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| 2004010720040107China Securities Regulatory Commissionepdf/e03335.pdfIlisted companies, controlling rights, acts of transferring, share right trusteeship, company trusteeshipe03335Notice of China Securities Regulatory Commission on the Relevant Issues concerning the Regulation of Acts of Transferring Actual Controlling Rights of Listed CompaniesZhengJianGongSiZi [2004] No.1January 7, 2004All the listed companies:Since the promulgation of the Regulations on the Takeover of Listed Companies (hereinafter referred to as the "Takeover Regulations"), the corporate control market for listed companies has developed further, and the takeover of listed companies is more transparent and standardizing, which has accelerated the innovation of the merger and acquisition (M&A) market. Because the transfer of the actual controlling right of listed companies concerns the sound management, sustainable development and the rights and interests of the wide minority shareholders, touches the normal order of the securities market, the Takeover Regulations have prescribed that the controlling shareholders (including other actual controlling parties) and purchasers shall have the fiduciary duty to listed companies and other shareholders, and are prohibited from impairing the legal rights and interests of the company being taken over and other shareholders through the takeover of listed companies.But recently, the controlling shareholders of some listed companies have transferred the voting rights of the shares they hold in advance to purchasers in the name of "share right trusteeship" or "company trusteeship" through concluding share transfer agreements with the purchasers or by other means violating legal procedures, which leads to the purchasers' actual control of the listed companies through controlling the voting rights of relevant shares before they become the shareholders of the listed companies. Under such circumstances, the controlling shareholders do not perform their duties of a controlling shareholder, and the purchasers are in actual control of the listed companies but do not bear the responsibility of a controlling shareholder, as a result, the management of listed companies is in an terribly uncertain state, and that provides conveniences for purchasers to willfully infringe upon the rights and interests of listed companies and other shareholders. Such acts have violated the relevant provisions of the Company Law, the Takeover Regulations and the Guidelines for the Governance of Listed Companies on the takeover of listed companies.With a view to further regulating the act of transfer of actual controlling right of a listed company, safeguarding the rights and interests of the listed companies and minority investors, and maintaining the normal order of the securities market, we hereby make the following notice on the relevant issues:I.The transfer of controlling right of a listed company shall be made normatively according to the relevant provisions of the Takeover Regulations, and since the date of the promulgation of this Notice, no controlling shareholder of a listed company may transfer the controlling right of the company in disguised form by way of so called "share right trusteeship" or "company trusteeship" and any other means violating legal procedures and evading legal obligations.II.In case the takeover of a listed company is made by agreement, the controlling shareholders and the purchasers shall stipulate clearly in the takeover agreement the rights and duties of the two parties during the transition period after concluding the takeover agreement and before transferring the relevant shares, and shall take effective measures to ensure the sound transition of the management of the listed company during the period of transferring the controlling right.During the transition period, the controlling shareholders or purchasers may not impair the rights and interests of the listed company and the minority shareholders thereof by the takeover act, and they shall also observe the following provisions:1.The controlling shareholders and the purchasers shall keep the independence of the listed company strictly according to the requirements of the Guidelines for Governance of Listed Company, and improve the corporate governance. Before the transfer of the relevant shares, the controlling shareholders shall seriously perform their duties of a controlling shareholder, and the purchasers shall seriously perform the fiduciary duties to the company being taken over and other shareholders according to the provisions of the "Takeover Regulations".2.During the transition period, the purchasers are prohibited from re-electing the board of directors of the listed company upon the suggestion of the controlling shareholders in principle; in case there are sufficient reasons to re-elect the board of directors, the directors from the purchasers shall not exceed one third of the members of the board of directors.3.During the transition period, the controlling shareholders and the purchasers shall ensure that the ordinary production and management of the listed company not be influenced. No purchasers may pledge the share right of the listed company. The listed company is prohibited from financing again, or conducting acts of major purchase, selling assets or great investment, unless there are otherwise circumstances under which the purchasers have to save the listed company facing serious financial difficulties.4.The listed company and its controlling shareholders, purchasers shall strictly observe the provisions of the Notice on Some Issues concerning Regulating the Funds between Listed Companies and Associated Parties and Regulating the Listed Companies' Provision of Guaranty to Other Parties (No.56 [2003] of China Securities Regulatory Commission). The listed company is prohibited from providing guaranty to purchasers and the associated parties, and the purchasers and the associated parties are prohibited from impropriating the capital and assets of the listed company.5.After completing the takeover act, the purchasers shall make self-examination, specifying the adjustment of assets, personnel, businesses and management of the listed company, and the normative operation of the company during the transition period, and whether there are circumstances of impairing the interests of the listed company such as providing guaranty or loans to the purchasers and the associated parties, etc. by the listed company.The board of directors of a listed company shall issue opinions expressly on the self-examination report of the purchasers, and engage a certified accountant firm, which has the qualifications of practicing securities business, or financial counselors to make special examination on the business status of the listed company during the transition period, and issue opinions on the comparison of the outstanding achievements of the company before and after the transfer of actual controlling right, whether the purchasers have failed to pay off the debts owed to the company, or failed to rescind the guaranty provided by the company or other circumstances of impairing the interests of the company; in case of any of the above-mentioned circumstances, the board of directors of the listed company shall take effective measures to protect the interests of the listed company.The self-examination report of the purchasers and the opinions of the board of directors shall be publicized and submitted to the detached offices of China Securities Regulatory Commission at the place where the listed company is located.III.Where any act of transfer of the actual controlling right of a listed company by the controlling shareholders in violation of legal procedures occurs before the promulgation of this Notice, it shall be corrected within 6 months after the promulgation of this Notice. If the takeover of the listed company is to be carried on continually by agreement, it shall be regulated in accordance with the provisions of Article 2 of this Notice. If the board of directors has been re-elected, the directors of the listed company shall earnestly perform their fiduciary duties, and handle the relevant proposals cautiously. And all the proposals of the board of directors shall be regarded as special proposals and approved by over one third of the directors, and the independent directors shall issue their opinions separately.Where a purchaser fails to reveal the Report on the Takeover of Listed Companies in accordance with the provisions of Takeover Regulations, it shall make supplementary information disclosure within 2 months after the promulgation of this Notice, and elaborate on the purpose of the takeover, the adjustment of the purchasers on the assets, businesses and personnel of the listed company, the follow-up plan, and the handling of the formalities for share rights transfer, etc..After making correction or regulation according to the provisions of the present Notice, the purchasers and the board of directors of the company taken over shall issue self-examination report and the check-up opinions by referring to the provisions of item (5), Article 2 of this Notice, and submit them to the detached offices of China Securities Regulatory Commission at the place where the listed company is located and publish them.IV.Where the acts of transferring the actual controlling right of a listed company by the controlling shareholders violate legal procedures, which have occurred before the promulgation of the present Notice, and which the controlling shareholders of the listed company and the purchasers fail to rectify or regulate according to the present Notice, China Securities Regulatory Commission shall order them to rectify pursuant to the Takeover Regulations and the relevant provisions of Document No.56 (2003) of China Securities Regulatory Commission.V.The provisions of the present Notice shall be applicable to the companies other than those which entrust the state-owned assets management entities to manage the state-owned share rights of a listed company due to the authorized management implemented by the department of state-owned assets management.VI.The present Notice shall enter into force as of the date of its promulgation. |
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