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2002092820021201The Chinese Securities Regulatory CommissionDecree of the Chinese Securities Regulatory CommissionNo.10Measures on the Takeover of Listed Companies are hereby promulgated and shall enter into force as of December 1, 2002.Chairman of the Chinese Securities Regulatory Commission Zhou XiaochuanSeptember 28, 2002epdf/e03125.pdfIlisted company, takeover, purchaser by agreement, purchaser by offer, shares, equity capitale03125Measures on the Takeover of Listed CompaniesChapter I General ProvisionsArticle 1 These Measures are formulated, in accordance with the Company Law, the Securities Law, and other laws and relevant rules and regulations, for the purpose of standardizing the activities of the takeover of the listed companies, promoting the optimum distribution of the resources of the securities markets, protecting the lawful rights and interests of the investors, and safeguarding the normal order of the securities market.Article 2 The takeover of the listed companies as mentioned in these Measures refers to an act which enpost_titles a purchaser to the practical control right of or the potential practical control right of a listed company if, through activities of the transfer of shares in the stock exchange, or through lawful means other than the activities of transfer of shares in the stock exchange, the purchaser holds a certain proportion of the shares issued by the said listed company.Article 3 A purchaser may, by agreement or by offer, or through transaction in the manner of public centralized trading at the competing price, take over a listed company, and obtain the practical control right of a listed company.Where a purchaser takes over a listed company, he shall adhere to the provisions stipulated by these Measures, and shall perform the obligations of making timely report and announcement in accordance with the provisions stipulated by these Measures.Article 4 The activities of the takeover of the listed companies shall be conducted in line with the principles of openness, fairness and impartiality. The relevant parties shall be faithful and reliable, and shall consciously safeguard the order of the securities market.Article 5 Information reported and announced by the relevant parties involved in the takeover of the listed companies shall be truthful, accurate, and complete, and shall not contain a falsehood, misleading statement or major omission.No individuals shall spread false information, disturb the market order, or undertake other fraudulent activities by taking advantage of the takeover of the listed companies.Article 6 Takeover of the listed companies may be conducted through payment by cash, by lawfully transferable securities, or by other means prescribed by laws, or rules and regulations.Article 7 A purchaser shall not damage the lawful rights and interests of the company under takeover and its shareholders by taking advantage of the takeover of the listed company.Any purchaser who is incompetent for the practical performance shall be forbidden to enter into the takeover of a listed company; company to be taken over shall not provide the purchaser with financial aids in any form.Article 8 The holding shareholders and other practical controller of a listed company shall bear good faith to the company under their control and other shareholders.A purchaser shall be faithful and reliable to the listed company under takeover and other shareholders of the listed company, and shall provide completely effective guarantees to perform the specific matters which the purchaser has promised.Article 9 Directors, supervisors and senior management persons of a listed company shall have the obligation of good faith to the listed company which they work for and to the shareholders of such listed company.Where a listed company changes its directors or its directors quit their positions during the term of the takeover, such listed company shall explain the reasons and make it publicly known.Article 10 The Chinese Securities Regulatory Committee (hereinafter referred to as CSRC) shall supervise the activities of the takeover of the listed companies.The stock exchange and the securities registration and clearing institution shall, pursuant to the duties and responsibilities authorized by the CSRC and their respective work regulations, supervise the daily activities of the takeover of the listed companies.Article 11 The CSRC may establish a special committee composed of professionals, which shall provide opinions on whether a specific transaction constitutes a takeover of a listed company, on how the parties shall perform their relevant duties, on whether the specific transaction matters will affect the continuous listing status of the listed company under takeover, and as to other entities and procedural matters.Chapter II Provisions on Takeover by AgreementArticle 12 Where a listed company is taken over by agreement, the purchaser shall submit to the SCRC a report on the takeover of the listed company the next day after the conclusion of the agreement; at the same time, the purchaser shall submit a copy of the report to the office under the SCRC located in the place where the listed company lies, send a copy of the report to the stock exchange, notify the listed company that is taken over, and make a suggestive announcement of the summary of the report on the takeover of the listed company.If the SCRC fails to offer objection within 15 days from the date of receiving the report on the takeover of the listed company, the purchaser may make an announcement of the report on the takeover of the listed company, and perform the takeover agreement.Article 13 Where a listed company is taken over by agreement, if the purchaser continues to increase shareholding or aggrandizing the control of the listed company after he comes to hold or control 30 percent of the shares issued by the listed company, he shall issue a takeover offer to all shareholders of the listed company to be taken over, which indicates a proposal to buy all the shares held by all the shareholders; if the takeover offer complies with the provisions stipulated in Chapter IV of these Measures, the purchaser may submit an application to the SCRC for exemption; upon exemption, the listed company may be taken over by agreement.Article 14 Where a listed company is taken over by agreement, if the shares the purchaser plans to hold or control excess 30 percent of the shares issued by the listed company, the purchaser shall issue a takeover offer to all shareholders of the listed company to be taken over, which indicates a proposal to buy all the shares held by