Administrative Measures for the Material Assets Reorganization of Listed Companies (Revised in 2016)

Order of the China Securities Regulatory Commission No.127

September 8, 2016

(Adopted at the 52nd Chairman's Executive Meeting of the China Securities Regulatory Commission on July 7, 2014; revised according to the Decision on Revising the Provisions on Several Issues concerning the Regulation of the Material Asset Reorganization of Listed Companies on September 8, 2016)

Chapter I General Provisions

Article 1 The Administrative Measures for the Material Assets Reorganization of Listed Companies (hereinafter referred to as the "Measures") are formulated pursuant to the provisions of the Company Law, the Securities Law and other relevant laws and administrative regulations, with a view to regulating material assets reorganization of listed companies, protecting the lawful rights and interests of listed companies and investors, and promoting the constant improvement of the quality of listed companies, and maintaining the order of the securities market and the social public interests.

Article 2 The Measures apply to asset trading behaviors, other than the daily business activities, conducted by a listed company or companies held or controlled by it, such as the purchase and sale of assets, or asset trading by other means that reach a specified proportion, thereby causing significant changes to the primary business, assets, or income of the listed company (hereinafter referred to as the "material assets reorganization").
Purchase of assets by a listed company by means of issuing shares shall be in compliance with the provisions of the Measures.
If a listed company, according to the fund raising purposes disclosed in the securities issuance documents that are verified and approved by the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"), uses the raised funds to purchase assets or make outbound investments, the Measures shall not apply.

Article 3 Any organization or individual shall not damage the lawful rights and interests of listed companies and their shareholders by way of material assets reorganization.

Article 4 Where a listed company carries out material assets reorganization, the parties concerned must disclose or provide information in a timely and fair manner, ensure the authenticity, accuracy, and completeness of the information disclosed or provided, and that the information disclosed or provided is free from any false record, misleading statement, or major omission.

Article 5 Directors, supervisors, and senior management personnel of a listed company shall, during the material assets reorganization, be faithful, diligent, and conscientious, maintain the safety of the company's assets, and protect the lawful rights and interests of the company and all the shareholders.

Article 6 Securities service institutions and personnel that provide services for material assets reorganization shall abide by the relevant provisions of laws, administrative regulations, and the CSRC, observe the business criteria and code of ethics generally accepted in the sector, strictly perform their duties, and bear liability for the authenticity, accuracy, and completeness of the documents prepared and issued by them.
For the purpose of the preceding article, the securities service institutions and personnel shall not instigate, assist or collude with the client to prepare or disclose the reports or announcements that have any false record, misleading statement, or major omission, and shall not engage in unfair competition or make use of the material assets reorganization of the listed company to seek improper interests.

Article 7 Any organization or individual shall be obliged to keep confidential the information on material assets reorganization they have access to before such information is disclosed in accordance with the law.
Any organization or individual is prohibited from conducting insider dealing, manipulating the securities market, or committing other illegal acts by using the information on material assets reorganization.

Article 8 The CSRC shall supervise and administer the material assets reorganization of listed companies in accordance with the law.
The CSRC shall review the applications for material assets reorganization or purchase of assets through issuance of shares of listed companies, and may make differentiated, open and transparent regulatory system arrangement to conditionally reduce the contents and processes of review according to the standard operation and credit standing of listed companies and the capability and quality of financial advisors to practice and based on the industrial policies of the State and the types of reorganization transactions.

Article 9 The merger and acquisition funds, equity investment funds, venture capital investment funds, industrial investment funds and other investment institutions established in accordance with the law are encouraged to participate in the merger, acquisition and reorganization of listed companies.

Article 10 The CSRC shall establish a Listed Companies' Merger, Acquisition and Reorganization Review Committee (hereinafter referred to as the "Merger, Acquisition, and Reorganization Committee") under the Public Offering Review Committee. The Merger, Acquisition, and Reorganization Committee shall vote on the application for material assets reorganization or purchase of assets through issuance of shares submitted thereto for deliberation, and present examination and verification opinions.

Chapter II Principles and Standards for Material Assets Reorganization

Article 11 For carrying out material assets reorganization, a listed company shall provide sufficient explanation and make disclosure on the compliance of the present transaction with the following requirements:
1. it shall meet the industrial policies of the State and the provisions of laws and administrative regulations on environmental protection, land administration, and anti-monopoly;
　　2. it will not result in inconformity of the listed company with the stock listing conditions;
3. the price of assets involved in the material assets reorganization is fair, and there is no circumstance in which the lawful rights and interests of the listed company and the shareholders will be undermined;
4. the ownership of the assets involved in the material assets reorganization is clear, and there is no legal obstacle in the change of owner or transfer of such assets, and the relevant creditor's rights and debts are legally handled;
5. it is conducive to strengthening the listed company's sustained operational capacity, and there is no circumstance which may lead to a result that the main assets of the listed company are cash or the listed company has no specific operational business after the reorganization;
6. it is good for the listed company to maintain independence from its actual controller or affiliated parties in terms of business, assets, finance, personnel, organization, and other aspects, and comply with the relevant provisions of the CSRC on the independence of listed companies; and
　　7. it is good for the listed company to form or maintain a healthy and effective legal person governance structure.

Article 12 Purchase or sale of assets by a listed company or a company held or controlled by it shall constitute the material assets reorganization provided it meets any of the following standards:
　　1. the total amount of assets purchased or sold accounts for 50% or more of the total amount of end-of-period assets of the listed company in the consolidated financial and accounting report for the last accounting year that has been audited;
2. the operating income from the purchased or sold assets in the last accounting year accounts for 50% or more of the operating income in the consolidated financial and accounting report for the same period that has been audited; or
3. the net assets purchased or sold account for 50% or more of the end-of-period net assets in the consolidated financial and accounting report for the last accounting year that has been audited, and exceed CNY50 million.
If the purchase or sale of assets does not reach the standards specified in the preceding paragraph, but the CSRC discovers that there are major problems that may undermine the lawful rights and interests of the listed company or the investors, the CSRC may, according to the principle of prudent supervision and administration, order the listed company to disclose the relevant supplementary information, suspend the transactions, engage an independent financial advisor or any other securities service institution to make supplementary verification and disclose the professional opinions pursuant to the provisions of the Measures.

