Circular of MOC and CSRC concerning the Relevant Issues on the Administration of Foreign Investment in the Share Trading Reform of Listed Companies

The competent commerce departments of all provinces, autonomous regions, municipalities directly under the Central Government and the Xinjiang Production and Construction Corp, the securities regulatory bureaus of China Securities Regulatory Commission (hereinafter referred to as the CSRC) in all regions, Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation Limited:


 With a view to carrying into effect the requirements of the Guiding Opinions of China Securities Regulatory Commission on the Share Trading Reform of Listed Companies (Zheng Jian Fa [2005] No. 80), promoting the share trading reform in an active and stable manner, pursuant to the relevant laws and regulations on foreign investment as well as the relevant provisions on foreign-funded joint stock companies, we hereby notify the relevant issues concerning the administration of foreign investment in the share trading reform as follows:


 I. The procedures for change of equity as involved in the share trading reform of an A-share listed company that holds the approval certificate of foreign-funded enterprises (hereinafter referred to as a foreign-funded listed company)


 The board of directors of a foreign-funded listed company shall directly file its share trading reform scheme with the Ministry of Commerce for record within 2 workdays after the notice on holding the relevant shareholders’ meeting is issued. After a share trading reform scheme is adopted by resolution at the relevant shareholders’ meeting, the board of directors of a foreign-funded listed company shall, within 1 workday, report the following documents through the competent commerce department of a province, autonomous region, municipality directly under the Central Government, city specifically designated in the state plan or the Xinjiang Production and Construction Corp (hereinafter referred to as the provincial competent commerce department ):
 (1) An Application;
 (2) Voting result at the relevant shareholders’ meeting;
 (3) A statement on the share trading reform;
 (4) The sponsor’s opinions;
 (5) The legal opinions;
 (6) If any state share or state corporation share is involved, the approval documents of the administrative department of state-owned asset administration on the disposal of the relevant non-tradable shares shall be submitted;
 (7) If a pledge is set on any share to be disposed of, the letter of agreement produced by the relevant pledgee shall be submitted; and
 (8) Other document as prescribed by any law or regulation.


 The provincial competent commerce department shall, within 2 workdays as of the date of receipt of the application documents, transfer them to the Ministry of Commerce, which will solicit the opinions of the CSRC within 2 workdays as of the date of receipt of the documents. The CSRC shall make a confirmation of no demurral in writing to the Ministry of Commerce within 2 workdays. The Ministry of Commerce shall, within 5 workdays, make a reply on the change of equity of a foreign-funded listed company according to law.


 II. The enterprise nature of and enterprise treatment for a foreign-funded listed company after a share trading reform
 (1) After a share trading reform scheme of a foreign-funded listed company is carried out, within the term wherein the holders of the original foreign corporate shares promise not to sell any share (hereinafter referred to as the time limit for not selling shares), a listed company will continue to hold the approval certificate of foreign-funded enterprises and enjoy the preferential treatment as given to foreign-funded enterprises. As is the general principle, any change in proportion of foreign shares as incurred from the share trading reform will not have any impact on the relevant existing policies of the listed company.
 (2) If, upon the expiration of the time limit for not selling shares, the holders of the original foreign corporate shares sell no shares, the listed company will continue to hold the approval certificate of foreign-funded enterprises and enjoy the preferential treatment as given to foreign-funded enterprises. Or
 (3) If, upon the expiration of the time limit for not selling shares, any shareholder of the original foreign corporate shares sells any share thereof:
 a) Where the proportion of foreign shares of a listed company is no less than 25% after the selling of foreign shares, the listed company will continue to hold the approval certificate of foreign-funded enterprises and enjoy the preferential treatment as given to foreign-funded enterprises.
 b) Where the proportion of foreign shares of a listed company is no less than10% but nor more than 25%, as is incurred from selling of the original foreign shares by any holder, the listed company will continue to hold the approval certificate of foreign-funded enterprises. For the preferential treatment as given to foreign-funded enterprises that the company has enjoyed, the relevant formalities shall be handled in accordance with the relevant provisions of such departments of taxation, Customs and foreign exchange administration. Or
 c) Where the proportion of foreign shares of a listed company is less than 10%, as is incurred from selling of the original foreign shares by any holder, the listed company shall, within 3 workdays, go through the relevant alteration formalities with the relevant departments such as the Ministry of Commerce and the administrative department for industry and commerce and may not hold the approval certificate of foreign-funded enterprises any more.


 III. The strategic investment made by overseas investors in listed companies


 According to the Guiding Opinions of China Securities Regulatory Commission on the Share Trading Reform of Listed Companies and the relevant provisions on merger and acquisition by foreign capital, an overseas investor is allowed to make strategic investment in a listed company. Where a listed that has gone through a share trading reform needs to attract any strategic investment from abroad for the implementation of its development strategy, upon the approval of the relevant departments such as the Ministry of Commerce, an overseas strategic investor may make purchase of shares of A-share of a listed company and promise to hold a certain proportion (as is a general principle, the International Monetary Fund’s definition on foreign direct investment shall be referred to; in the case of any clear provision thereon, it shall prevail). As to the procedures for examination and approval of the purchase of shares of a listed company by an overseas investor as well as the management of share accounts, the measures for the administration thereof shall be separately formulated by the Ministry of Commerce and the CSRC.


 IV. An A-share listed company with H-share or B-share that holds the approval certificate of foreign-funded enterprises may continue to hold the approval certificate of foreign-funded enterprises after the share trading reform.


 V. After the share trading reform, a foreign-funded listed company shall report any change of H-share proportion to the Ministry of Commerce as required. The China Securities Depository and Clearing Corporation Limited shall provide the relevant services of data inquiry according to the requirements of the Ministry of Commerce.


 VI. Any change of equities of a foreign-funded listed company that hasn’t gone through the share trading reform for the time being shall be handled in light of the relevant provisions in force.


 VII. The power to interpret the present Circular shall reside in the Ministry of Commerce and the CSRC.


 VIII. The present Circular shall go into effect as of the date of promulgation.

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