other than those which may be transferred directly by agreement in accordance with relevant provisions of the State, state-owned assets shall be transferred publicly in an asset/equity transaction executed in accordance with the law. The transferor shall disclose all relevant information in an honest manner to solicit potential transferees; where two or more potential transferees emerge in the solicitation process, the transferor shall make a decision on the final transferee by way of an open auction.
Any transfer of shares listed on a stock exchange shall be carried out in accordance with the provisions of the Securities Law of the People's Republic of China.

Article 55 For any transfer of state-owned assets, the minimum transfer price shall be determined in a reasonable manner on the basis of a price that has been evaluated in accordance with the law and recognized by an organ that performs the duties of an investor or approved by the people's government at the same level after being reported by such an organ.


Article 56 Where, when any state-owned assets of an enterprise which, as provided for in laws, administrative regulations or by the State-owned Assets Supervision and Administration Commission under the State Council, may be transferred to any director, supervisor, or senior manager of the enterprise, any of their immediate family members or any enterprise owned or effectively controlled by any of those persons are to be transferred, and any of those persons or any such enterprise participates in such transfer, they shall compete with other participants on a equal footing; the transferor concerned shall disclose all relevant information in an honest manner in accordance with relevant provisions of the State, and no director, supervisor or senior manager related thereto shall participate in any activities connected with the preparation and implementation of any plan for such transfer.

Article 57 Where any state-owned assets are to be transferred to a foreign investor, such transfer shall be carried out in compliance with relevant provisions of the State and shall not harm the national security or public interests of China.

Chapter VI Operating Budgets for State-owned Capital

Article 58 The State is to establish a sound operating budget system for state-owned capital to carry out budget management activities for income derived from and expenses incurred in relation to state-owned capital.

Article 59 An operating budget for state-owned capital shall be prepared for the following types of income derived from and expenses incurred by the State in relation to state-owned capital:
1. Profits derived from state-invested enterprises;
2. Income derived from the transfer of state-owned assets;
3. Income derived on the liquidation of state-invested enterprises; and
4. Other state-owned capital income.

Article 60 People's governments shall prepare separate operating budgets for state-owned capital on an annual basis, incorporate such budgets into the budget of the government, and submit it to the people's congress at the same level for approval.
Expenses paid out of any operating budget for state-owned capital shall arranged on the basis of the amount of budgetary income for the current year, and no arrangement shall be made for any deficit.

Article 61 The State Council and the financial departments of relevant local people's governments shall be responsible for the preparation of draft operating budgets for state-owned capital. Any organ that performs the duties of an investor shall submit to the relevant financial department a preliminary proposal for an operating budget for state-owned capital in respect of which it performs the duties of an investor.

Article 62 Specific measures and implementation procedures for the administration of operating budgets for state-owned capital shall be formulated by the State Council and reported to the Standing Committee of the National People's Congress for the record.

Chapter VII Supervision of State-owned Assets

Article 63 The standing committees of people's congresses at all levels shall pay attention to and review special work reports produced by the people's government at the same level on the performance of the duties of an investor and on the supervision and administration of state-owned assets, arrange for enforcement inspections and other activities with respect to the implementation of this Law, and perform their supervisory duties in accordance with the law.

Article 64 The State Council and local people's governments shall supervise organs they authorize to perform the duties of an investor in the performance of their duties.

Article 65 The State Council and audit authorities in local people's governments shall, in accordance with the provisions of the Audit Law of the People's Republic of China, carry out audit supervision on the implementation of operating budgets for state-owned capital and on state-invested enterprises subject to audit supervision.

Article 66 The State Council and local people's governments shall disclose to the general public information on the status of state-owed assets and information on the supervision and administration of state-owned assets in accordance with the law, and shall be subject to the supervision of the general public.
Any entity or individual has the right to report or complain about any act that may lead to any loss of state-owned assets.

Article 67 Any organ that performs the duties of an investor may, where necessary, instruct an accounting firm to audit the annual financial reports of a wholly state-owned enterprise or company or, by way of a resolution adopted at a meeting of shareholders or general meeting of shareholders, cause any accounting firm engaged by a company controlled by state-owned capital to audit the annual financial reports of the company, so as to protect the rights and interests of the state-owned capital contributor.