Article 13 Where the purchase of assets by a listed company from the acquirer or the affiliated party thereof within 60 months as of the date when the control is changed causes any of the following fundamental changes to the listed company, such purchase constitutes the material asset reorganization, and shall be reported to the CSRC for approval in accordance with these Measures:
1. the total assets purchased account for 100% or more of the total amount of the end-of-period assets of the listed company in the consolidated financial and accounting report for the previous accounting year that was audited before the change of the control over the listed company;
2. the operating income from the purchased assets in the last accounting year accounts for 100% or more of the operating income of the listed company in the consolidated financial and accounting report for the previous accounting year that was audited before the change of the control over the listed company;
3. the net profits from the purchased assets in the last accounting year account for 100% or more of the net profits of the listed company in the consolidated financial and accounting report for the previous accounting year that was audited before the change of the control over the listed company;
4. the net assets purchased account for 100% or more of the end-of-period net assets of the listed company in the consolidated financial and accounting report for the previous accounting year that was audited before the change of the control over the listed company;
5. the shares issued for the purchase of assets account for 100% or more of the shares of the listed company for one trading day before the resolution of the board of directors on the first purchase of assets by the listed company from the acquirer or the affiliated party thereof;
6. the purchase of assets by the listed company from the acquirer or the affiliated party thereof is not up to the standards set out in Items 1 to 5 of this paragraph, but may cause fundamental changes to the primary business of the listed company; or
7. other circumstances that may cause fundamental changes to the listed company as identified by the CSRC.
To carry out the foregoing material asset reorganization, a listed company shall conform to the following provisions:
　　1. meeting the requirements prescribed in Articles 11 and 43 herein;
　　2. the operational entity from which the assets are purchased by the listed company shall be a joint stock company or a limited liability company and meet the other issue conditions prescribed in the Administrative Measures for Initial Public Offering and Listing of Shares;
　　3. none of the listed company and its controlling shareholders and actual controllers in the recent three years is involved in the circumstance where they are under investigation by a judicial organ due to a suspected criminal offense or by the CSRC due to the suspected violation of laws or regulations, except where it has been three full years since the termination of the suspected criminal offense or violation of laws or regulations, the transaction plan is able to eliminate the adverse consequence that is likely to be caused by such act and imposition of liability on the relevant persons committing the act is not affected;
　　4. none of the listed company and its controlling shareholder and actual controller have been publicly denounced by the stock exchange within the last 12 months or committed any other major dishonest behavior; and
　　5. the material asset reorganization does not fall under other circumstances that may damage the investors' legitimate rights and interests, or go against the principles of openness, fairness and justice as identified by the CSRC.
　　Material assets reorganization carried out by listed companies by means of issuing shares to purchase assets shall be subject to the Securities Law and the relevant provisions of the CSRC.
　　Control referred to in Paragraph 1 of this article is identified in accordance with Article 84 of the Administrative Measures for the Takeover of Listed Companies. The directors and senior management personnel who can control financial and operating decisions of a listed company decentralizing its equities shall be deemed as having control over the listed company.
　　No purchase of assets by a listed company on the Growth Enterprise Market from the acquirer or the affiliated party thereof as of the date when the control is changed may lead to any of the circumstances set forth in Paragraph 1 of this article.
　　Where the assets purchased by listed companies from the acquirers or the affiliated parties thereof as of the date when the control is changed belong to the finance, venture capital investment or other specific industries, separate provisions shall be formulated by the CSRC.

Article 14 For the calculation of the proportions specified in Articles 12 and 13 herein, the following provisions shall be complied with:
　　1. if the assets purchased are equities, the total amount of the assets is the product of the total amount of the assets of the invested enterprise and the equity percentage of the investment or the transaction amount, whichever is higher; the operating income is the product of the operating income of the invested enterprise and the equity percentage of the investment; the amount of net assets is the product of the amount of net assets of the invested enterprise and the equity percentage of the investment or the transaction amount, whichever is higher. If the assets sold are equities, the total amount of the assets, operating income, and amount of net assets shall be the product of the total amount of the assets, operating income, and amount of net assets of the invested enterprise and the equity percentage of the investment respectively.
　　If the listed company obtains the controlling stake of the invested enterprise by purchasing the equities of the latter, the total amount of assets shall be the total amount of assets of the invested enterprise or the transaction amount, whichever is higher; the operating income shall be the operating income of the invested enterprise; the net profits shall be the net profits of the invested enterprise before or after the deduction of non-recurring profits and losses, whichever is higher; and the amount of net assets shall be the amount of net assets of the invested enterprise or the transaction amount, whichever is higher. If the listed company loses the controlling stake of the invested enterprise by selling the equities of the latter, the total amount of assets, operating income, and amount of net assets shall be the total amount of assets, operating income, and amount of net assets of the invested enterprise respectively..
　　2. if the assets purchased are non-equity assets, the total amount of assets shall be the book value of the assets or the amount of transaction, whichever is higher; and the amount of net assets shall be the difference between the book values of the relevant assets and debts or the amount of transaction, whichever is higher. If the assets sold are non-equity assets, the total amount of assets and net assets shall be the book value of the assets and the difference between the book values between the relevant assets and debts respectively. If the non-equity assets do not involve debts, the standards for net assets specified in Item 3 of Paragraph 1 of Article 12 herein shall not apply.
　　3. if the listed company purchases and sells assets at the same time, the relevant proportions for the purchase and sale of assets shall be calculated respectively, and the higher proportion shall prevail.
　　4. if the listed company purchases and sells the same or relevant assets within 12 months in a row, the corresponding amount shall be calculated separately on an accumulative basis. Asset trading activities for which the written report on the material asset reorganization has been prepared and disclosed in accordance with the provisions of these Measures do not need to be included in the accumulative calculation. Where the CSRC otherwise provides for the accumulative period and scope of material asset reorganization specified in Paragraph 1 of Article 13 hereof, those provisions shall prevail.
Subject matters for the transaction that are owned or controlled by the same trading party, or fall within the same or similar business scope, or fall under other circumstances identified by the CSRC, may be determined as the same or relevant assets.

