发布文号: No. 20 of China Securities Regulatory Commission
The branch offices of China Securities Regulatory Commission in all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning, Shanghai Stock Exchange and Shenzhen Stock Exchange:
In order to further implement the jurisdiction monitoring accountability system for listed companies and the Measures for the Administration of the Takeover of Listed Companies, this Commission has formulated the Rules for the Supervision over the Takeover of Listed Companies and the Relevant Equity Changes, which are hereby promulgated to you, please implement them accordingly. The supervisory work over the takeover of listed companies and the relevant equity changes shall be governed by the Rules for the Supervision over the Takeover of Listed Companies and the Relevant Equity Changes, and other matters involved in the Rules for the Supervision over the Takeover and Reorganization of Listed Companies as promulgated in 2004 shall still be implemented according to the former provisions.
February 5, 2007
Rules for the Supervision over the Takeover of Listed Companies and the Relevant Equity Changes
In order to regulate the takeover of listed companies and the relevant equity changes, adapt to the major alteration of this Commission's supervisory mode under the new tendency of securities market in the all-round circulation, and boost the market-based merger and reorganization, these Rules are formulated according to the Measures for the Administration of the Takeover of Listed Companies （Order No. 35 of China Securities Regulatory Commission）, the Supervisory Duties of CSRC Attached Offices （No. 86 [2003] of China Securities Regulatory Commission） and the Provisions on the Jurisdiction Monitoring Accountability System for Listed Companies （No. 42 [2005] of China Securities Regulatory Commission）.
I. Supervisory Duties
i. Listed Company Supervisory Department under China Securities Regulatory Commission （CSRC）
The Listed Company Supervisory Department under the CSRC （hereinafter referred to as the Listing Department） shall be responsible for formulating rules and policies for the takeover of listed companies and the relevant equity changes, examining and approving the alteration in controlling shares of 30% or more of a company as well as tender offers, taking supervisory measures for the illegal and irregular acts involved in the takeover of listed companies and the relevant equity changes, and requesting relevant authorities to impose legal liabilities on violators; guiding stock exchanges to formulate detailed rules for the implementation of supporting businesses, organizing stock exchanges to perfect the construction of the shareholder information disclosure system of listed companies; organizing the credit archive sharing system for purchasers, controlling shareholders, actual controllers, financial advisors and other professional institutions of listed companies, and formulating relevant detailed implementation rules; urging and inspecting the performance of duties by CSRC branch offices and stock exchanges; organizing, guiding and coordinating the supervisory work of CSRC branch offices and stock exchanges over the takeover of listed companies; formulating the financial consultancy rules for merger and reorganization businesses, putting forward specific supervisory requirements for financial advisors and their practitioners, and carrying out the overall coordination with other CSRC departments and the Securities Association of China.
ii. Stock Exchanges
Stock exchanges shall be responsible for the supervision over information disclosure, market organization and the offering of relevant technical services for the takeover of listed companies and the relevant equity changes, lawfully formulating and promulgating the rules for supporting businesses, formulating internal guidelines, carry out real-time monitoring over the securities trading of relevant listed companies, taking supervisory measures for those problems encountered in the supervisory work and reporting them to the Listing Department, recording down the supervisory conditions over purchasers, controlling shareholders, actual controllers, financial advisors and other professional institutions of listed companies in their credit archives, linking with the credit archive system of the Listing Department, and doing a good job in collection and sort-out of the basic data regarding the takeover of listed companies and the relevant equity changes.
iii. CSRC Branch Offices
As the frontline regulator for the takeover of listed companies and the relevant equity changes, CSRC branch offices shall focus on the supervision over the continuous supervisory and guiding work on the alteration in corporate controlling shares of under 30% as well as the companies whose controlling rights have been altered; and shall, before the completion of takeover, carry out on-site verifications of purchasers according to the principle of prudent supervision or the requirements of the Listing Department; and shall, after the completion of takeover, be responsible for checking the fulfillment of continuous supervisory and guiding responsibilities by the financial advisor, and carrying out the follow-up supervision over the implementation of follow-up plans and the fulfillment of relevant commitments by the purchaser and the listed company, as well as the effects of takeover. CSRC branch offices shall, in view of the problems encountered in the supervision process, in particular, those encountered in the continuous supervision process, record down the supervisory conditions over purchasers, controlling shareholders, actual controllers, financial advisors and other professional institutions for listed companies in the credit archives, and link with the credit archive system of the Listing Department; and shall make investigations into the complaints about the takeover and the relevant equity change, as well as the illegal or irregular conducts as involved; and put forward their opinions for disposal and report them to the Listing Department.
