Circular of China Banking Regulatory Commission Concerning the Printing and Distribution of the Operating Rules for Applying for the Establishment of Financial Companies of Enterprise Groups Each banking regulatory bureau:
The amended Operating Rules for Applying for the Establishment of Financial Companies of Enterprise Groups are hereby printed and The China Banking Regulatory Commission January 26, 2007 Operating Rules for Applying for the Establishment of Financial Companies of Enterprise Groups Article 1 In accordance with the Banking Supervision Law of the People’s Republic of China and the Measures for the Administration of Financial Article 2 The term “financial company” as referred to in the present Rules means the non-bank financial institutions that provide financial Article 3 The present Rules shall apply to the market access behaviors occurring during the stage of preparatory establishment or business Article 4 Where any financial company is established within the territory of China, it shall be reported to China Banking Regulatory Commission Chapter II Establishment Conditions Article 5 An enterprise group (parent company) applying for the establishment of a financial company shall meet the following conditions: (1) It complies with the industrial policies of the state and has core principal business. (2) Its registered capital is not less than 800 million Yuan by the end of the year prior to its application. (3) By the end of the year before its application, its member entities’ total assets consolidated into statement for accounting as prescribed (4) Its financial situation is good, for two consecutive years before its application, by the end of each year, the total amount of its (5) It has stable cash flow with a large scale. (6) It has been set up for more than two years and possesses certain experience in the internal financial management and capital management (7) It has sound corporate governance structure and has no improper associated transaction. (8) Its credit standing is good, and in the two consecutive years prior to its application, it has no bad credit record or illegal or (9) The source of the funds used for purchasing shares is authentic and lawful, no loan funds or the funds entrusted by other people may (10) Other prudential conditions as provisioned by CBRC. Article 6 A financial company’s registered capital shall be raised mainly from the member entities of the enterprise group or through absorbing Except for enterprise groups of a special industry into which external investors are restricted from entering and obtains the consent Article 7 For becoming a shareholder of a financial company of an enterprise group, a member entity of the enterprise group shall meet the (1) It has been registered as an enterprise legal person at the administrative department of industry and commerce. (2) It possesses a sound corporate governance structure or effective organizational management manner. (3) It has good social reputation, credit record and taxation record. (4) Its financial situation is good, and it consecutively gains profits in the latest two accounting years. (5) After the year-end distribution, its net assets accounts for 30% or more of its total assets (in accordance with the standards for (6) Its operation and management are nice, it repays bank loans on time and in full amount, and commits none illegal or irregular act (7) The source of the funds used for purchasing shares is authentic and lawful, loan funds or the funds entrusted by other people may (8) This investment complies with the legal provisions of the state. And (9) Other prudential requirements as provided for by CBRC. Article 8 For becoming a shareholder of a financial company, a strategic investor other than the member entities of an enterprise group shall (1) He consents that he will, in principle, not alienate the shares of the financial company he holds within 3 years as of the date of (2) He possesses 3 years or more of experience in operating and managing financial companies or similar institutions. And (3) Other prudential requirements as provisioned by CBRC. Article 9 As regards a strategic investor that is a financial institution legal person, for becoming a shareholder of a financial company, (1) It possesses a nice corporate governance structure. (2) It has sound and effective inner management and risk control bylaws. (3) Its financial situation is nice and it consecutively gains profits in the latest two years. (4) Its credit standing is nice, and it has not been substantially punished by the supervisory organ in the latest two consecutive years. (5) The source of the funds used for purchasing shares is authentic and lawful, loan funds or the funds entrusted by other people may (6) It meets the related supervisory requirements and indices, and this investment complies with the related laws, regulations and supervisory (7) In case it is an overseas financial institution legal person, its total assets may not, by the end of the latest year, be less than (8) Other prudential requirements as provided for by CBRC. Article 10 As regards a strategic investor that is a non-financial institution legal person, for becoming a shareholder of a financial company, Article 11 A financial company to be set up shall meet the requirements as follows: (1) The establishment is really necessary for the concentrated management of enterprise group’s funds, and the financial company can, (2) It has the articles of association complying with the provisions of the Company Law of the People’s Republic of China and the Measures. (3) It has the minimum registered capital as provided for in the Measures. (4) It has the directors and senior managers that meet the requirements on post-holding qualification as provided for by CBRC, and a proportion The term “directors and senior managers” as referred to above means the financial company’s legal representative of and the personnel The term “personnel for key posts such as risk management and fund intensive management” as referred to above means the working staff The number of the personnel that have been undertaking finance or accounting