Article 15 For the purposes of Article 2 of the Measures, asset trading conducted by other means shall include:
　　1. establishment of a new enterprise with others, increase or decrease in capital of the existing enterprises;
2. operating or leasing the assets of other enterprises as entrusted, or entrusting others with operating or leasing the operating assets;
　　3. accepting conditional assets donations, or donating assets to other parties; and
4. other circumstances identified by the CSRC according to the principle of prudent regulation.
If the aforementioned asset trading constitutes, in substance, purchase or sale of assets, and the relevant proportion that is calculated according to the standards specified in the Measures reaches 50% or more, the listed company shall perform the relevant obligations and procedures according to the provisions of the Measures.

Chapter III Procedures for Material Assets Reorganization

Article 16 Where a listed company conducts preliminary negotiation on matters related to material assets reorganization with the trading counterparty, it shall promptly take necessary and sufficient confidential measures, formulate strict and effective confidential rules, and restrict the scope of personnel who may know of the relevant sensitive information. If the listed company and the trading counterparty engage a securities service institution, they shall promptly sign a confidentiality agreement with the engaged securities service institution.
If, before the listed company announces the resolution of the board of directors on the material assets reorganization, the relevant information has been circulated on the media, or abnormal fluctuations occur to the stock transactions of the company, the listed company shall promptly make public announcement of the relevant plan, scheme, current situation of the relevant matters, the relevant progress, and risks, and handle the other relevant matters in accordance with the relevant rules on information disclosure.

Article 17 A listed company shall engage an independent financial advisor, a law firm, and an accounting firm that has the relevant securities business qualifications, and other securities service institutions to issue opinions on the material assets reorganization.
The independent financial advisor and law firm shall, in a prudent manner, verify whether or not the material assets reorganization constitutes affiliated transaction, and express explicit opinions based on the relevant facts determined in the verification. If the material assets reorganization involves affiliated transaction, the independent financial advisor shall express explicit opinions regarding the impact of the present reorganization on the non-affiliated shareholders of the listed company.
　　If the pricing for the asset trading is based on the asset evaluation result, the listed company shall engage an asset evaluation institution that has the corresponding securities business qualifications to issue an asset evaluation report.
If the securities service institution adopts the professional opinions of other securities service institutions or personnel in the opinions it issues, it shall still conduct due diligence, prudently verify the contents of the professional opinions it has adopted, and be responsible for the conclusions derived from using the professional opinions of other securities service institutions or personnel.

Article 18 After a listed company and the trading counterparty conclude an employment contract with a securities service institution, the securities service institution shall not be replaced without any justified cause. Where a replacement of the securities service institution is truly needed under justified grounds, the specific reasons for the replacement and statements of the securities service institution shall be disclosed.

Article 19 A listed company shall, in the part of discussion and analysis by the management of the written report for material assets reorganization, elaborate the impacts of the present transaction on the sustained operation capacity, future development, earning per share of the current year and other financial or non-financial indicators of the listed company.

Article 20 If, in material asset reorganization, the pricing of the relevant assets is based on the asset evaluation result, the asset evaluation institution shall carry out practice-related activities according to the principles and standards relating to the evaluation of assets. The board of directors of a listed company shall express explicit opinions on the independence of the evaluation institution, reasonableness of the evaluation hypothesis, relevance between the evaluation method and evaluation purpose, and the fairness of pricing. Where the pricing of relevant assets is not based on the result of the evaluation of the assets, the listed company shall make detailed analysis and explanation of the method and parameters for valuing the relevant assets and other indicators and factors affecting the result of valuation in the written report on the material assets reorganization. The board of directors of the listed company shall express explicit opinions on the independence of the valuation institution, reasonableness of the valuation hypothesis and relevance between the valuation method and valuation purpose and make detailed analysis of the fairness of pricing for the present transaction in the written report on the material assets reorganization.
In the circumstances mentioned in the preceding two paragraphs, the evaluation institution and valuation institutions shall, in principle, adopt two or more methods to conduct the evaluation or valuation. The independent directors of the listed company shall be present at the meeting of the board of directors and express independent opinions on the independence of the evaluation or valuation institution, reasonableness of the evaluation or valuation hypothesis, and fairness of pricing and make separate disclosure thereof.

Article 21 The material assets reorganization of a listed company shall be subject to a resolution made by the board of directors in accordance with the law and submitted to the general meeting of shareholders for approval.
The board of directors of the listed company shall make explicit judgment on whether or not the material assets reorganization constitutes an affiliated transaction, and disclose the same as a subject matter of the resolution of the board of directors.
　　Independent directors of the listed company shall express independent opinions on the material assets reorganization based on full understanding of the relevant information. If the material assets reorganization constitutes an affiliated transaction, independent directors may engage an independent financial advisor separately to express opinions on the impact of the present transaction on the non-affiliated shareholders of the listed company. The listed company shall actively assist the independent directors to access the relevant materials, and, by arranging field investigation, organizing securities service institutions to report the relevant information, or by other ways, provide necessary support and convenience for independent directors to perform their duties.

Article 22 A listed company shall, on the working day immediately following the day on which the board of directors makes a resolution on material assets reorganization, disclose at least the following documents:
1. resolution of the board of directors and opinions of the independent directors; and
　　2. the material assets reorganization plan of the listed company.
Written report on the material assets reorganization, independent financial advisory report, legal opinions, and the auditor's report, asset evaluation report and valuation report that are involved in the reorganization shall, at the latest, be announced at the same time with the announcement on convening the general meeting of shareholders. Where the listed company makes a voluntary disclosure of a profit forecast report, such report shall be reviewed by an accounting firm with the relevant qualification for securities business and be announced at the same time with the announcement on the written report on the material assets reorganization.
　　The contents and format of information disclosure documents as specified in Item 2 of Paragraph 1, and Paragraph 2 of the present article shall be prescribed separately.
　　The listed company shall, in at least one newspaper or periodical designated by the CSRC, announce the resolution of the board of directors, opinions of the independent directors, and shall, disclose the full text and summary of the written report on the material assets reorganization and the report or opinions issued by the relevant securities service institutions on the website of the stock exchange.