II. Work Requirements
i. Stock Exchanges
1. Daily Supervision
（1） The stock exchange shall pay attention to the media reports, market hearsays and complaints about the takeover of listed companies and the relevant equity changes, as well as the abnormal transactions in the secondary market as caused by these media reports, market hearsays and complaints, urge the listed company to timely disclose the information or issue announcements for clarification; and shall urge the listed company to promptly inquire its controlling shareholders and actual controllers and promptly disclose the result of inquiry in the case of an indirect take-over.
（2） Before the disclosure of relevant information or the clarification of hearsays, the stock exchange has the right to suspend the listing of the relevant listed company's stocks. Where both the purchaser and the target company are listed, the stock exchange shall pay attention to the synchronization of relevant information disclosure and suspend the listing of these two companies' stocks.
2. In-process Supervision
（1） The stock exchange shall examine and approve the relevant information disclosure documents on the takeover of listed companies and the relevant equity changes, including both simple and detailed reports on the equity changes, summary takeover reports, summary reports on tender offers, reports made by the board of directors of target companies, as well as the professional opinions of financial advisors and independent financial advisors.
（2） In the information disclosure supervision over the takeover of listed companies and the relevant equity changes, the stock exchange shall, as required by the rules for supporting businesses, internal guidelines as well as the comparison tables for examination, supervise relevant persons obliged to make information disclosure to practically perform their information disclosure obligation. In particular, the stock exchange shall focus on the supervision over the timeliness of information disclosure, sufficiency and integrity of information as disclosed, sufficiency of documents for future references, and maintain reasonable doubts to the information disclosure; and if finding that there is any problem in the aforesaid information disclosure documents and the information can not be disclosed on time, the stock exchange shall require the related party or the listed company to briefly disclose the relevant information, so as to ensure the timely information disclosure.
（3） If finding any illegal or irregular problem in the information as disclosed, the stock exchange shall deal with it according to its business rules. If finding that the purchaser （in particular, less than 30%） is not qualified, the stock exchange shall urge the listed company to disclose the relevant information about the takeover, report the relevant information to the Listing Department for disposal, and send a copy to the competent CSRC branch office. Before the Listing Department specifies the disposal decision, the stock exchange shall not handle the formalities for confirming the share transfer; and shall, in the case of any doubt, request the competent CSRC branch office to pay attention or suggest putting it on file and making investigations, and report the relevant information to the Listing Department for disposal.
（4） Where a controlling shareholder or actual controller of a company occupies the capital of the listed company for purposes other than business operations or encroaches on the legitimate rights and interests of the listed company, the stock exchange shall require the board of directors of the listed company to make an explanation and make correction, if necessary; and shall simultaneously report the relevant information to the Listing Department for disposal and send a copy to the competent CSRC branch office. Before the Listing Department makes an explicit decision for disposal, the stock exchange shall not handle the formalities for confirming the share transfer.
（5） For the agreement-based equity transfer by way of cash, the stock exchange shall, while handling the formalities for confirming the share transfer, require both parties to provide a certificate proving that all the transfer fees have been deposited into a bank account as accepted by both parties.
（6） The department for the supervision over listed companies in the stock exchange shall request the market supervisory department to pay attention to the stock transactions of the companies involved in the takeover and the relevant equity changes. The market supervisory department shall check the abnormal stock transactions of the listed companies involved. If finding any insider transaction or market manipulation as made by the related party or an intermediary institution, the department for the supervision over listed companies shall take supervisory measures for the problems in the information disclosure according to the rules for supporting businesses, and report such problems to the Listing Department for further investigation and disposal.
