Laws of the People's Republic of China

the Ministry of Commerce

Order of the Ministry of Commerce of the People's Republic of China

No. 24

Measures for the Administration of Auctions, which were deliberated and adopted at the 14th executive meeting of the Ministry of Commerce on November 15, 2004, are hereby promulgated and shall come into force as of January 1, 2005.

Bo Xilai, the Minister of Commerce

December 2, 2004

Measures for the Administration of Auctions

Chapter I General Provisions

Article 1

With a view to standardizing auction activities, maintaining the order of the auction market and promoting the opening-up and healthy development of the auction sector, the present Measures are formulated according to the Auction Law of the People's Republic of China (hereinafter referred to as the "Auction Law") and other laws, administrative regulations and rules concerning foreign investment.

Article 2

The present Measures shall be applicable to auction activities by auction companies within the territory of the People's Republic of China.

All kinds of for-profit auction activities shall be conducted by lawfully incorporated auction companies.

Article 3

The "auction company" referred to as in the present measures shall mean a limited liability company or a joint stock limited company incorporated in China to engage in auction activities.

Article 4

The Ministry of Commerce shall be the competent department of auction sector and shall supervise and regulate the auction sector throughout the country.

The competent departments of commerce of the people's governments of all provinces, autonomous regions and municipalities directly under the Central Government (hereinafter referred to as the "competent department(s) of commerce at the provincial level") and of the cities divided into districts (hereinafter referred to as the "competent department(s) of commerce at the city level") shall supervise and regulate the auction sector in their respective administrative regions.

Article 5

When undertaking auction activities, auction companies must accord with the Auction Law and other relevant laws, administrative regulations and rules and observe the principles of openness, impartiality, fairness and good faith.

Chapter II Establishment, Change and Termination of Auction Companies

Article 6

To apply for the establishment of an auction company, the investor must have a good credit without records of any act in violation of laws, administrative regulations or rules.

Article 7

Anyone, who applies to establish an auction company, must meet the following requirements:

(1)

having registered capital of at least one million yuan;

(2)

having its own name, organizational structure and articles of association;

(3)

having a fixed business place ;

(4)

having at least three staff members who are qualified to engage in the auction sector, of which there must be at least one auctioneer; and having full-time or part-time personnel who are qualified to engage in the sector closely related to its principal business;

(5)

having its auction rules according with the relevant laws, administrative regulations and the present Measures; and

(6)

conforming to the planning of the competent department of commerce for the development of the auction sector.

Article 8

To apply for the establishment of an auction company, one must submit the following materials:

(1)

a written application;

(2)

the articles of association and auction rules;

(3)

a Notice of Advance Approval of Corporate Names as issued by the administrative department for industry and commerce;

(4)

the resume and valid ID certificate of the person to be the legal representative;

(5)

the qualification certificate of the auctioneers to be employed for the practice of auction business and relevant qualification certifications of other staff members to be employed; and

(6)

a certificate of title to or a contract of tenancy for the fixed place of business.

Article 9

When conducting auction sales of cultural relics, every auction company shall comply with the laws and administrative regulations concerning such auctions.

Auction sales of confiscated articles and articles seized for payment of taxes or fines by administrative organs of the state, confiscated articles and articles seized for payment of fines or fines by the people's courts, recovered articles that cannot be returned to their owners and other special state-owned assets shall be conducted by auction companies that have corresponding auction qualifications. The specific requirements for such qualifications shall be determined by the competent departments of commerce at the provincial level in conjunction with the departments concerned in the light of the principles of standard administration and competitive selection, which shall be submitted to the Ministry of Commerce for archival purposes.

Article 10

The name of an auction company shall conform to the provisions on the registration and control of corporation names, and shall contain the word "auction" as a description of the trade that the company engages in.

Article 11

To apply for the establishment of a branch, an auction company shall meet the following requirements.

(1)

the establishment of a branch shall accord with the planning for the development of the auction sector;

(2)

the company shall have passed the annual inspection;

(3)

the registered capital of the company shall be not lower than 5 million yuan and be paid in full amount; and the company shall appropriate to each of its branches at least a million yuan of cash or in kind;

(4)

the branch to be set up shall have at least two staff members who are qualified to engage in the auction sector and shall have full-time or part-time personnel who are qualified to engage in the sector closely related to its principal business;

(5)

the branch to be set up shall have a fixed place of business; and

(6)

the company shall have engaged in the auction business for at least three years, make profits during the recent two successive years and have had a total auction turnover of not less than 50 million yuan for the last year; or the company shall have had a total auction turnover of not less than 200 million yuan for the last year.