Article 23 A resolution on material assets reorganization made by the general meeting of shareholders of a listed company shall, at least, include the following matters:
　　1. method, subject matter and counterparty of the present material assets reorganization;
2. transaction price or price range;
　　3. method of pricing or basis of pricing;
4. attribution of the profits and losses of the relevant assets from the base day of pricing to the delivery date;
5. contractual obligations of and liability for breach of contract for transferring the ownership of the relevant assets;
　　6. validity period of the resolution;
7. specific authorization to the board of directors for handling the matters concerning the present material assets reorganization; and
　　8. other matters that are required to be specified.

Article 24 A resolution of the general meeting of shareholders of a listed company on the matters concerning the material assets reorganization shall be adopted by at least two thirds of the voting rights held by the shareholders present at the meeting.
If there is an affiliate relationship between the matters concerning the material assets reorganization by the listed company and the company's shareholders or their affiliated parties, the affiliated shareholders shall withdraw when the general meeting of shareholders conducts voting on such matters.
If the trading counterparty has reached an agreement or a tacit understanding with the controlling shareholder of the listed company on accepting the transfer of the equities of the listed company or on recommending directors to the listed company, and such agreement or tacit understanding may cause changes to the actual control of the listed company, the controlling shareholder and its affiliated parties shall withdraw from voting.
Where the listed company convenes a general meeting of shareholders on matters concerning the material assets reorganization, the meeting shall be an on-site meeting, and the listed company shall provide online voting and other lawful ways for the convenience of the shareholders to participate in the meeting. The votes of the shareholders shall be counted and disclosed separately except for those of the directors, supervisors, senior management personnel and the shareholders who hold separately or jointly 5% or more of the shares of the listed company.

Article 25 A listed company shall announce a resolution on the material assets reorganization on the working day immediately following the day on which the resolution is made by the general meeting of shareholders, and the written legal opinions on the convening procedure, the qualifications of the convener and participants, voting procedures, voting results and other matters of such meeting issued by the law firm.
Where the transaction falls under the circumstance prescribed in Article 13 of the Measures, the listed company shall also entrust an independent financial advisor to file application with the CSRC within three working days after the resolution is made in accordance with the provisions of the CSRC.

Article 26 All the directors, supervisors, senior management personnel of a listed company shall make a commitment publicly that the information disclosure and application documents for the material assets reorganization are free from any false record, misleading statement, or major omission.
The trading counterparty of the material assets reorganization shall make a commitment publicly that it shall provide the listed company with the information relating to the present reorganization in a timely manner and guarantee that the information provided is authentic, accurate and complete, and shall bear liability for compensation in accordance with the law if there is any false record, misleading statement or major omission in the information provided and the listed company or the investor incurs loss as a result.
　　Any of the entities and individuals prescribed in the preceding two paragraphs shall make commitments publicly that it shall suspend the transfer of the equity it holds in the listed company before there is explicit investigation conclusion of the case where the present transaction is suspected of involving false records, misleading statements or major omissions in the provided or disclosed information and is under investigation by the judicial organ or the CSRC.

Article 27 The CSRC shall, according to the statutory conditions and statutory procedures, make a decision of approval or disapproval of the applications filed by listed companies regarding the transactions that fall under the circumstance prescribed in Article 13 of the Measures.
　　Where the CSRC puts forward feedback opinions during the period of verification, requesting the listed company to make written explanations or statements, the listed company shall, within 30 days as of the date of receipt of the feedback opinions, provide written reply to the feedback opinions with the cooperation of the independent financial advisor. If the listed company fails to provide such reply within the specified time limit, it shall, on the day immediately following the expiration date, make public announcement on the progress of the present transaction and the specific reasons for the failure to timely provide such reply.

Article 28 If, after the resolution on the material assets reorganization is made at the general meeting of shareholders, the listed company intends to make any change to the transaction target, subject matter of transaction, or transaction price, and such change constitutes a major adjustment to the original transaction plan, the listed company shall submit the changed transaction plan to the general meeting of shareholders for deliberation after it is adopted through voting by the board of directors, and make a public announcement on the relevant documents in a timely manner.
　　If, during the period of verification by the CSRC, the listed company makes a major adjustment to the original transaction plan in accordance with the provisions of the preceding paragraph, it shall file the application anew to the CSRC in accordance with the provisions of the Measures and make a public announcement of the relevant documents at the same time.
During the period of verification by the CSRC, if the board of directors of a listed company makes a resolution to withdraw the application, it shall provide the reasons and make a public announcement; if the board of directors of a listed company makes a resolution to terminate the transaction, it shall submit the resolution to the general meeting of shareholders for deliberation in accordance with the provisions of its articles of association.

Article 29 Where the material assets reorganization of a listed company falls under the circumstance prescribed in Article 13 of the Measures, it shall be submitted to the Merger, Acquisition, and Reorganization Committee for review.

Article 30 A listed company shall, upon receipt of the notice of the CSRC on convening a meeting of the Merger, Acquisition, and Reorganization Committee to verify its application, promptly make a public announcement, and apply for the handling of trading suspension matters from the beginning of the meeting to the disclosure of the voting result.
A listed company shall, upon receipt of the notice on voting result of the Merger, Acquisition, and Reorganization Committee on its application, make a public announcement on the voting result on the following working day and apply for resumption of trading. It shall be stated in the announcement that the company will make another public announcement after receiving the decision from the CSRC whether the reorganization has been approved or not.

Article 31 After a listed company receives the decision made by the CSRC on approval or disapproval of its application, it shall make a public announcement on the following working day.
　　If the CSRC approves its application, the listed company shall disclose the relevant documents according to the provisions of the rules on information disclosure while the public announcement on the approval decision is made.

