· Area of Law： Securities Companies

· Level of Authority： Administrative Regulations

· Date issued：12-25-1995

· Effective Date：12-25-1995

· Issuing Authority： State Council

· Status： Effective

REGULATIONS OF THE STATE COUNCIL ON DOMESTIC LISTING OF FOREIGN-ORIENTED STOCKS BY SHARE-HOLDING COMPANIES
(Promulgated by the State Council of China on December 25, 1995)
Article 1 These Regulations are hereby formulated in accordance with relevant stipulations in the Company Law of the People's Republic of China (hereinafter referred to as the Company Law) for the purpose of standardizing the issuance and trading of foreign-oriented stocks for domestic listing by share-holding companies and safeguard the legitimate rights and interests of investors.
Article 2 With approval from the Securities Committee of the State Council, share-holding companies (hereinafter referred to as the company) can issue foreign-oriented stocks for domestic listing. If the total face value of the foreign-oriented stocks to be issued for domestic listing exceeds US$30 million, however, the Securities Committee of the State Council shall report the case to the State Council for approval.
The foreign-oriented stocks to be issued by the company for domestic listing as referred to in the preceding clause shall include the foreign-oriented stocks for domestic listing to be issued by the company set up through fund raising and those to be issued by the company through multiplication of capital.
The total amount of foreign-oriented stocks for domestic listing to be issued with approval from the Securities Committee of the State Council shall be kept within the aggregate size of stocks fixed by the State.
Article 3 The foreign-oriented stocks to be issued by the company for domestic listing shall take the form of registered stocks, use the Renminbi yuan to mark their face value, be purchased and traded in foreign exchanges, and listed and traded at stock exchanges inside China.
The foreign-oriented stocks for domestic listing to be issued by the company to domestic investors (hereinafter referred to as domestic-oriented stocks) shall take the form of registered stocks.
Article 4 Investors in foreign-oriented stocks for domestic listing shall be limited to
1. Foreign natural persons, legal persons, and other organizations.
2. Natural persons, legal persons and other organizations in Hong Kong,Macao, and Taiwan.
3. Chinese citizens resided in foreign countries.
4. Other investors in foreign-oriented stocks for domestic listing specified by the Securities Committee of the State Council.
Investors in foreign-oriented stocks for domestic listing shall produce valid documents certifying their identification and qualification when they purchase or trade foreign-oriented stocks for domestic listing.
Article 5 Shareholders of the same kind of foreign-oriented stocks for domestic listing shall enjoy equal rights and fulfil equal obligations as shareholders of domestic-oriented stocks, as stipulated in the Company Law.
The company can write into its articles of association specific stipulations on special matters concerning the exercise of rights and performance of duties by its shareholders.
Article 6 The company's articles of association are binding to the company itself and its shareholders, directors, supervisors, managers,and other senior management personnel.
The directors, supervisors, managers and other senior management personnel of the company shall be obliged to be loyal to and hard working for the company.
The other senior management personnel as mentioned in the two clauses preceding of this article include the financial leader of the company,the secretary of its board of directors, and other people listed in the company's articles of association.
Article 7 The Securities Committee of the State Council and its supervision and management organ-the China Securities Supervision and Management Committee (hereinafter referred to as the Supervision and Management Committee - shall exercise, in accordance with stipulations in laws and administrative decrees, management and supervision of the issuance and trading and other related activities of foreign-oriented stocks for domestic listing.
Article 8 The company set up through funding raising shall meet the following qualifications if it applies for issuance of foreign-oriented stocks for domestic listing:
1. Use of the funds it raises in line with State industrial policies.
2. Observance of relevant State regulations on the establishment of fixed asset investment projects.
3. Observance of relevant State regulations on the utilization of overseas capital.
4. Purchase of shares by the promoter no less than 35 per cent of the total amount of the capital stocks the company plans to issue.
5. Investment by the promoter of no less than 150 million Renminbi yuan.
6. Planned issuance to the society of stocks more than 25 per cent of the total amounts of the company's stocks, or more than 15 per cent of the total amounts of the company's stocks if the total capital stocks it plans to issue exceed 400 million Renminbi yuan in value.
7. Freedom from any major law-breaking behaviours in the last three years on the part of the original enterprise reorganized and transformed into the company or the State-owned enterprise which is the major promote of the company.
8. Profitability for the past three years running on the part of the original enterprise reorganized and transformed into the company or the State-owned enterprise which is the major promoter of the company.
9. Other conditions specified by the Securities Committee of the State Council.