Article 12

To apply for the establishment of a branch, an auction company must submit:

(1)

an application report for the establishment of a branch;

(2)

a duplicate of the business license of the company as a business corporation;

(3)

the annual financial statements of the company for the last two years as audited by an accounting firm;

(4)

the resume and valid ID certificate of the person to be in charge of the branch;

(5)

the qualification certificate for the practice of auction business of the person to be employed as an auctioneer and the corresponding qualification certifications of persons to be employed as staff members of the branch; and

(6)

a certificate of title to or a contract of tenancy for the fixed place of business.

Article 13

The following procedures shall be followed for the establishment of an auction company or a branch thereof:

The application for the establishment of an auction company or a branch thereof shall, after the examination of the local competent department of commerce at the city level, be submitted to the competent department of commerce at the provincial level for verification and issuance of an approval certificate for auction business, with which the applicant shall go through the registration formalities at the local administrative department for industry and commerce.

The competent departments of commerce at the provincial level may adopt hearing of witnesses on the establishment of an auction company or a branch thereof.

The approval certificate for auction business shall be uniformly printed by the Ministry of Commerce.

Article 14

In the case of any change in an auction company, the company must submit such change to the competent department of commerce at the provincial level for verification and for re-issuance of an approval certificate for auction business before going through the formalities of change registration with the administrative department for industry and commerce.

Article 15

The approval certificate for auction business shall automatically become invalid, in case the relevant auction company or branch thereof fails to draw a business license within six months from receipt of such certificate.

Where an auction company or a branch thereof fails to start business within six months from its establishment or has held no auction sales or has no tax certificates without justified reasons consecutively in six months after it starts business, the relevant departments shall revoke its business license and the department of commerce shall withdraw its approval certificate for auction business.

Article 16

An auction company, which is dissolved for any reason as specified in its articles of association, a resolution of its shareholders' meeting or any other reasons, or closed due to its violation of any law, administrative regulations or the present Measures or declared bankrupt according to law for its insolvency, shall be cancelled according to law by relevant departments.

Chapter III Establishment, Change and Termination of Foreign-invested Auction Companies

Article 17

Foreign-invested auction companies may engage in for-profit auction business unless it is otherwise provided for by any law or administrative regulation.

Article 18

Foreign investors, who have a considerable economic strength, advanced auction technologies and operation and management experience and extensive international auction marketing network, are encouraged to establish foreign-invested auction companies in China.

Article 19

In addition to those provided for in Article 7 hereof, the following requirements shall be met for the establishment of a foreign-invested auction company:

(1)

relevant provisions concerning the registered capital and total investment of foreign-invested enterprises shall be observed; and

(2)

the management duration of a foreign-invested auction company shall generally not beyond 30 years; in the case of one in a central or western area, the management duration shall not beyond 40 years.

Article 20

To apply for the establishment of a branch, a foreign-invested auction company shall on time take part in and have passed the joint annual inspection of foreign-invested enterprises in addition to the requirements as provided for in Article 11 hereof.

Article 21

To apply for the establishment of a foreign-invested auction company, the applicant must submit the following documents in addition to those as provided for in Article 8 hereof:

(1)

the contracts and articles of association (only the articles of association in the case of a foreign-capital auction company) and the attachments thereto;

(2)

photocopies of the credit and registration certificates of all parties to the investment ();

(3)

the audit reports of all parties to the investment for the last year as audited by an accounting firm;

(4)

a report on assessment of the state-owned assets to be invested by the Chinese investor into the Chinese-foreign equity joint venture or Chinese-foreign cooperative joint venture to be established; and

(5)

a list of persons to be the members of the board of directors of the company to be established and letters of appointment of the directors to be appointed by all parties to the investment.

To apply for the establishment of a branch, a foreign-invested auction company shall submit a capital verification report in addition to those provided for in Article 12 hereof.

Article 22

The following procedures shall be followed for the establishment of a foreign-invested auction company or a branch thereof:

The applicant shall submit its application documents as provided for in Article 20 hereof to the Ministry of Commerce, which shall, within the specified period of time from receipt of all application documents, make a decision on whether or not to approve the application. In the case of approval, the Ministry of Commerce shall issue an approval certificate for the establishment of a foreign-invested enterprise and an approval certificate for auction business, or else give an explanation.