Article 32 A listed company shall, upon completion of the relevant approval procedures for the material assets reorganization, implement the reorganization plan in a timely manner, formulate a written report on the implementation within three working days upon completion of the implementation, submit a written report to the stock exchange, and make a public announcement.
　　The independent financial advisor and law firm engaged by the listed company shall verify the compliance and risks of the implementation of the material assets reorganization, transfer of the ownership of assets, and the relevant follow-up matters, and express explicit conclusive opinions. The opinions issued by the independent financial advisor and law firm shall be reported and announced together with the implementation report.

Article 33 If the implementation of the present materials asset reorganization has not been completed within 60 days upon completion of the relevant approval procedures, the listed company shall report the implementation progress on the working day immediately following the expiration date, and make a public announcement. The listed company shall make public announcement every 30 days thereafter until the implementation is completed. Under any of the transaction circumstances prescribed in Article 13 or Article 44 of the Measures, if the implementation fails to be completed within 12 months after the date of receipt of the approval documents from the CSRC, the approval documents will become invalid.

Article 34 If any important matter subject to disclosure as required by the laws and regulations occurs during the implementation of the material assets reorganization, the listed company shall make a public announcement thereof in a timely manner. If such matter leads to a substantial change to the present transaction, the reorganization shall be resubmitted to the general meeting of shareholders for deliberation and, if falling under the circumstance prescribed in Article 13 of the Measures, be resubmitted to the CSRC for verification and approval.

Article 35 Where the assets to be purchased are evaluated or valued by using the present value method, hypothetical development method, and other methods that are based on the future prospective profit, and such evaluation or valuation result is used as the basis for pricing, the listed company shall, in its annual reports for the three years after the completion of the material assets reorganization, make a separate disclosure of the difference between the actual profit of the relevant assets and the estimated profit of the relevant assets, and the accounting firm shall issue special audit opinions for that. The trading counterparty shall conclude an explicit and feasible compensation agreement with the listed company in the circumstance that the actual profit of the assets is lower than the estimated profit.
Where the present material assets reorganization is estimated to dilute the earnings per share of the listed company for the current year, the listed company shall come up with the specific measures for filling the gap of the earnings per share and submit the relevant proposals to the board of directors and the general meeting of shareholders for voting. The subject responsible for implementing such specific measures shall make commitment publicly to guarantee the effective performance of its obligations and responsibilities.
Where a listed company purchases assets from the specific targets other than its controlling shareholder, actual controller or the affiliated parties under its control without resulting in the change of the control, the provisions of the preceding two paragraphs of the present article shall not apply. The listed company and the counterparty to the transaction may, according to the market-oriented principle, consult on their own to decide whether or not the performance compensation, the measures for filling the gap of earnings per share and the relevant specific arrangements shall be adopted.

Article 36 Where the material assets reorganization of a listed company falls under any of the following circumstances, the independent financial advisor shall, in a timely manner, issue verification opinions and make a public announcement:
1. before completing the relevant approval procedures, the listed company has made any change in the transaction target, subject matter of transaction, or transaction price, and such change constitute a major adjustment to the original reorganization plan, or the occurrence of a significant event leads to a substantial change to the original reorganization plan; or
　　2. after completing the relevant approval procedures by the listed company, a significant event occurs to the listed company during its implementation of the reorganization, and leads to a substantial change to the original reorganization plan.

Article 37 An independent financial advisor shall, according to the relevant provisions of the CSRC, perform the duties of sustained supervision and guidance of the listed companies that implement material assets reorganization. The period of sustained supervision and guidance shall commence from the day of the completion of the implementation of the present material assets reorganization, and shall not be less than one accounting year. With regard to the implementation of a material assets reorganization prescribed in Article 13 herein, the period of sustained supervision and guidance thereof shall commence from the day when the CSRC approves the present material assets reorganization, and shall not be less than three accounting years.

Article 38 An independent financial advisor shall, in combination with the annual reports for both the year when the listed company implements the material assets reorganization and the first accounting year after the reorganization is completed, and, within 15 days upon disclosure of the annual report, issue sustained supervision and guidance opinions regarding the following matters carried out for the material assets reorganization and make a public announcement:
　　1. information on the delivery or the transfer of ownership of the trading assets;
2. performance of the commitment of each party to the trading;
3. realization of the announced estimated earnings or profits;
4. current situation of the development of the business lines mentioned in the part of discussion and analysis by the management;
5. governance structure and operation status of the company; and
6. other matters that are different from the reorganization plan already published.
The independent financial advisor shall also take into consideration the annual reports of the second and third accounting years after the material assets reorganization stipulated in Article 13 herein is completed, and, within 15 days upon disclosure of the annual report, issue sustained supervision and guidance opinions regarding the matters stipulated in Items 2 to 6 of the preceding paragraph and make a public announcement.

Chapter IV Information Management for Material Assets Reorganization

Article 39 Where a listed company plans and implements a material assets reorganization, the relevant information disclosure obligor shall, on a fair basis, disclose to all the investors the relevant information that may cause significant impact on the trading price of the stocks of the listed company (hereinafter referred to as the "sensitive information for stock price"), and shall not, on a selective basis, disclose the information to specific targets in advance.

Article 40 The shareholders and actual controller of a listed company, and other relevant institutions and personnel that participate in the planning, feasibility study, decision-making, and other steps for a material assets reorganization shall promptly and accurately report the relevant information to the listed company, and cooperate with the listed company to disclose the information in a timely, accurate, and complete manner. If the listed company knows of the sensitive information for stock price, it shall apply for trading suspension with the stock exchange and disclose such information.