（7） The stock exchange shall perfect and maintain the shareholder information disclosure system of listed companies. The relevant information disclosure documents shall be put in the said information disclosure system while being published on the newspapers and periodicals as designated. The stock exchange shall report the Listing Department with a name list of listed companies involved in both simple and detailed equity alteration reports, summary takeover reports, summary reports on tender offers as published every day.
（8） The stock exchange shall, according to its business rules and supervisory requirements, be responsible for market organization of equity transfer, and arrange the suspension and resumption of listing of listed companies' shares during the takeover course.
3. Continuous Supervision
（1） The stock exchange shall coordinate with China Securities Depository & Clearing Corporation Limited, do a good link-up job in the confirmation and registration of share transfer, set up proper procedures, and shall, after the information disclosure with respect to the takeover and the relevant equity changes, urge the related parties to disclose the conditions on share transfer according to legal provisions.
（2） The stock exchange shall record down the improper conducts of purchasers, controlling shareholders and actual controllers, financial advisors and other professional agencies, as well as the supervisory measures adopted therefor into the credit archives, and share the supervisory information with the Listing Department and CSRC branch offices.
（3） The stock exchange shall make statistics of the conditions about the takeover of listed companies and the relevant equity changes, and report relevant statistical data to the Listing Department in the prescribed format every month and every year.
ii. CSRC branch offices
1. Daily Supervision
（1） The CSRC branch office shall keep informed about the controlling shareholders and actual controllers of the listed companies within its own jurisdiction, establish historical archives about the takeover of listed companies and the relevant equity changes within its own jurisdiction, and keep a close eye on the alteration of controlling shareholders and actual controllers of listed companies.
（2） As for those listed companies in which the equity structure is fairly decentralized and the shareholding proportions of different shareholders are close to each other, the CSRC branch office shall keep a close eye on whether or not the management personnel is stable and whether any actual controller has changed; and shall have a good master of whether the listed company is independent of its shareholders, whether the accumulative voting system has been adopted for the election of senior managers as well as any other issue that may cause the failure of the company.
（3） The CSRC branch office shall have a comprehensive knowledge of the control of two or more listed companies by a same purchaser （hereinafter referred to as "two or more companies controlled by a same purchaser"） within its own jurisdiction. All the competent CSRC branch offices wherein two or more companies are controlled by a same purchaser shall, under the organization and coordination of the Listing Department, carry out cooperative supervision, actively cooperate with each other, pay attention to the inter-guild competition, affiliated transactions, capital management and the financial situation of the listed companies as controlled or to be taken over by the purchaser, as well as whether or not the control of two or more companies by a same purchaser will cause the loss of independence of all the listed companies, do a good job in the inspection of purchasers, and timely communicate the relevant supervisory information.
（4） The CSRC branch office shall pay attention to whether the board of directors has erected any barrier for the takeover in the company's constitution, and shall continuously exchange the information with the Listing Department regarding new problems found in the company's constitution.
（5） Where the CSRC branch office finds that a listed company fails to perform its statutory obligations for an indirect takeover, it shall, in the process of the daily supervision, urge the related parties to perform statutory obligations, report it to the Listing Department, and notify it to the stock exchange. Where any listed company refuses to perform statutory obligations, the CSRC branch office shall report it to the Listing Department and put forward suggestions for disposal, and report them to the leaders of the CSRC for a decision.
（6） The CSRC branch office shall investigate the complaints about the illegal or irregular takeover of listed companies as involved; where a real-name complaint is lodged, the CSRC branch office shall report the investigation conditions to the Listing Department in a timely manner; and where an anonymous complaint is lodged, the CSRC branch office shall deal with such a complaint at its discretion in light of the result of disposal, and reflect it in the monthly reports.