all the shareholders; if the takeover offer complies with the provisions stipulated in Chapter IV of these Measures, the purchaser may submit an application to the SCRC for exemption; upon exemption, the listed company may be taken over by agreement.Article 15 When the listed company to be taken over receives the notification sent by the purchaser, its board of directors shall state a timely opinion on the potential influence which the takeover may impose upon the listed company; simultaneously the independent director shall express his independent opinion when he is engaged in the development of the opinion of the board of directors. If the board of directors of the listed company under takeover deems it necessary, the board may employ professional institutions such as an independent financial consultant to offer them consultative opinion in the name of the listed company. The opinion of the board of directors of the listed company under takeover, the opinion of the independent director, and the opinion of the professional institution shall be made known to the general people.Where a listed company is taken over by the management, or staff members, the independent director of the company under takeover shall state his independent review on the potential influence which the takeover may impose upon the listed company. The independent director shall demand the company to employ such professional institutions as an independent financial consultant to offer consultative opinion, which plus the opinion of the independent director shall be made publicly known. The fees for the financial consultant shall be borne by the company to be taken over.Article 16 In the case of the transfer of shares held by institutions authorized by the state, or the transfer of shares which is subject to administrative examination and approval, the relevant parties to the takeover agreement shall not effect the takeover by agreement before examination and approval is provided by the competent administrative department.Article 17 The relevant parties to the takeover agreement shall, in accordance with the regulations and requirements drawn up by the stock exchange or the securities registration and clearing institution, apply for the transfer of shares and the registration of change of ownership.The stock exchange and the securities registration and clearing institution shall not handle the transfer of shares and the registration of change of ownership if, inconsistent with provisions, no report or announcement is performed, or no application is submitted.Article 18 Where a listed company is taken over by agreement, the relevant parties shall, on an ad hoc basis, entrust a securities registration and clearing institution with custody of the shares planned to be transferred and with deposit of the cash to be used as the payment with the designated bank.Article 19 By agreement, if the transfer of shares issued by a listed company and quoted for trading on the stock exchange results in the purchaser’s practical control right or feasible control right of the said company, the following procedures shall be applicable:1.after the takeover report on the listed company is announced, the relevant parties shall entrust the securities company to apply for transfer of shares and registration of change of ownership; the entrusted securities companies shall apply to the stock exchange and the securities registration and clearing institution for suspension of trading and ad hoc custody of the shares scheduled to take over; if the shares of a listed company are suspended for trading or entrusted with custody on a ad hoc basis, an announcement shall be made;The stock exchange may, in light with the needs of the management of the securities market, decide on the suspension of listing of the shares which are quoted and traded on the stock exchange.2.the transferee shall, on the next day from submitting an application for transfer of shares, make announcement of the matters of the transfer agreement and the name of the securities company that accepts the entrustment, and inform the listed company of these.3.the stock exchange shall, within 3 work days from the date on which it receives the application, complete the examination and rectification, and decide on whether to affirm the application or not;4.if the stock exchange affirms the application for transfer of shares, the entrusted securities company shall, in the name of both the transferor and transferee, apply to the securities registration and clearing institution for registration of the change of ownership; the transferee shall, within 2 days after the completion of the registration of the change of the ownership, make the registration publicly known.if the stock exchange refuses to affirm the application, the entrusted securities company shall on the same date when it receives the notification from the stock exchange, inform both the transferor and transferee of the shares and the company under takeover of the refusal to affirm the application, and shall, in the name of the transferor and transferee, apply to the securities registration and clearing institution for elimination of the temporary custody of the said shares; the transferor shall, within 2 work days from the date on which he is informed of the refusal to affirm the application, make announcement of the matter;5.after the registration of the change of the ownership of the shares, the entrusted securities company shall, in the name of the transferee, apply to the securities registration and clearing institution for elimination of the temporary custody of the said shares; the transferee shall, within 2 work days from the date of submitting the application for the elimination of the custody, make announcement of the matter; the said section of shares shall resume trading in the stock exchange.Article 20 Where Holding shareholders of a listed company or other practical controllers of a listed company transfer their practical control rights of the listed company, if they fail to repay their debts in full to the company; or if they fail to eliminate the guarantee which the company has provide for their debts; or if there exist other matters that damage the interests of the company, the board of directors of the listed company shall, for the company, employ an audit institution, which shall make special rectification and examination of the relevant matters and produce a report on the rectification and examination, and demand the holding shareholders of the listed company or other practical controllers of the listed company offer feasible resolutions. The board of directors of the listed company and the independent