Article 41 A listed company and its directors, supervisors, and senior management personnel, counterparty of the material assets reorganization and its affiliated parties, directors, supervisors, and senior management personnel or person-in-charge of the counterparty and its affiliated parties, securities service institutions and their employees engaged by parties to the trading, the relevant organizations and personnel that participate in the planning, feasibility study, decision-making, examination and approval, and other steps for the material assets reorganization, and other relevant organizations and personnel that know of or may know of the sensitive information for stock price due to lineal relationship, provision of service, and business contact, shall, before the sensitive information for stock price relating to the material assets reorganization is disclosed, bear the obligations of keeping such information confidential, and shall be prohibited from using such information to conduct insider trading.

Article 42 Where a listed company plans the matters related to the material assets reorganization, it shall record in detail the progress of each specific step during the planning, including the specific time, place, participating organizations and personnel, and contents of negotiation and resolution, that are related to the negotiation of the relevant plans, formation of the relevant intent, and conclusion of the relevant agreement or letter of intent. It shall also prepare a written memorandum of the trading progress and keep the memorandum properly. All the personnel that participate in each specific step shall sign on the memorandum immediately for confirmation.
Where the listed company predicts that it is difficult to keep confidential the planned matters of the material assets reorganization or such matters have already been divulged, it shall, in a timely manner, apply for trading suspension to the stock exchange, until the relevant information is truthfully, accurately, and completely disclosed. During the period of trading suspension, the listed company shall make public announcement on the status of the event at least once per week. Where abnormal fluctuation occurs to the stock trading price of a listed company due to market rumors on the material assets reorganization, the listed company shall, in a timely manner, apply for trading suspension to the stock exchange, and verify whether or not there is any reorganization matter that affects the stock trading price of the listed company and make clarification, and shall not refuse to perform the information disclosure obligations on the ground of the uncertainties of the relevant matters.

Chapter V Purchase of Assets through Issuance of Shares

Article 43 Purchase of assets by a listed company through issuance of shares shall comply with the following provisions:
1. sufficient explanation and disclosure are made that the present transaction is conducive to enhancing the asset quality of the listed company, improving the financial status, and strengthening sustained profit-making ability; and it is beneficial to the listed company for reducing affiliated transactions, avoiding horizontal competition, and enhancing independence;
2. the certified public accountants have issued an auditor's report with unqualified opinions for the financial and accounting report of the listed company for the last year and last period. If the certified public accountants issue a qualified opinion, adverse opinion, or disclaimer of opinion in the auditor's report, the financial and accounting report shall be subject to special verification by the certified public accountants to confirm that the major impact of the matters relating to the qualified opinion, adverse opinion, or disclaimer of opinion has been eliminated or will be eliminated through the present trading;
3. none of listed company and its incumbent directors and senior management personnel thereof is involved in the circumstance where they are under investigation by the judicial organ due to suspected criminal offense or by the CSRC due to suspected violations of laws or regulations, except where it has been three full years since the termination of the suspected criminal offense or violation of laws or regulations, the transaction plan is conducive to eliminating the adverse consequence that is likely to be caused by such act and imposition of liability on the relevant persons committing the act is not affected;
4. sufficient explanation and disclosure are made that the assets purchased through issuance of shares by the listed company are the operating assets with clear ownership and the formalities for transfer of ownership can be completed within the agreed time limit; and
5. other conditions specified by the CSRC.
In order to promote industrial integration, transformation and upgrading, a listed company may, under the circumstance that there is no change to its control, purchase assets from specific targets other than its controlling shareholder, actual controller or affiliated parties under its control by means of issuing shares. If the purchased assets have no significant synergies with the existing primary business, sufficient explanation and disclosure shall be made as to the business development strategies and business management mode after the present transaction as well as the risks that may arise in the business transformation and upgrading and the corresponding solutions.
After a specific target subscribes for the shares issued privately by a listed company with cash or assets, if the listed company uses the funds raised through the same private issuance of shares to purchase assets from that specific target, such an act shall be deemed as purchasing assets through issuance of shares.

Article 44 A listed company that purchases assets through issuance of shares may, at the same time, raise part of the supporting funds, of which the pricing method shall be subject to the relevant existing provisions, unless such purchase falls under the trading circumstances set forth in Paragraph 1 of Article 13 hereof.
For purchase of assets through issuance of shares, a listed company shall, in accordance with the provisions of the Measures on material assets reorganization, formulate the plan for the purchase of assets through issuance of shares and the written report on purchase of assets through issuance of shares and shall file an application with the CSRC.

Article 45 The price for the shares issued by a listed company shall not be lower than 90% of the market reference price. The market reference price shall be the average trading price of stocks of the company for the 20 trading days, 60 trading days or 120 trading days before the resolution of the board of directors on the present purchase of assets through issuance of shares is announced, and such resolution shall specify the basis for choosing the market reference price.
　　For the purpose of the preceding paragraph, the formula for calculating the average trading price is: the average trading price of stocks of the company for the certain trading days before the resolution of the board of directors is announced = the total trading amount of stocks of the company for the certain trading days before the resolution is announced / the total trading volume of stocks of the company for the certain trading days before the resolution is announced.
The resolution of the board of directors on the present purchase of assets through issuance of shares may specify that the board of directors may adjust the issuance price once according to the determined adjustment plan if there is any major change to the price of the shares of the listed company as compared with the originally determined issue price before the approval by the CSRC.
　　The issue price adjustment plan stipulated in the preceding paragraph shall be explicit, specific and practical, stating in detail whether or not the pricing of the assets to be purchased or the number of the shares to be issued shall be adjusted appropriately and the reasons therefor, disclosed sufficiently at the time of the first announcement of the resolution of the board of directors, and submitted to the general meeting of shareholders for deliberation according to the relevant provisions. Where, upon resolution by the general meeting of shareholders, the board of directors adjusts the issue price according to the determined plan, the listed company is not required to file an application anew with the CSRC in accordance with the provisions of Article 28 of the Measures.