The applicant shall go through the registration formalities at the local administrative department for industry and commerce within one month from receipt of the approval certificate for the establishment of a foreign-invested enterprise and an approval certificate for auction business.

The Ministry of Commerce may hold a hearing on the establishment of a foreign-invested auction company or a branch thereof.

Article 23

In the case of any change in a foreign-invested auction company, the company shall submit such change to the Ministry of Commerce for verification and for re-issuance of an approval certificate for auction business and an approval certificate for the establishment of a foreign-invested enterprise before going through the formalities for change registration at the administrative department for industry and commerce.

Article 24

Where a foreign-invested auction company or a branch thereof fails to start business within six months from its establishment or has held no auction sales or has no tax certificates without justifiable reasons during a consecutive period of six months after it starts business, the relevant departments shall revoke its business license and the Ministry of Commerce shall withdraw its approval certificate for auction business.

Article 25

A foreign-invested auction company, which is dissolved for any reason specified in its articles of association, a resolution of its shareholders' meeting or board of directors or any other reason, or closed due to its violation of any law, administrative regulations or the present Measures or declared bankrupt according to law for its insolvency, shall be cancelled by the relevant departments.

Chapter IV Persons Engaged in the Auction Sector and Auction Activities

Article 26

The state shall adopt a credential system to professional and technical personnel in auction sector, under which only a person who has obtained the qualification certificate to be an auctioneer and registered as an auctioneer may preside over auction sales.

The "auctioneer" referred to as in the present Measures shall mean a person who has passed the national examination for auctioneers, obtained the qualification certificate to be an auctioneer e of the People's Republic of China issued by China Auction Association with the official seals of both the Ministry of Personnel and the Ministry of Commerce affixed on it and registered as an auctioneer.

Article 27

An auctioneer may register as an auctioneer of only one auction company and may not hold a part-time post in any other auction company.

No auctioneer may lend his qualification certificate to be an auctioneer of the People's Republic of China to any other individual or entity.

Article 28

An auctioneer may change the auction company of which he has registered as an auctioneer. If he plans to do so, he shall go through the formalities of change registration with Chine Auction Association.

China Auction Association shall submit the auctioneers' registrations and change status to the Ministry of Commerce for archival purposes on a monthly basis.

Article 29

None of the following articles or the rights to property may be put on auction:

(1)

those of which the purchase and sale are prohibited by any law or administrative regulation;

(2)

those to or of which the ownership or the disposition right is in dispute not yet settled by a judicial or administrative organ; and

(3)

goods under the Customs control without Customs clearance.

Article 30

Auction companies shall conduct their auction business according to law and none of them may:

(1)

let or transfer without permission its right to engage in the auction business;

(2)

make false representations of any auction object, which would cause any loss to the purchaser;

(3)

employ any auctioneer without registering according to law or any other person to preside over an auction sale as an auctioneer;

(4)

conduct any unfair competition by maliciously decreasing the commission rate, charging a commission below the auction cost or even without charging any commission (except for charity auctions) or by offering the consignor a kickback; or

(5)

commit any other act in violation of laws or regulations.

Article 31

If the auction company finds any article or booty for which the public security organ has issued a circular for cooperative investigation, it shall immediately report that to the public security organ.

Article 32

In the case of entrusted bidding, a power of attorney and a copy of the ID certificates of both the agent and the principal shall be issued.

The power of attorney shall include the name of the agent, matters delegated and the purview and the term of the delegated authority.

Article 33

Before conducting an auction, the auction company shall conclude a written agreement with its consignor concerning the treatment of matters when no transaction has been made on the auction object and concerning the compensation for damages that might be caused due to the consignor's suspending or terminating of the auction.

Article 34

An auction company shall have a special person to take proper care of the auction objects handed over by its consignors, set up an auction object custody and shift system and take necessary security measures.

Article 35

To hold an auction sale, the auction company shall make an announcement in pursuance of the properties of the auction objects and nature of the auction sale within the time limit as provided for by the Auction Law and relevant laws or administrative regulations. The announcement shall be published in newspapers with larger circulation as designated by the competent department of commerce at the place where the auction objects are located or where the auction sale is to be held or in other media with a similar influence.