director shall state their respective review on the feasibility of the resolution. The listed company under takeover shall make announcement of the report on the rectification and examination, as well as announcement of the resolution, and of the respective opinion of the board of directors and the independent director.If the holding shareholders or other practical controllers refuse to make resolutions, the board of directors, or the independent director shall adopt completely effective legal measures to protect the interests of the company.Article 21 If, upon approval by the SCRC and the stock exchange, the shareholders of a listed company transfer by public collection the shares they hold which are issued by the listed company, the transfer shall be entrusted to the securities company, specific procedures and requirement for which shall be consistent with the professional provisions stipulated by the stock exchange.Article 22 Where a purchaser holds, controls the shares of a listed company by means of administrative distribution or transfer of the state-owned shares, by ruling of the courts, by inheritance, and by donation, which enpost_titles him to the practical or possible control of a listed company, these regulations shall be applicable.Chapter III Provisions on Takeover by OfferArticle 23 When the number of shares held or controlled by a purchaser comes to 30 percent of the shares issued by a listed company, the purchaser shall, on the next day after such shareholding becomes a fact, submit a report on the takeover of the said company to the CSRC. At the same time the purchaser shall submit a copy of the report to the office under the CSRC located in the place where the listed company lies, send a copy of the report to the stock exchange, and make an announcement. Without performing the obligation of reporting and announcing in accordance with these Measures, the purchaser shall not continue to increase the shareholding or aggrandize the control right.Where the purchaser prescribed in the proceeding paragraph continues to increase the shareholding or aggrandizing the control right, the purchaser shall, in the form of offer takeover, send an offer to all the shareholders of the said company which indicates that the purchaser attempts to buy all the shares which they hold; if the takeover complies with the provisions stipulated in Chapter IV of these Measures, an application may be submitted to the CSRC for the exemption.Where the purchaser prescribed in the proceeding paragraph has produced a report on and made announcement of the takeover of the listed company before it comes to hold or control 30 percent of the shares issued by a listed company, the purchaser may make a report only on the difference between the statement of this report and the statement of the former one and make it publicly known.Article 24 When the number of shares held or controlled by a purchaser accounts for less than 30 percent of the shares issued by a listed company, if the purchaser increases the shareholding of the said company by offer, the proportion of shares the purchaser schedules to takeover shall not account for less than 5 percent; upon the completion of the scheduled takeover, the proportion of shares held or controlled by the purchaser shall not exceed 30 percent; if the proportion is planned to exceed 30 percent, an offer shall be sent to all the shareholders of the said company which indicates that the purchaser attempts to buy all the shares which they hold; if the case complies with the provisions prescribed in Chapter IV of these Measures, an application for exemption may be submitted to the CSRC.Article 25 Where a listed company is taken over by offer, the purchaser shall submit to the CSRC a report on the offer takeover. Simultaneously, the purchaser shall submit a copy of the report to the office under the CSRC located in the place where the listed company lies, send a copy of the report to the stock exchange, notify the company to be taken over, and make a suggestive announcement of the summary of the report on the offer takeover.The stock exchange may, according to the needs of the securities market, make decide on the suspension of the trading of the shares of the listed company quoted and traded on the stock exchange.Article 26 A report on the takeover by offer shall state the following matters:1.the name and domicile of the purchaser;2.the purchaser’s decision on the takeover;3.the name of the listed company under takeover;4.the purpose of the takeover;5.a detailed description of the shares to buy up and the total number of the shares scheduled to buy up;6.the term and price of the takeover;7.the amount and guaranteed availability of the funds required for the takeover;8.the ratio between the total number of the issued shares of the company to be taken over and the number of such shares held at the time the offer takeover report is submitted;9.the follow-up schedule after the completion of the takeover; and10.other matters required by the CSRC.Article 27 In the report on the takeover by offer, a purchaser shall state whether the listing of the company under takeover shall be planned to cease or not; if the listing of the company is to planned be cease, special suggestion shall be highlighted in the report on the offer takeover.A purchaser shall state in the report on the offer takeover whether, upon the completion of the takeover, the change of distribution of the shareholding of the company under takeover may have influence upon the continuous listing of the said company; if influence does exist, the purchaser shall make specific programs to maintain the continuous listing of the said company.Article 28 A purchaser shall employ lawyers who shall undertake verification and examination of the truthfulness, accuracy, and completeness of the contents of the report on the offer takeover, and who shall produce a lawful statement.A purchaser shall employ such professional institutions as a financial consultant who shall appraise the capability of a purchaser to perform the takeover. The professional opinion of the financial consultant shall be announced.Article 29 Where a purchaser applies to revoke the takeover plan after an application has be submitted to the CSRC for a takeover by offer but before an offer is sent out, the purchaser shall not, within 12 months from the date on which the application for the revoke of the takeover is submitted to the CSRC, reapply for a takeover of the listed company.Article 30 If the CSRC fails to state objection within 15 days from the date of the receipt of the report on the takeover by offer, the purchaser may make announcement of the