Article 46 Shares of a listed company obtained by a specific target through subscription with assets shall not be transferred within 12 months as of the date upon the completion of the issuance of such shares, and shall not be transferred within 36 months under any of the following circumstances:
　　1. the specific target is the controlling shareholder or actual controller of the listed company, or an affiliated party controlled by the actual controller;
2. the specific target obtains the actual control of the listed company through subscribing for the shares of the present issuance; or
3. when the specific target obtains the shares of the present issuance, it has not been 12 months since the specific target owns the equities to the assets that are used to purchase the shares.
Under any of the trading circumstances set forth in Paragraph 1 of Article 13 hereof, a listed company's original controlling shareholder, original actual controller and affiliated parties controlled thereby, and specific targets directly or indirectly purchasing the shares of the listed company transferred by the above subjects in the process of trading shall make a public commitment that the shares of which the rights and interests are enjoyed by them in the listed company shall not be transferred within 36 months upon completion of the transaction; and the specific targets other than the acquirer or the affiliated party thereof shall make a public commitment that the shares of the listed company obtained by them through subscription with assets shall not be transferred within 24 months as of the date on which the issuance of such shares is completed.

Article 47 The application of a listed company for purchase of assets through issuance of shares shall be submitted to the Merger, Acquisition, and Reorganization Committee for examination and verification.

Article 48 Where a listed company purchases assets through issuance of shares, thereby rendering the shares held or controlled by the specific target reaching the statutory proportion, the listed company shall perform the relevant obligations in accordance with the provisions of the Administrative Measures for the Takeover of Listed Companies (Order of the China Securities Regulatory Commission No.108).
If a listed company purchases assets through issuance of shares to the controlling shareholder, actual controller or the affiliated parties thereof or the purchase of assets through issuance shares will lead to the change in the actual control of the listed company, the specific target subscribing for the shares shall make commitments publicly in the report on purchase of assets through issuance of shares that the lockup period for the stocks of the listed company it holds shall be extended for at least six months automatically if the closing price of the stocks of the listed company is lower than the issue price for 20 consecutive trading days within six months after the completion of the transaction or the closing price at the end of the six-month period after the completion of the transaction is lower than the issue price.
　　The specific target stipulated in the preceding paragraph shall additionally make commitments publicly in the report on purchase of assets through issuance of shares that it shall not transfer the equities it holds in the listed company before there is an explicit investigation conclusion of the case where the present transaction is suspected of involving any false record, misleading statement or major omission in the provided or disclosed information and is under investigation by the judicial organ or the CSRC.

Article 49 After the CSRC verifies and approves the application of a listed company to purchase assets through issuance of shares, the listed company shall implement the same in a timely manner. After the ownership of the relevant assets purchased from the specific target is transferred to the listed company, the independent financial advisor and the law firm engaged by the listed company shall verify the compliance and risks of the matters relating to the transfer of ownership of the assets and the relevant follow-up matters, and express explicit opinions. The listed company shall, within three working days upon completion of the transfer of ownership, make a public announcement on the information regarding the transfer of ownership. The announcement shall include the conclusive opinions of the independent financial advisor and the law firm.
After a listed company completes the report and public announcement specified in the preceding paragraph, it may, at the stock exchange and the securities depository and clearing company, apply for securities registration for the specific target that subscribes for shares.

Article 50 Where the combination by merger under equity swap involves a listed company, the pricing and issuance of the shares of the listed company shall be subject to the provisions of the present Chapter.
Where a listed company's purchase of assets or merger with another company through issuance of preferred shares is otherwise provided for by the CSRC, such provisions shall prevail.
A listed company may issue to specific targets the corporate bonds convertible into shares or private placement of warrants to be used for purchase of assets or merger with another company.

Chapter VI Application for Issuance of New Shares or Corporate Bonds after Material Assets Reorganization

Article 51 After the completion of the material assets reorganization that is verified and approved by the CSRC, the performance before the present material assets reorganization may be subject to simulated calculation during the examination and verification if the listed company's application for public offering of new shares or corporate bonds complies with the following conditions simultaneously:
1. the assets that enter the listed company are complete operational entities;
　　2. after completion of the present material assets reorganization, the commitments of the reorganizing party is performed as scheduled, and the listed company is in stable and sound operation; and
3. after the completion of the present material assets reorganization, the profits realized for the listed company and the relevant assets reach the predicted profit-making level.
If the listed company fails to meet the conditions for public issuance of securities as specified by the CSRC before the present material assets reorganization, or the present reorganization causes the change in the actual controller of the listed company, the application of the listed company for public issuance of new shares or corporate bonds shall not be filed within less than one accounting year upon completion of the present reorganization transaction.

Article 52 For the purposes of the Measures, an operational entity shall comply with the following conditions:
　　1. operational business and operational assets are independent and complete, and no major change has occurred thereto within the last two years;
　　2. it has operated as a going concern for more than two years under the same actual controller before it enters the listed company;
　　3. it has independent accounts, or, in the event of having no independent accounts, there is a clear division for the income and expenses relating to its operating business in terms of accounting before it enters the listed company; and
　　4. the listed company concludes employment contracts with the chief senior management personnel of the said operational entity, or adopts other means, and makes proper arrangement with regard to the sustained operation and management of the said operational entity after the completion of the transaction.

Chapter VII Supervision, Administration and Legal Liabilities

Article 53 With regard to any listed company that fails to perform the relevant obligations or procedures and implements material assets reorganization without approval, the CSRC shall order it to make corrections, and may take regulatory talks, issuance of a warning letter, and other regulatory measures. If the case is serious, the listed company may be ordered to suspend or terminate the reorganization activities and subject to warning or fines, and the measure of banning the entry into the market may also be adopted for the relevant personnel subject to liability.
If a listed company implements the material asset reorganization specified in Paragraph 1 of Article 13 hereof without the approval of the CSRC but has not yet completed the transaction, the CSRC will order the listed company to make supplementary disclosure of the relevant information, suspend the transaction and submit the application documents in accordance with Article 13 of these Measures; if the transaction has been completed, the listed company may be subject to a warning or fine, and the measure of banning the entry into the market may also be adopted for the relevant persons liable; if any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation into criminal liability in accordance with the law.
Where the material assets reorganization of a listed company causes damage to the lawful rights and interests of the listed company or investors due to the issues such as obviously unfair pricing or improper transfer of benefits involved therein, the CSRC shall order the listed company to make corrections, and may take regulatory talks, issuance of a warning letter, and other regulatory measures. If the case is serious, the listed company may be ordered to suspend or terminate the reorganization activities and subject to warning or fines, and the measure of banning the entry into the market may also be adopted for the relevant personnel subject to liability.