work for 3 years or more may not be less than 2/3 of (5) It has established relatively perfect bylaws for corporate governance, inner control, business operation and risk prevention, etc, (6) It has a business place, safety measures and other facilities as required. And (7) Other prudential requirements as provided for by CBRC. Chapter III Directors and Senior Managers Article 12 The post-holding qualifications of a financial company’s chairman of the board of directors and vice chairmen thereof, general managers, Article 13 A financial company’s directors and senior managers shall meet the following basic requirements: (1) Being a natural person with complete civil capacity. (2) Possessing nice vocational ethics, personal integrity, morality and reputation, acquainting with and respecting laws and administrative (3) Possessing professional knowledge, skills and work experience necessary for fulfilling his duties, ensuring the time and energy necessary (4) Possessing the independency necessary for fulfilling his duties. (5) Not falling within any of the circumstances under which he may not undertake the post of director or senior manager of any financial (6) Other prudential requirements as provided for by CBRC. Article 14 A financial company’s directors shall also meet the requirements as follows in addition to the requirements listed in Article 13 (1) Possessing more than 5 years of working experience in such field as economy, banking, law, finance or any other one facilitating his (2) Being capable of judging the operation, management and risk situations of the financial company from its financial statements and (3) Acquainting with the financial company’s corporate governance structure, articles of association, duties of the board of directors Article 15 The chairman or vice chairman of a financial company shall meet, in addition to the requirements listed in Articles 13 and 14, also Possessing an educational background of university or higher and having been working in financial institutions for more than 6 years, Article 16 A financial company’s general manager and deputy general manager shall meet, in addition to the requirements as provided for in Article Possessing an educational background of university or higher and having been working in financial institutions for more than 6 years In case the general manager or deputy general manager holds the post of director concurrently, the requirements as provided for in Article 17 A senior manager introduced from overseas shall also meet the following requirements in addition to the requirements as provided (1) Acquainting with the economy, financial policies and the related laws and regulations on financial supervision of China as well as (2) Possessing the working experience and organizational management experience in line with the post he holds. He shall possess more than 5 years of fund management experience in a world famous transnational financial institution or the fund Or, he shall possess more than five years of working experience in a world famous commercial bank or investment bank, acquaint with In case he concurrently holds the post of director, the requirements prescribed in Article 14 shall be also satisfied. Chapter IV Application for Establishment Article 18 The establishment of a financial company shall be divided into such two phases as the application for preparatory establishment and Article 19 The applicant shall submit the application materials for preparatory establishment and opening business to the banking regulatory Article 20 The application materials for preparatory establishment shall contain the contents as follows: (1) Application form for preparatory establishment (see attached list 1). (2) Application letter for preparatory establishment, which shall contain such contents as the name of the financial company to be set (3) Feasibility study report on establishing the financial company. (4) Materials for proving the qualification of the parent company of the group. (5) Roster of the member entities and the related evidentiary materials issued by the competent departments. Member entities shall contain the parent company of the group, the subsidiary companies with 51% shares held by the parent company (6) Materials about the shareholder qualifications of the applicant and other contributors. (7) The contributors’ capital contribution guarantee or agreement. (8) Written commitment made by the board of directors of the parent company on increasing corresponding capital in the case of any payment (9) In the case of the introduction of senior managers or risk management professionals, the parent company’s board of directors shall (10) Evidentiary materials signed by the parent company’s legal representative on confirming the authenticity of the materials submitted (11) Legal letter issued by a law firm on the applicant’s legality, regulation-compliance and integrity in respect of the procedure and (12) Other documents and materials shall be submitted as required by CBRC. Article 21 The feasibility study report on establishing a financial company shall contain the major contents as follows: (1) The enterprise group’s basic information, including its historical evolution, situations of its member entities, organizational structure, (2) Industry to which the enterprise group belongs and instruments on the related industrial policies of the state. (3) The enterprise group’s production and operation situations, its position in the industry, development plans and the proportion of (4) Cash flow analysis, that is, the analysis on the scale, characteristics and routs, etc, of the enterprise group’s cash flow in the (5) The enterprise group’s finance and fund management experience. And (6) Principles, role, business volume forecast and profit mode of the financial company to be set up. Article 22 The materials on proving the qualification of the parent company of a group shall contain the major contents as follows: (1) Enterprise Group Registration Certificate as issued by the administrative organ of industry and commerce. (2) Materials proving that the enterprise group conforms to the related