documents of the offer takeover; if the CSRC objects, the purchaser shall make remedy or supplement concerning the relevant matters. The time for the remedy or supplement shall not be accounted into the time period specified in this paragraph.Article 31 The board of directors of the company under takeover shall in the interest of the said company employ such professional institution as a independent financial consultant to analyze the financial status qua of the company under takeover. The independent financial consultant shall state its review on matters such as the fairness and rationality of the conditions for the takeover by offer, and the potential influence of the takeover upon the said company. The matters shall be made known to general people.Where the management, and the staff members conduct the takeover of a listed company, the independent director of a listed company shall employ such institutions as an independent financial consultant to analyze the financial status qua of the company under takeover. The independent financial shall state its review on matters such as the fairness and rationality of the conditions for the takeover by offer, and the potential influence of the takeover upon the said company. The matters shall be made known to general people.. The fees for the consultants shall be borne by the company under takeover.Article 32 The board of directors of the company to be taken over shall, within 10 days from the date on which a purchaser sends out takeover offer, submit the report of the board of directors, and the professional opinion of the independent consultant as well to the CSRC. Simultaneously, the board of directors shall submit a copy of the report and opinion to the office under the CSRC located in the place where the listed company lies, send a copy of the report and opinion to the stock exchange, and make announcement of the report and opinion.The statement of the board of directors of the listed company shall provide advice for the shareholders as to whether to accept the takeover offer or not. The independent director of the company under takeover shall express independent opinion. Both the statement and the opinion shall be made publicly known.Where the purchaser make major alteration of the conditions for the takeover offer, the board of directors of the listed company under takeover shall make a supplementary report on the alteration of the conditions for the takeover offer, and the independent director shall state independent review. Both the report and the review shall be made publicly known.Article 33 Strategies and measures adopted by the directors, supervisors and senior management of a company under takeover concerning the purchasing activities shall not damage the legal rights and interests of the company and its shareholders.If a purchaser has made a suggestive announcement, the board of directors of the company that is taken over may continue to perform the concluded contracts or decisions made by the shareholders’ meeting, but shall not suggest the following matters:1.issuing shares;2.issuing company bonds that can be converted into shares;3.repurchasing the shares issued by the listed company;4.modifying the articles of association of the company;5.concluding contracts that may have great influence on the assets, debts, rights or interests, or operation results of the company, with exception of the conclusion of contracts concerning the normal business of the company; and6.disposing or purchasing assets with a great value, or readjusting the major business of the company, with exception of the readjustment of the business or redistribution of the assets for the companies that are confronted with grim financial difficulty.Article 34 The purchaser shall abide by the following principle when he decides on the price of the takeover by offer:1.the price at which the same kind of shares quoted and traded is taken over by offer shall not be lower than the higher price listed as follows:(1)the highest price at which a purchaser buy the said kind of shares of the company under takeover quoted and traded within 6 months prior to the date on which the suggestive announcement is made;(2)90 percent of the arithmetic average value of the daily added average price at which the said kind of shares of the company under takeover quoted and traded within 30 trading days prior to the date on which the suggestive announcement is made;2.the price at which shares not quoted and traded are taken over shall not be lower than the higher price listed as follows:(1)the highest price which a purchaser pays for the shares issued by the listed company which are not quoted and traded within 6 months prior to the date on which the suggestive announcement is made;(2)the net asset value of per share of the company under takeover which is audited in the last announcement.Under special circumstances, if the principle for the determination of the prices prescribed in the proceeding paragraph needs to be readjusted, the purchaser shall seek consent from the CSRC in advance. If the price offered by the purchaser is obviously unfair, the CSRC may demands the purchaser to make readjustment.Article 35 Where a purchaser pays for the takeover in cash, the purchaser shall, at the same time when a suggestive announcement is made, deposit not less than 20 percent of the total amount of the guaranteed funds for the performance in the account of a bank designated by the securities registration and clearing institution, and shall undertake procedures to freeze the account.Where a purchaser pays for the takeover with lawfully transferable company bonds, the purchaser shall, at the same time when a suggestive announcement is made, entrust the securities registration and clearing institution with the custody of the total securities that the purchaser will use to pay for the takeover, except that the securities are not included in custody pursuant to the regulations of the securities registration and clearing institution.Where a purchaser revokes the takeover plan, if the purchaser is not involved in inappropriate investigation, the purchaser may submit an application for unfreezing the guaranteed funds for the performance and for unfreezing the custody of securities.Article 36 The effective term of a takeover offer shall not be less than 30 days, but not be more than 60 days, except that competing offers occur.Within the effective term of a takeover offer, the purchaser shall not withdraw the takeover offer.Article 37 Where a purchaser modifies the conditions for the takeover offer within the effective term of the takeover offer, 
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