Article 54 Where a listed company or other information disclosure obligor fails to submit the reports relating to the material assets reorganization in accordance with the provisions of the Measures, or there are false records, misleading statements, or major omissions in the reports submitted, the CSRC shall order the said listed company or other information disclosure obligor to make corrections, and impose punishments thereon in accordance with Article 193 of the Securities Law. If the case is serious, the said listed company or other information disclosure obligor may be ordered to suspend or terminate the reorganization activities, and the measure of banning the entry into the market may also be adopted for the relevant personnel subject to liability. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.

Article 55 Where a listed company or other information disclosure obligor fails to disclose material assets reorganization information according to the relevant provisions, or there are false records, misleading statements, or major omissions in the information disclosed, the CSRC shall order the said listed company or other information disclosure obligor to make corrections, and impose punishments thereon in accordance with Article 193 of the Securities Law. If the case is serious, the said listed company or other information disclosure obligor shall be ordered to suspend or terminate the reorganization activities, and the measure of banning the entry into the market may also be adopted for the relevant personnel subject to liability. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.
Where the other party to the transaction of material assets reorganization or purchase of assets through issuance of shares fails to provide information for the listed company or other information disclosure obligor in a timely manner, or there are false records, misleading statements, or major omissions in the information provided, the provisions of the preceding paragraph shall apply.

Article 56 If a material assets reorganization is suspected to be under any of the circumstances set forth in Articles 53, 54 and 55 of the Measures, the CSRC may order the listed company to make an explanation publicly and engage an independent financial advisor or other securities service institution to make supplementary verification and disclose professional opinions. The listed company shall suspend the reorganization before making the explanation publicly and disclosing the professional opinions. If the listed company is suspected to be involved under any of the aforesaid circumstances and subject to the investigation by the judicial organ or the CSRC, the reorganization shall be suspended before there is explicit investigation conclusion of the case.
Where the relevant entities and individuals are suspected to be under any of the circumstances prescribed in Articles 54 and 55 of the Measures and subject to the investigation by the judicial organ or the CSRC, they shall strictly adhere to their commitments made publicly that they shall not transfer the equities they hold in the listed company before there is explicit investigation conclusion of the case.

Article 57 If the directors, supervisors, or senior management personnel of a listed company fail to perform the obligations of being faithful, diligent, and conscientious, or the shareholders, the actual controller or the relevant responsible personnel of a listed company fail to perform the relevant obligations according to the provisions of Measures, thereby rendering the reorganization plan harmful to the interests of the listed company, the CSRC shall order the violating party to make corrections, and may take regulatory talks, issuance of a warning letter, and other regulatory measures. If the case is serious, the CSRC shall impose warning and fines, and may adopt measures against the relevant personnel such as deeming as inappropriate candidate and banning the entry into the market. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.

Article 58 If any securities service institution or its employees that issues, for the material assets reorganization, financial advisory report, auditor's report, legal opinions, assets evaluation report, valuation report or other professional documents, fails to perform the obligations of being faithful, diligent, and conscientious and violates the code of practice and business rules, or fails to perform the obligations of making a report and public announcement or the obligations of sustained supervision and guidance, the CSRC shall order the violating party to make corrections, and may conduct regulatory talks, issue a warning letter, order it to make public explanations, attend trainings or report regularly, deem it as inappropriate candidate, and adopt other regulatory measures. In the event of a serious case, punishment shall be imposed in accordance with Article 226 of the Securities Law.
If there are false records, misleading statements, or major omissions in documents prepared or issued by the securities service institution or its employees specified in the preceding paragraph, the violating party shall be ordered by the CSRC to make corrections, and punishment shall be imposed thereon in accordance with Article 223 of the Securities Law. In the event of a serious case, the measure of banning the entry into the market may be adopted. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law. In the case of the circumstances stipulated in the preceding two paragraphs, the violating party shall not accept new merger and acquisition and reorganization business of listed companies before completing the rectifications as required by the CSRC.

Article 59 After the completion of the material assets reorganization, if, not due to any reason that the management of the listed company is unable to know in advance or unable to control afterwards, the profit realized by the listed company with the purchased assets fails to reach 80% of the predicted amount specified in the asset evaluation report or valuation report, or there are big discrepancies between the actual operations and the contents of the management discussion and analysis contained in the material assets reorganization report, the chairman of the board of directors and the general manager of the listed company, and the accounting firm, financial advisor, asset evaluation institution, the valuation institution and their employees that bear the corresponding liability shall, at the same time when the listed company discloses its annual report, make explanations in the same newspaper or periodical, and make a public apology to the investors. If the profit realized fails to reach 50% of the predicted amount, regulatory talks, issuance of warning letter, ordering to make regular report, and other regulatory measures may be adopted by the CSRC against the listed company, the relevant institution, and their personnel subject to liability.

Article 60 If any person that has access to the material assets reorganization information, before the relevant information is publicized in accordance with the law, divulges such information, buys or sells or suggests others buying or selling the securities of the relevant listed company, disseminates false information by using the material assets reorganization, manipulates the securities market, or carries out fraudulent activities, punishment shall be imposed by the CSRC in accordance with Articles 202, 203, and 207 of the Securities Law. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.

Chapter VIII Supplementary Provisions

Article 61 The Measures shall take effect as of November 23, 2014. The Administrative Measures for the Material Assets Reorganization of Listed Companies (Order of the China Securities Regulatory Commission No.73) promulgated on April 16, 2008 and revised on August 1, 2011 and the Supplementary Provisions on Pricing for Share Issuance in the Material Assets Reorganization during Bankruptcy Restructuring of Listed Companies (Announcement of the China Securities Regulatory Commission [2008] No.44) promulgated on November 11, 2008 shall be repealed simultaneously.