industrial policies of the state. (3) The parent company’s articles of association, organizational structure and internal management system. (4) Certificate on tax payment credit rating issued by the tax authorities; list of the banks from which the parent company lends money Special explanation shall be made accordingly where the general public or any media discloses the company’s any illegal or irregular (5) Accounting statements (including consolidated accounting statements) of the latest two years which are prepared pursuant to the Enterprise Article 23 The materials on the shareholders qualifications of the applicant and other contributors shall contain the basic contents as follows: (1) A roster of the applicant and other contributors, photocopy of the business license, accounting statements of other contributors (including (2) Evidence on the source of the contributed funds. (3) Moreover, a strategic investor shall provide the related materials on proving its successful engagement in the operation and management The strategic investor’s organizational structure, roster of its main shareholders, branches, roster of the subsidiary companies it In case the strategic investor is a financial institution, it shall also provide the opinion letter issued by the competent regulatory The evidential materials on the centralized management scale and mode of financial companies’ funds or that of similar institutions Article 24 The contributors’ guarantee for and the agreement on capital contribution shall contain the main contents as follows: (1) The guarantee for or the agreement on capital contribution shall be affixed with the signature of the legal representatives of all (2) The strategic investors shall indicate in the investment agreement their promise of not alienating the shares they hold in the financial (3) The resolution, authorization or approval papers made at the shareholders’ meeting or by the board of directors on the contributors’ Article 25 The application materials for opening business shall contain the contents as follows: (1) Application form for opening business (see attached list 2). (2) Report on the application for opening business, including the explanation on the accomplishment of the preparatory work, the contribution (3) The articles of association draft of the financial company to be established. (4) The financial company’s operation principles and plans of. (5) A roster of the finance company’s shareholders, their respective amounts and investment proportions. (6) Capital verification certificate produced by a legal capital verification institution on the capital contributions of the finance The capital verification certificate produced by a legal capital verification institution means a capital verification report issued (7) A registration letter issued by the administrative department for industry and commerce on advance approval of the financial company’s (8) Name list, detailed profession training, resumes and post-holding qualification certificates of the directors and senior managers (9) Evidentiary materials on the personnel to hold such pivotal posts as risk control and fund centralized management. (10) Evidentiary materials on the introduced risk management professionals’ assuming of the manager post for two years or more in risk (11) Evidentiary materials on the related personnel’s engagement in the financial or accounting work for 5 years or more. (12) The financial company’s business rules and risk prevention system, which shall contain the strict risk isolation between the financial The financial company shall, by referring to the Guidance for Internal Control of Commercial Banks, set up and perfect the rules and (13) The financial company’s management information system and risk control system. (14) Materials on the financial company’s business place and other business-related facilities (which means the agreement on the financial (15) Resolutions made at the first shareholders’ assembly of the financial company. (16) Legal opinion on the applicant’s legality, regulation-compliance and integrity in respect of the application procedure and materials (17) Other documents and materials as required by CBRC. Article 26 The articles of association draft of a financial company to be set up shall contain the main contents as follows: (1) The company’ name, domicile, organization form, business scope and registered capital. (2) Each shareholder’s name and investment amount, the shareholders’ rights and obligations and the strategic investors’ promise of not (3) The company’s legal representative, institutions, as well as its formation method, discussion rules. (4) Method of profit distribution. And (5) Causes for dissolution and liquidation method, and the promise of the parent company’s board of directors on increasing corresponding Article 27 The name list of the directors and senior managers to hold posts in a financial company, their detailed professional training, resumes (1) Their application letters for the approval of post-holding qualification, which shall be affixed with the signature of the applicants’ (2) Their application forms for the approval of post-holding qualification (refer to Attached list 3). (3) Comprehensive appraisement on their morality, whether there is any bad record, business capacity, management capability and work performance, (4) Photocopies of their identity certificates. (5) Photocopies of their academic certificates and professional technology certificates recognized by the state. Such photocopies shall be affixed with the seals of the applicants, and the CBRC shall take charge of examining and verifying the (6) Announcements signed by them on no bad record. (7) Evidentiary materials on proving that the introduced senior managers comply with the related prescribed requirements. (8) Announcement signed by the person in charge of the appointment and removal department of the parent company of the group on the authenticity (9) Materials in the shareholders’ meeting on proposing the directors and senior managers to hold posts. And (10) Other materials
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