Article 9 The company that applies for issuance, through capital multiplication, of foreign-oriented stocks for domestic listing shall meet the following qualifications apart from meeting the qualifications specified in the first three clauses of Article 8:
1. Completion of sales of the stocks the company has issued last time,conformity of the use of the funds raised the refrom with that fixed at the time when they were raised, and excellent returns from the use of these funds.
2. Company possession of total net assets no less than 150 million Renminbi yuan in value.
3. Freedom on the part of the company from any major law-breaking behaviours during the time from the last issuance of stocks to the time of the current application.
4. Profitability on the part of the company for the last three years running (in case of a company reorganized from an existing enterprise or whose major promoter is a State-owned enterprise, the profitable years of this existing enterprise or State-owned enterprise can be added into account).
5. Other conditions specified by the Securities Committee of the State Council.
The company that multiplies its capital for the first time by means of promotion shall also observe stipulations in Clause 6 of Article 8 of these Regulations when it applies for issuance of foreign-oriented stocks for domestic listing.
Article 10 Applications for the issuance of foreign-oriented stocks for domestic listing shall be handled through the following procedures:
1. Application by the promoter or the company to the people's government of a province, autonomous region or municipality or the relevant departments under the State Council in charge of enterprise management and recommendation by the people's government of a province, autonomous region or municipality or the relevant departments under the State Council in charge of enterprise management to the Securities Committee of the State Council.
2. Selection by the Securities Committee of the State Council after consultation with relevant departments under the State Council of companies for issuance of foreign-oriented stocks for domestic listing.
3. Submission by the chosen companies of the documents listed inarticles 11 and 12 of these Regulations to the Supervision and Management Committee for examination.
4. Report by the Supervision and Management Committee of qualified companies to the Securities Committee of the State Council for approval or to the State Council for approval as stipulated in the first clause of Article 2 of these Regulations before issuing by these companies of foreign-oriented stocks for domestic listing.
Article 11 The company set up through fund raising shall present the following documents to the Supervision and Management Committee if it applies for issuing foreign-oriented stocks for domestic listing:
1. An application report.
2. The name of the promoter, the number of shares to be purchased by the promoter, the kind of investment, and certificate of capital verification.
3. Resolutions of agreement reached at the meeting of the promoters on the open issuance of foreign-oriented stocks for domestic listing.
4. Documents issued by departments authorized by the State Council or the people's government of a province, autonomous region or municipality to approve the establishment of the company.
5. Recommendations by the people's government of a province, autonomous region or municipality or the relevant department under the State Council in charge of enterprise management.
6. The Notice of Pre-verification of Enterprise Title issued by a company registration department.
7. The draft of the articles of association of the company.
8. The prospectus.
9. Feasibility study report on the use of funds, and document of approval of the establishment of the fixed asset investment project if the funds to be raised are to be used for fixed asset investment in a project whose establishment calls for approval.
10. Financial statements of the original enterprise or of the State-owned enterprise who is the major promoter for the last three years that have been audited by chartered accountants or their accounting firms and auditing reports signed and sealed by more than two chartered accountants and their accounting firms.
11. Asset evaluation reports signed and sealed by more than two professional evaluators and the organs they work with, and documents of verification and documents of approval of State ownership of stocks from State assets management departments if State assets are involved.
12. Legal opinions on relevant matters signed and sealed by more than two lawyers and their firms.
13. Plans and contracts on the under writing of stocks.
14. Other documents required by the Supervision and Management Committee.
Article 12 The company that applies for the issuance of foreign-oriented stocks for domestic listing by way of capital multiplication shall present the following documents to the Supervision and Management Committee:
1. An application report.
2. Resolutions of agreement reached at the meeting of the promoters on the open issuance of foreign-oriented stocks for domestic listing.
3. Documents issued by departments authorized by the State Council or the people's government of a province, autonomous region or municipality to approve the issuance of new stocks through capital multiplication.
4. Recommendations by the people's government of a province, autonomous region or municipality or the relevant department under the State Council in charge of enterprise management.
5. The business license of the company issued by a company registration department.
6. The articles of association of the company.
7. The prospectus.
