(June 20, 1997 Guo Fa [1997] No.21)
Since 1992, the State Council and its securities regulatory departments have specified policies for share issuance and overseas listing in a series of regulations and official documents. However, lately some institutions and enterprises have entailed a negative effect as they violated the regulations by transferring domestic assets in various forms for overseas listing shares without approval. Overseas shares issuance and listing, closely related to relevant policies, must be carried out step-by-step in an organized manner according to the relevant s tate regulations. In view of the current problems in overseas listing and for the purpose of further strengthening the administration to ensure the implementation of overseas shares issuance and listing in orderly way , relevant provisions are hereby notified as follows：
1. Any overseas listed company registered in a foreign country or controlled by a Chinese -funded shareholder ( including in the case where a Chinese -funded shareholder is the largest one, the same below ) ( hereinafter referred to as "an overseas Chinese-holding listed company" ) shall subject itself to the supervision and regulation of the local securities supervisory and regulatory organ when engaging in activities such as spin-off listings and issuance of additional stock. However, the share-holding unit inside the country of the Chinese -funded shareholder should report the case to the China Securities Regulatory Commission (CSRC) for the record afterwards and shall strengthen the supervision and administration over the stock ownership.
2. Local laws are applicable to a Chinese -funded non-listed company or a Chinese-holding listed company which applies for overseas shares issu ance and listing with its overseas assets or its domestic assets which are formed from its overseas assets invested in China and have been in its actual possession for over three years. However， it domestic share-holding unit should obtain consent in advance from the provincial people's government or the competent department under the State Council based on its subordination thereto. For domestic assets in its possession for not more than three years, the company shall not apply for overseas share issuance and listing. In the case of special requirements, a report shall, upon submission to the CSRC for verification, be subject to the examination and approval of the State Council’s securities commission. Upon completion of the listing, the domestic share-holding unit should report the relevant details to the CSRC for the record.
3. In case that assets of a domestic enterprise are to be transferred to an overseas Chinese -funded non-listed company or an overseas Chinese-holding listed company by purchase， stock exchange， transfer or by any other means for overseas shares listing, or that domestic assets are to be first transferred to an overseas Chinese -funded non-listed company and then injected into an overseas Chinese-holding listed company for overseas shares listing，the domestic enterprise or the domestic share-holding unit of the Chinese -holding shareholder should obtain in advance consent from the provincial people's government or the competent department under the State Council based on its subordination. And they should, upon reporting it to the CSRC for verification, be subject to the examination and approval of the State Council’s securities commission in accordance with the state industrial policies, the relevant provisions of the State Council and the total volume of the year.
4. In reiteration of the provisions of the “Circular of the State Council concerning Suspending the Purchase of Overseas Enterprises and Further Strengthening the Administration of Overseas Investment” ( Guo Fa [1993] No.69 ) , domestic institutions and enterprises are prohibited from listing by buying shell through purchasing share-holding rights of overseas listed companies.
5. Violation s of the aforesaid provisions shall be punished for unauthorized shares issuance . A dministrative penalties shall be imposed by the department concerned on the p ersons - in - charge of the competent departments for such violations. The p ersons - in - charge of a violating unit and other persons with direct responsib ilities shall be removed from their posts or even expelled by superior authorities . Those who commit crimes shall be transferred to judicia l authorities according to law for criminal liabilities . Violating units, intermediary agencies involved as well as other violators shall be penalized by the CSRC in accordance with the provisions of the “Provisional Regulations on Administration of Share Issuance and Trading” and other relevant provisions.
All localities and departments shall, in strict accordance with the provisions in this circular, take solid and effective measures to exercise supervision on its subordinate enterprises for the earnest implementation of the relevant state laws and policies. Domestic enterprises should take direct listing of shares as the main form in which they seek funds on the overseas securities market. The State Council’s securities commission shall keep its guidance on this work and select state-owned enterprises which conform to the state industrial policies and overseas listing requirements for direct overseas listing of shares.
This circular shall come into effect as of the promulgation date.