2. In-process Supervision
（1） Supervision over Purchasers
General requirements: where the CSRC branch office has any doubt about the alteration of the control of a listed company, it shall, according to the financial consultancy report and in light of the principle of prudent supervision or the requirements of the Listing Department, make an on-site verification within 15 days after the purchaser makes a suggestive announcement about the summary takeover report or within 15 days after the purchaser discloses the detailed report on equity change, and report the verification opinions as well as the handling suggestions to the Listing Department, and send a copy to the relevant stock exchange. In the on-site verification, the CSRC branch office shall put the attention on the real identity of the purchaser, the equity structure and the personnel control relationship of the purchaser, the existence of any concerted parties, businesses and operational situation of the purchaser, the controlling shareholders and actual controllers, the purchaser's credit, sources of purchase fees, whether or not the purchaser has the purchasing ability, whether or not the purchaser concludes any major transaction with any of its related parties or the listed company within 24 months before the takeover, whether there is any doubt about the offering of financial subsidies by the listed company to the purchaser, whether or not the financial advisor has performed the duty of diligence. As for any alteration in controlling shares of 30% or more, the CSRC branch office shall, within two working days after receipt of a written takeover report, circulate a notice to the general office of the people's government of the province, autonomous region, municipality directly under the Central Government or the city under separate state planning （hereinafter referred to the local government） at the locality of the listed company, and in case the local government objects, it shall be requested to present such views to the CSRC in written form within 10 days, make an explanation or provide evidence, and the CSRC branch office shall notify the relevant conditions it has known to the Listing Department in a timely manner.
Special requirements: for an agreement-based takeover, the CSRC branch office shall pay attention to whether or not the share transfer is restricted, whether there are additional special requirements or any supplementary agreement; in the case of a takeover by way of trust or any other asset management, the CSRC branch office shall focus on whether or not the takeover is an investment by using self-owned capital, whether there is sectional ledger management with any other trust investment, whether there is any share held on behalf of another party, if yes, the CSRC branch office shall firstly get the basic information about that party; in case the purchaser obtains control by directional additional issuance with non-cash assets, the CSRC branch office shall, on the basis of the suggestions of the financial advisor and other professional agencies, carry out an on-site verification of the non-cash assets to be input within 15 days after the announcement of the resolution of the board of directors, find out whether the ownership of the assets being input is clear, whether it complies with the actual situation of assets, whether the transaction price of assets is unfair, and shall issue an inspection report; in the case of a takeover involving any judicial ruling, the CSRC branch office shall pay attention to whether or not there is any abuse of legal process, or intentional avoidance of statutory obligations or approval; in the case of a management buy-out, the CSRC branch office shall pay attention to the pricing basis, terms of payment, sources of funds, financing arrangement, repayment plan and its feasibility, the transactions between the listed company's management staff or their lineal relatives with the listed company within the recent 24 months, whether or not the listed company or its related shareholder has provided any financial subsidy to the management staff, whether or not there is any major business alteration of the listed company before or after the management buy-out, and whether the management staff has manipulated the company's financial statements in any effort to reduce the purchase price, and present inspection opinions; in the case of the takeover by a foreign investor, if the purchaser is an offshore company established abroad （such as a BVI company）, the CSRC branch office shall rigidly enforce the regulation, request the purchaser to provide the materials as detailed as possible as well as the professional opinions issued by the financial advisor and the lawyer, etc., fully disclose the relevant information, make a relevant committee; and in case the controlling shareholder or actual controller of an offshore company is a Chinese legal person or natural person, the CSRC branch office shall request the purchaser to provide the approval document on the overseas establishment of the offshore company as issued by the competent domestic authority, and carry out an on-site inspection of the business as engaged in by the controlling shareholder or actual controller and its main enterprises, corporate strength, credit records, and financial status thereof, and work out an inspection report; and in case the purchaser is an offshore company established abroad by a central enterprises, the CSRC branch office shall handle it according to the principle of prudent supervision.
（2） Supervision over the Target Company, Its Controlling Shareholders and Related Parties
The CSRC branch office shall pay attention to whether a controlling shareholder, actual controller or related party of the target company has damaged the legitimate rights and interests of the target company or any other shareholder thereof, for example, whether the majority shareholder occupies the capital of the listed company for purposes other than business operation, or lets the listed company illegally provide the security for it. If yes, the CSRC branch office shall request the controlling shareholder or its related party to work out a solution scheme to eliminate the aforesaid illegal act, and put forward regulatory opinions and suggestions in light of the solution scheme.