Article 36

Where the auction company ought to exhibit the auction objects before the auction sale, it shall provide convenient conditions for the competitive bidders to examine such auction objects and offer the relevant materials at the same time.

The auction objects shall be exhibited for at least two days except fresh goods or other perishable goods.

Article 37

An auction company shall be entitled to verify or require the consignor to state the source and defects of the auction object.

The auction company is obliged to state to the competitive bidders any defect of the auction object that it knows or should have known.

Article 38

Where any law, administrative regulation or rule prescribes any special requirements for the purchaser of an auction object, the auction object may be auctioned off only to persons who meet such requirements.

Where an auction object is the business qualification that needs administrative licensing according to laws, administrative regulations or rules and is transferable, the consignor shall obtain approval from the administrative organ concerned before the auction sale.

Article 39

The auction company may designate seats for biding agents on the auction spot and make a statement thereof to all bidders at the beginning of the auction sale.

Article 40

An auction sale shall be suspended under any of the following conditions:

(1)

no competitive bidder is present at the auction sale;

(2)

any third person challenges the ownership to or the disposition right of the auction object and offers a valid certificate on the spot;

(3)

the consignor has given notice in written form to the auction company before the auction sale on reasonable grounds;

(4)

the auction sale cannot be carried out for the time being due to the occurrence of any accident; or

(5)

any other circumstances under which the auction sale ought to be suspended according to law.

The suspension of an auction sale shall be declared by the auction company. The auction sale shall be resumed upon the elimination of the reasons for suspension.

Article 41

The auction sale shall be terminated under any of the following conditions:

(1)

the people's court, an arbitral organ or an administrative organ concerned has determined that the consignor has no disposition right of the auction object and has given notice of it to the auction company;

(2)

the auction object is ascertained to be a booty;

(3)

the auction sale cannot be carried out due to the occurrence of any force majeure or accident;

(4)

the auction object has been damaged or perished before the auction sale;

(5)

the consignor has given notice in written form of the termination of auction sale to the auction company before the auction sale; or

(6)

any other circumstances under which the auction sale ought to be terminated according to law.

The termination of an auction sale shall be declared by the auction company. Where the consignor requests to proceed with the auction sale after the termination of it, he shall go through the auction formalities again.

Article 42

In the case of an auction sale held within the territory of the People's Republic of China jointly by a foreign-invested auction company and a Chinese-capital auction company, the auction object shall accord with the relevant provisions of laws, administrative regulations and the present Measures.

Chapter V Supervision and Administration

Article 43

The Ministry of Commerce shall organize the formulation of relevant rules and policies on auction sector, guide all regions in working out their respective plans for the development of auction sector and setting up supervision and verification, industry statistic and credit management systems for auction sector, and shall be responsible for the promotion and administration of the use of foreign capital and provide operation guidance to self-disciplinary organizations in the auction sector.

Article 44

The competent departments of commerce at the provincial level shall be responsible for the formulation and implementation of the plan for the development of the auction sector for their respective regions and submit the plan to the Ministry of Commerce for archival purposes.

The competent departments of commerce at the provincial level shall set up their respective supervision and verification, industry statistic and credit management systems governing auction companies and persons engaging in the auction sector, shall be responsible for the verification and licensing of the establishment of auction companies and branches thereof and conduct administration and guidance of the local self-disciplinary organizations in the auction sector.

The competent departments of commerce at the provincial level shall create conditions for setting up a computer system interconnected with those of the local auction companies and other administrative departments, keep records of the status of supervision and inspection and the treatment of auction activities, render their supervision and verification opinions on the auction companies on annual basis, charge auction companies not up to standard to make rectifications in a specified time limit and report the verification results to the authorities concerned.

Article 45

The auction associations shall supervise the auction companies and auctioneers according to law and their respective articles of association. They shall work out their auction criterion, strengthen the self-disciplinary administration, regulate relations between their member companies and the relevant departments of the government and relations between their member companies, provide service to their member companies and safeguard the legitimate rights and interests of their member companies.

China Auction Association shall, under the guidance of the Ministry of Commerce, implement an the credit management system of auction companies throughout the country and organize the examinations, assessment and qualification certification for auctioneers.

Chapter VI Legal Responsibilities

Article 46

Any company, which engages in for-profit auction activities without a license, shall be banned according to the relevant provisions of the state.