Chapter VIII Legal Liability

Article 68 Where any organ that performs the duties of an investor acts in any of the following ways, appropriate penalties shall be imposed on any principal person directly responsible therefor and any other person directly responsible therefor in the relevant organ:
1. Violating statutory requirements in appointing or proposing the appointment of any manager of a state-invested enterprise;
2. Embezzling, withholding or misappropriating any funds of a state-invested enterprise or state-owned capital income to be turned over to the treasury;
3. Violating statutory powers or procedures in making a decision on any significant matter relating to a state-invested enterprise, thereby leading to a loss of state-owned assets; or
4. Failing to perform the duties of an investor in accordance with the law in any other way that leads to a loss of state-owned assets.

Article 69 Where any staff member of an organ that performs the duties of an investor neglects his or her duties, abuses his or her powers, or misuses his or her position for personal gain, and the circumstances do not constitute a crime, he or she shall be given an appropriate penalty.

Article 70 Where any shareholder representative appointed by an organ that performs the duties of an investor fails to perform his or her duties in accordance with the instructions of that organ, thereby leading to a loss of state-owned assets, the relevant shareholder representative shall be held liable to pay compensation for the loss; where any such shareholder representative is a person employed by the State, he or she shall also be given an appropriate penalty.

Article 71 Where any director, supervisor or senior manager of a state-invested enterprise acts in any of the following ways, thereby leading to a loss of state-owned assets, the relevant director, supervisor or senior manager shall be held liable to pay compensation for the loss; where any such director, supervisor or senior manager is a person employed by the State, he or she shall also be given an appropriate penalty:
1. Taking a bribe or deriving any other illegal income or inappropriate interest by taking advantage of his or her powers;
2. Embezzling or misappropriating any of the enterprise's assets;
3. In the course of the restructuring of the enterprise, the transfer of its property or any other activity, transferring or converting into shares at a discount any property of the enterprise in violation of laws, administrative regulations or fair dealing rules;
4. Conducting any transaction with the enterprise in violation of the provisions of this Law;
5. Providing false relevant particulars or information to an asset assessment institution or accounting firm, or colluding with an asset assessment institution or accounting firm in issuing a false asset assessment report or audit report;
6. Violating decision-making procedures provided in laws, administrative regulations or the
Articles of association of the enterprise in making a decision on any significant matter involving the enterprise; or
7. Performing his or her duties in any other way which violates laws, administrative regulations or the
Articles of association of the enterprise.
Income obtained as a result of any action described in the preceding paragraph taken by any director, supervisor or senior manager of a state-invested enterprise shall be recovered or returned to the enterprise in accordance with the law.
Where any director, supervisor or senior manager appointed or proposed for appointment by an organ that performs the duties of an investor acts in any of the ways described in the first paragraph of this Article, thereby leading to any substantial loss of state-owned assets, that organ shall, in accordance with the law, remove him or her from office or propose to do so.

Article 72 Where, in the activities such as any related-party transaction and the transfer of state-owned assets, the parties concerned collude maliciously with each other to harm the interests of the owner of the state-owned assets concerned, the relevant transaction shall be invalid.

Article 73 Where any director, supervisor or senior manager of a wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital causes any substantial loss of state-owned assets due to any violation of the provisions hereof and is therefore removed from office, he or she shall not act as a director, supervisor or senior manager in any other wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital for a period of five years from the date he or she is removed from his or her post; where the loss of state-owned assets is quite substantial or he or she is held criminally liable for corruption, bribery, embezzlement of state-owned assets, misappropriating state-owned assets, or damaging the order of the socialist market economy, he or she shall be banned from acting as a director, supervisor or senior manager in any other wholly state-owned enterprise, wholly state-owned company or company controlled by state-owned capital for life.

Article 74 Where any asset assessment institution or accounting firm that is instructed to carry out an asset assessment or financial audit for a state-invested enterprise issues a false asset assessment report or audit report in violation of laws, administrative regulations or practice standards, it shall be pursued for legal liability in accordance with relevant provisions of laws or administrative regulations.

Article 75 Where any provision hereof is violated and the circumstances in question constitute a crime, the party concerned shall be pursued for criminal liability.

Chapter IX Supplementary Provisions

Article 76 All other provisions set out in laws and administrative regulations that relate to the administration and supervision of state-owned assets in financial enterprises shall be complied with.

Article 77 This Law shall come into effect on May 1, 2009.