For an agreement-based takeover, the CSRC branch office shall urge both parties involved to take practical and effective measures so as to guarantee the stable transition of the listed company's business management during the period of transferring the controlling right. Within the transitional period, the CSRC branch office shall focus on: whether or not the directors on the side of the purchaser （including the directors nominated by the purchaser） have exceeded 1/3 of all the members of the board of directors, whether or not the target company has provided the security to the purchaser or any of its affiliated parties; except for the circumstance wherein the purchaser intends to save a listed company under the crisis or facing serious financial difficulty, the CSRC branch office shall pay attention to whether or not the target company has publicly issued any shares to raise capital or conducted any major purchase or selling of assets or major investment or any other affiliated transaction with the purchaser or any of its related parties. The CSRC branch office shall prevent the former controlling shareholder from transferring the controlling right of the listed company by way of the so called "equity trusteeship" or "company trusteeship" or any other means in violation of legal procedures and evading legal obligations.
In the case of a tender offer, after the target company makes a suggestive announcement and before the tender offer is completed, the CSRC branch office shall focus on whether or not the target company is under any of the following circumstances: whether or not the board of directors of the target company has materially affected the assets, liabilities, entitlements or business performances of the company by disposing of the assets or external investments of the company or adjusting main businesses, guarantees or loans of the company, etc. without approval of the general assembly of shareholders, unless the target company continuously engages in normal business operations or implements the resolutions made by the general assembly of shareholders; and whether or not any director of the target company has resigned.
（3） Supervision over Financial Advisors
If finding that the financial advisor has not performed the obligation of diligence according to the Measures for the Administration of the Takeover of Listed Companies, the CSRC branch office can require the financial advisor to provide his working papers and make an explanation about the diligent investigation, and shall carry out an on-site inspection in case it still has any doubt after the financial advisor has made an explanation. If finding that the financial advisor has not performed the obligation of diligence after the on-site inspection, the CSRC branch office shall put forward suggestions for disposal, record down such doubts into the credit archives of the financial advisor; and shall immediately report the conditions and the suggestions for disposal to the Listing Department in case the financial advisor does not cooperate its inspection.
3. Continuous Supervision
（1） Supervision over Purchasers
The CSRC branch office shall, according to the financial consultancy report, focus on whether or not the stock rights have been transferred after the takeover is completed; make a follow-up supervision over the purchaser's fulfillment of commitments as well as the implementation of the follow-up plan 12 months after the takeover is completed; pay attention to the conditions about reorganization and the fulfillment of relevant agreements where the purchaser plans the asset reorganization at the same time or after the takeover. As for any problem purchaser, the CSRC branch office shall require the financial advisor to extend the period of continuous supervision and guidance to another 6 up to 12 months; and simultaneously explain the reasons for such extension, and report the decision on extending the continuous supervision over and guidance of the financial advisor to the Listing Department. In case the purchaser still has any problem unable to be solved within the extended 12 months, the CSRC branch office shall explain the reasons and the nature of the difficult problem, put forward the suggestions for disposal and report them to the Listing Department for disposal.
（2） Supervision over Listed Companies
The CSRC branch office shall, on the basis of the financial consultancy report, carry out regular or irregular on-site inspections of the listed company whose control has been altered within 12 months after the takeover; and focus on the alteration regarding the business, personnel, asset and investment, etc. of the listed company after the takeover; and whether the listed company has kept its business operation independent; and shall, in light of the regular reports of the listed company, make an appointment with the accounting firm in charge of the audit of the company for conversations, and get to know the financial situation and business situation of the listed company after its controlling right has changed.
