(Guo Ban Fa  No.62, issued on December 23, 2005)
The people’s governments of all the provinces, autonomous regions and municipalities directly under the Central Government, all the ministries and commissions of the State Council and all the institutions directly under the State Council:
The revised “Company Law of the People’s Republic of China” (the Company Law) and “Securities Law of the People’s Republic of China” (the Securities Law) were approved at the 18th session of the Standing Committee of the Tenth National People’s Congress on October 27, 2005, and they shall go into effect as of January 1, 2006. The Company Law and the Securities Law are essential for building and consummating the socialist market economy system, and for regulating operation of the capital market. To ensure their implementation, upon approval by the State Council, the relevant issues are hereby notified as follows:
1. Be aware of the great significance of implementing the revised Company Law and Securities Law. Based on the practice in recent years and according to the changes also rules of the current economy, the revised Company Law and Securities Law include many adjustments, supplementations and modifications to the former ones, and also make consummation and innovation for relevant systems. The revision of the two laws is the objective need, is conducive to deepening the economic system reform and promoting economic development, and is beneficial to improvement of the socialist market economy system. Therefore, Implementation of the two revised laws is of great significance for perfecting the market entity, regulating and promoting development of companies, protecting legitimate rights and interests of companies, shareholders, creditors and employees, improving quantity of listed companies, and ensuring stable and sound development of the capital market. The local people’s governments at all levels and relevant departments of the State Council shall attach great importance to the implementation of the revised Company Law and Securities Law, and shall do the relevant work earnestly.
2. Carefully study and propagandize the laws, and strengthen the business training. The revised Company Law includes comprehensive modifications to a company’s registered capital system, corporate governance structure, protection of shareholder’s rights, financial accounting system, merger and division systems, etc., and it also makes additional regulations on personality denial of legal person, relationship norms, accumulative voting and independent director, etc. While the revised Securities Law improves the internal control system of securities companies, strengthens supervision of the securities regulatory authorities, perfects the legal liabilities of securities violations, and adds such new systems as the sponsor system of securities issuance and listing, the system for protection funds of securities investors and the advance disclosure of securities issuance. Those are in favor of steadily propelling comprehensive operation of financial services, creating securities derivatives, promoting securities and futures trading, expanding legal channels for capital’s entry into market, and gradually making margin purchase and short sale. Extensive and in-depth study and propaganda are necessary for the whole society’s understanding of such system innovation. The Legislative Affairs Office of the State Council, P.R. China shall formulate a specific study and propaganda scheme with relevant parties, strengthen the training of relevant personnel at forums and symposiums, transform governmental functions and working methods in time, and act according to law. The news media shall publicize the revision background, main contents and implementation significance of the Company Law and the Securities Law, and the effective measures taken by all localities and departments, as well as make proper guide for hot spots of society.
3. Do a good job in combination of the revised Company Law and Securities Law with the former ones. The revision covers adjustments to relevant administration systems and department responsibilities, so good coherence is needed for smooth administration.
Firstly, the work of company registration shall be adjusted in time. According to the revised Company Law and Securities Law, the establishment of a company limited by shares is free from approval by the departments authorized by the State Council or relevant provincial people's government, while public shares issuance needs to be approved by the China Securities Regulatory Commission (CSRC). The State Administration for Industry & Commerce of the People’s Republic of China (SAIC) shall accordingly amend relevant regulations of company registration and strengthen the administration.
Secondly, strict administration on securities issuance shall be ensured. The revised Securities Law requires compulsory approval from securities regulatory authorities of the State Council or other departments authorized by the State Council for public securities issuance. According to the actual situation, departments authorized by the CSRC and the State Council shall study and formulate relevant regulation, specify approval conditions and procedures, and establish corresponding securities registration, custody, clearing and settlement systems. Before relevant supporting provisions are promulgated, over issuance of securities shall be prohibited. The CSRC will only accept applications for IPO and listing, without regard to other applications for public shares issuance temporarily, and the industrial and commercial registration authorities at all levels will not accept corresponding registration application, either. As for such behaviors as purchasing and selling illegally issued securities, and providing services like agency trade and transfer custody of illegally issued securities, relevant departments such as the CSRC, the Ministry of Public Security of the People’s Republic of China and the SAIC, together with local people's governments, shall investigate and deal with them according to law.
Thirdly, administration of securities trading shall be intensified. According to the revised Securities Law, the legally and publicly issued securities may not only be listed and traded at the Shanghai Stock Exchange and the Shenzhen Stock Exchange, but also be transferred at other securities trading sites approved by the State Council. Based on the past experiences, the unified leadership of the State Council and the organized, stepwise and steady promotion are musts for construction of the multi-level capital market system. Without authorization by the State Council, the local people’s governments at all levels and relevant departments of the State Council shall not establish securities trading sites, or provide securities transfer service through the existing trading platforms. The CSRC and relevant departments of the State Council shall study and formulate a scheme for construction of the multi-level capital market system, and then put it into practice after approval by the State Council.
Fourthly, organization and leadership of relevant implementation shall be strengthened to formulate or clear off relevant administrative regulations and rules. The local people’s governments at all levels and relevant departments of the State Council shall intensify the organization and leadership of relevant implementation and also strictly enforce the revised Company Law and Securities Law; meanwhile, they shall not only perform their respective duties, but also coordinate and cooperate with others. The CSRC and relevant departments of the State Council shall collaborate on implementation of law enforcement and supervision over the capital market; they shall prevent and resolve market risks through effective measures, and thus create good environment for the development of the capital market together. Such authorities in charge of supervision and management of state-owned assets as the State-owned Assets Supervision and Administration Commission of the State Council shall further improve the governance structures of wholly state-owned companies and state holding companies according to the revised Company Law, and actively promote the shareholding system reform of state-owned enterprises.
Relevant departments of the State Council shall highlight the drafting of relevant administrative regulations regarding regulation of listed companies and securities companies, risk disposal of securities companies and regulation of financial holding companies according to the revised Company Law and Securities Law, and submit the draft to the State Council for discussion as soon as possible. Those departments shall also put forward relevant scheme of securities credit trading system at an appropriate time to create favorable conditions for capital’s legal entry into market. The Legislative Affairs Office shall organize relevant departments to clear off the existing administrative regulations and rules related to the Company Law and Securities Law. In case of any inconsistency with the revised Company Law and Securities Law, amendment or abolition shall be made. The SAIC and other departments shall revise such administration regulations as the “Regulations of the People's Republic of China on Administration of Registration of Companies”, and completely clear off the regulations related to company registration. The Ministry of Finance shall further revise and perfect the financial system for enterprises and the uniform accounting system of the state. The National Development and Reform Commission and such departments and units as the People's Bank of China and the CSRC shall perfect the legal system of corporate bonds. The Legislative Affairs Office, the Ministry of Public Security, the SAIC, the CSRC and other departments and units shall actively coordinate with relevant parties in amending relevant clauses of company and securities crimes in the Criminal Law of the People's Republic of China, or making legislative and judicial interpretation about the clauses, thus adjusting relevant provisions for prosecution standards in economic crime cases as soon as possible. The people’s governments of all the provinces, autonomous regions and municipalities directly under the Central Government shall also perfect relevant government regulations according to the revised Company Law and Securities Law.
After receiving this notice, all localities and departments shall formulate and take specific measures according to actual situations. In case of significant issues and problems during the implementation, timely reporting shall be made to the State Council.