8. Feasibility study report on the use of funds, and document of approval of the establishment of the fixed asset investment project if the funds to be raised are to be used for fixed asset investment in a project whose establishment calls for approval.
9. Financial statements of the company for the last three years that have been audited by chartered accountants or their accounting firms and auditing reports signed and sealed by more than two chartered accountants and their accounting firms.
10. Legal opinions on relevant matters signed and sealed by more than two lawyers and their firms.
11. Plans and contracts on the under writing of stocks.
12. Other documents required by the Supervision and Management Committee.
Article 13 The timing between the issuance by the company of foreign-oriented and domestic-oriented stocks for domestic listing can be shorter than 12 months.
Article 14 The company shall invite registered accountants and their firm meeting State qualifications to carry out auditing or re-examination of its financial statements.
Article 15 The company shall carry out accounting and compile financial statements in line with relevant State regulations.
If the financial statements released by the company to the investors in foreign-oriented stocks for domestic listing should be readjusted as required by the accounting rules of other countries or regions,explanations shall be given on the relevant differences.
Article 16 The company that issues foreign-oriented stocks for domestic listing shall disclose information to the public and write into itsarticles of association the venue, form and other specific matters concerning such disclosure.
Article 17 The information-disclosing documents of the company issuing foreign-oriented stocks for domestic listing shall be produced in the Chinese language. If copies in a foreign language are necessary, a commonly used foreign language shall be used. If different interpretations of these Chinese and foreign copies arise, the Chinese copy shall prevail.
Article 18 The company that issues foreign-oriented stocks for domestic listing shall entrust a domestic securities organization set up with approval from the People's Bank of China and acknowledged by the Management and Supervision Committee to serve as its principal underwriter or one of its principal underwriters.
Article 19 The company that issues foreign-oriented stocks for domestic listing shall open a foreign exchange account with a domestic bank qualified to handle foreign exchange business. Matters concerning the opening of such an accountant shall be handled in line with relevant State regulations on the management of foreign exchanges.
The principal underwriter that underwrites foreign-oriented stocks for domestic listing shall transfer, with the time limit set in the underwriting agreement, the funds it raises into the foreign exchange account of the company issuing the foreign-oriented stocks for domestic listing.
Article 20 Agency transactions of foreign-oriented stocks for domestic listing shall be handled by securities organizations set up with approval from the People's Bank of China and acknowledged by the Management and Supervision Committee.
Article 21 Shareholders of foreign-oriented stocks for domestic listing can entrust agents to exercise their rights as shareholders. The agent exercising the right of a shareholder on behalf of this shareholder shall produce valid documents verifying its qualifications.
Article 22 The equity holder of foreign-oriented stocks for domestic listing can register its shares in the name of a nominal holder.
The equity holder of foreign-oriented stocks for domestic listing shall disclose information about changes in the ownership of its shares in accordance with law.
Article 23 The trading, custody, liquidation and settlement, transfer,and registration shall abide by laws, administrative decrees and relevant rules of the Securities Committee of the State Council.
Article 24 With approval from the Securities Committee of the State Council, foreign-oriented stocks for domestic listing and their derivative forms can be circulated and transferred in foreign countries.
The derivative forms as referred to in the previous clause refer to stock warrants and overseas stock deposits.
Article 25 The company that issues foreign-oriented stocks for domestic listing shall use Renminbi to calculate and announce the dividends and other items its pays to shareholders and pay them in foreign exchanges.The management of the capital funds raised by the company and the foreign exchanges needed by the company to pay dividends and other items shall be handled according to State regulations on the management of foreign exchanges.
If it is written into the company's articles of association that other organizations shall be entrusted to exchange currencies for payments to shareholders, the case shall be handled according to stipulations of these articles of association.
Article 26 The dividends and other incomes from the foreign-oriented stocks for domestic listing can be remitted abroad after payment of taxes in accordance with law.
Article 27 The Securities Committee of the State Council can work out implementing rules in line with these Regulations.
Article 28 These Regulations shall take force on the date of their promulgation. The Rules of Shanghai Municipality on the Management of Special Renminbi Stocks promulgated by the People's Bank of China and the Shanghai Municipal Government on November 22, 1991 and the Provisional Regulations of Shenzhen City on the Management of Special Renminbi Stocks promulgated by the People's Bank of China and the Shenzhen City People's Government on December 5, 1991 shall be nullified on the same day.