（3） Supervision over Financial Advisors
The CSRC branch office shall check the continuous supervision and guidance of the financial advisor, record down the practices of the financial advisor into his archives. In case the financial advisor rescinds the contract with the purchaser during the period of continuous supervision and guidance, the CSRC branch office shall investigate the true reasons for rescinding the contract, and urge the purchaser to retain another financial advisor to perform the duty of supervision and guidance as soon as possible, and request the new financial advisor to actively contact with the former financial advisor and get to know the risks of the company.
（4） Punitive Measures for Purchasers and Related Institutions
The CSRC branch office may do a good job in continuous supervision and guidance by ways of making appointments for conversations, inspecting working papers, on-site inspections, ordering correction within a time limit, supervisory talks, supervisory warning letters, etc. In case the CSRC branch office plans to adopt the punitive measure of issuing a supervisory warning letter, etc., it shall report the problem encountered in the supervision and the relevant materials to the Listing Department, and can not take a corresponding measure until the Listing Department approves it.
The CSRC branch office shall record down relevant supervisory measures and the conditions about correction in the credit archives, and share the supervisory information with the Listing Department and stock exchanges.
III. Supervisory Cooperation
i. The stock exchange shall make proper arrangements in the examination procedures, require those obliged to make information disclosure to clarify whether or not they will submit pertinent materials to the Listing Department and the CSRC branch office within the prescribed time limit in the information disclosure documents.
ii. As for an individual takeover case for which the applicable standards are hard to be managed and there is no precedent, the stock exchange shall solicit the opinions of the Listing Department. As for the common issues or issues featuring the prevailing trend as found in the examination, the stock exchange shall put forward the suggestions for disposal, report the Listing Department for study, and work out a corresponding memorandum.
iii. The Listing Department and the stock exchange shall, according to the examination of individual takeover cases, submit those issues under continuous attention to the competent CSRC branch office for continuous supervision within 12 months after completion of the takeover.
Monthly statements as submitted by each CSRC branch office to the Listing Department every month shall include the conditions about the takeover of listed companies within the jurisdiction, continuous supervision, as well as continuous supervision and guidance.
iv. The supervision over the takeover and the relevant equity change shall be in the charge of the competent CSRC branch office at the registration place of the listed company. In the case of any examination matter involving several jurisdictions, the competent CSRC branch office may be authorized for coordination. Where it is really necessary to entrust another CSRC branch office to complete the examination, the competent CSRC branch office shall submit written authorization materials to the authorized CSRC branch office, make an explanation, and enclose basic materials and specific requirements.
Where the registration place of the purchaser is different from that of the listed company, the competent CSRC branch office at the registration place of the listed company shall urge the financial advisor to simultaneously submit the report on continuous supervision and guidance to the CSRC branch office at the registration place of the listed company.
v. Where the registration place of the listed company is changed, the CSRC branch office at the emigration place shall issue a report on supervision over the takeover of the listed company and the relevant equity change to the CSRC branch office at the immigration place, and turn over the archives about the purchaser and the financial advisor involved in this takeover to the CSRC branch office at the immigration place together with the archives about the listed company.
vi. The stock exchange and each CSRC branch office shall, every half a year, sum up their typical takeover cases in light of its regulatory practice and submit them to the Listing Department. The Listing Department shall be responsible for collection and regularly formulate a case book on the takeover of listed companies.
Annexes:
1. Letter to the Local Government
2. Inspection, Continuous Supervisory and Guidance Opinions of the CSRC Branch Offices about the Takeover of the Listed Company （omitted）
3. Sample on Supervisory Talks （omitted）
4. Sample Letter on the Supervisory Warning （omitted）
Annex 1
Letter to the Local Government
The General Office of the People's Government of _____ （Province, Autonomous Region, Municipality Directly under the Central Government or City under Separate State Planning）:
This Commission has received the report on the takeover of ____ Company by the Purchaser ____ on （the date）, there are totally XX shares involved in this takeover, accounting to __% of the total shares of ____ Company, and this administrative licensing is under examination of this Commission for the time being.
According to the provisions in the Measures for the Administration of the Takeover of Listed Companies, if you have different views about this takeover, please inform us in writing within 10 days after receipt of this letter, and simultaneously make explanations and the grounds.