Article 47

Where any auctioneer violates the provisions of Article 26 or 27 hereof or conceals facts and figures from or provides false information to the regulatory department or commits any other lawless act, the competent department of commerce at the provincial level may notify such lawless acts and its proposal for treatment to China Auction Association, which shall deal with the offending auctioneer according to the relevant provisions and report in written form the result of treatment to the competent department of commerce and auction association at the place of the auctioneer within 10 working days.

Article 48

Any auction company, which has caused any loss to the purchaser by violating the provisions of Article 29 hereof, shall make compensation for such damages; if such loss is attributable to the consignor, the auction company shall be entitled to recover the loss from the consignor.

Article 49

Any auction company, which violates the provisions of Article 30 (1) hereof, shall be ordered by the competent department of commerce at the provincial level to make corrections and be imposed upon a fine not exceeding 30,000 yuan.

Article 50

Any auction company, which violates the provisions of Article 30 (3) hereof, shall be given a warning and a fine at or above the amount of its illegal earnings with roof of 30,000 yuan pursuant to the severity of the circumstances; in the case of non-illegal earnings, it shall be given a fine not exceeding 10,000 yuan by the competent department of commerce at the provincial level, and make compensation for losses caused to the consignor and purchaser according to law, if any.

Article 51

Any auction company, which violates Article 30 (2) or (4) hereof, shall be punished by the relevant administrative organ according to law.

Article 52

Any auction company, which violates the provisions of Article 35 or 36 hereof by making irregular announcements or exhibitions before an auction sale, shall be given a warning in the light of the severity of the circumstances, ordered to make corrections or postpone the auction sale or given a fine not exceeding 10,000 yuan by the competent department of commerce at the provincial level.

Article 53

Where the auction company or consignor violates the provisions of Article 37 hereof by failing to state the defect of the auction object and causes damages to the purchaser, the purchaser shall be entitled to request the auction company to make compensation ; if the damages are attributable to the consignor, the auction company shall be entitled to recover the compensation from the consignor.

Where the auction company or the consignor has stated before the auction sale that they cannot guarantee the genuineness or quality of the auction object, it/he may not bear the responsibility to warrant the defects (hereafter referred to as disclaimer). However, the disclaimer shall be invalid if the auction company or the consignor knows or should have known the defect of the auction object.

Article 54

Where, after a successful bidding, the consignor fails to assist the purchaser in going through the formalities for changing certificates or licenses and ownership transfer and thus causes losses to the purchaser or to the auction company, the consignor shall be liable for such losses according to law.

The consignor shall be liable for the losses of the auction company or the purchaser according to law as caused by the suspension or termination of the auction sale as required by the consignor.

Article 55

The competent department of commerce at the provincial level or the Ministry of Commerce may withdraw its decision of approval for the establishment of an auction company or a branch thereof, if such decision has been made:

(1)

by the functionary's abusing his power or neglecting his duty;

(2)

in violation of the requirements as provided for in the Auction Law or the present Measures; or

(3)

beyond its statutory authority.

Article 56

Where any functionary of a competent department of commerce or any staff member of an auction association abuses his power, engages in malpractice for private benefit, neglects his duty, extorts or takes bribes, the person in charge who is directly responsible and other persons directly responsible shall be given an administrative punishment, or shall be investigated for assuming criminal responsibilities if a crime is constituted.

Article 57

Every functionary of competent departments of commerce shall, according to the relevant provisions on confidentiality, keep confidential the information he gets to knowwhen performing his duties as required by the relevant auction company, consignor, bidder or purchaser. In the case of any improper disclosure, he shall be dealt with according to the relevant provisions. Where the auction company believes that some materials submitted by it to the administrative organ contain any confidential information, it shall mark the "confidential" on the materials and have them sealed.

Chapter VII Supplementary Provisions

Article 58

The introduction of auction sales into commodity transaction markets, such as the agricultural product wholesale market and motor vehicle transaction market, and the administration of auction sales on the Internet shall be conducted by referring to the present Measures in principle, for which the specific measures shall be separately formulated.

Article 59

All wholly state-owned auction companies shall be reorganized according to the relevant provisions of the state.

Article 60

The power to interpret the present Measures shall remain with the Ministry of Commerce.

Article 61

The present Measures shall come into force as of January 1, 2005.