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The China Securities Regulatory Commission, the Ministry of Finance, the State Economy and Trade Commission
Circular of the China Securities Regulatory Commission (CSRC), the Ministry of Finance (MOF) and the State Economy and Trade Commission
(SETC) on Issues Related to Transferring State-owned Shares and Institutional Shares of Listed Corporations to Foreign Investors
ZhengJianFa [2002] No.83
November 1, 2002
In order to introduce advanced management experience, technologies and capital funds from overseas, accelerate the pace of economic
restructuring, improve the structure of corporate governance of listed corporations, enhance international competitiveness, protect
lawful rights and interests of investors, and promote the sound development of the securities market, with the approval of the State
Council, a circular on issues related to transferring state-owned shares and institutional shares of listed corporations to foreign
investors is given hereunder:
1.
Transferring state-owned shares and institutional shares of listed corporations to foreign investors shall follow the principles listed
below:
(1)
Abide by state laws and regulations, safeguard national economic safety and social public interests, prevent state assets from erosion,
and maintain social stability;
(2)
Accord with requirements for strategic adjustment of the national economic distribution and the state’s industrial policies, and promote
the optimum distribution of stateowned capital and fair competition;
(3)
Adhere to the principles of openness, justness and impartiality, and protect the lawful rights and interests of shareholders, especially
those of small and medium shareholders;
(4)
Attract medium- and-long-term investments, prevent short-term speculation, and maintain the order of the securities market.
2.
Transferring state-owned shares and institutional shares of listed corporations to foreign investors shall accord with requirements
of the Industrial Guide for Foreign Investment. State-owned shares and institutional shares of the industries to which foreign investment
is forbidden shall not be transferred to foreign investors; for those of the industries which must be controlled or relatively controlled
by Chinese shareholders, Chinese shareholders shall remain in a controlling or relatively controlling position after the transfer.
3.
A foreign investor to whom state-owned shares and institutional shares of a listed corporation are to be transferred shall possess
a strong capacity in operation and management and adequate financial strength, a good financial status and reputation, and the ability
to improve the structure of governance of the listed corporation and to promote its sustainable development. The method of open competitive
bidding shall be adopted in principle in transferring shares held by the state and legal persons in listed corporations to foreign
investors.
4.
Transfer of state-owned shares and institutional shares of listed corporations to foreign investors involving industrial policy and
enterprise reorganization shall be checked and ratified by the SETC. That involving the administration of state-owned equities shall
be checked and ratified by the MOF. Important matters shall be reported to the State Council for approval. Transferring state-owned
shares and institutional shares to foreign investors shall comply with relevant provisions of the CSRC on acquisition of listed corporations
and information disclosure. Any region or institution shall not approvetransfer of state-owned shares and institutional shares of
listed companies to foreign investors without proper authorization.
5.
Parties in a transfer shall, in accordance with law, present approval documents of the SETC and the MOF for the transfer and payment
certificate of the foreign investor to the securities registration and settlement institution for procedure of equity transfer registration
and to the administration for industry and commerce for procedure of shareholder alteration registration. Before the transfer proceeds
are paid up, the securities registration and settlement institution and the administration for industry and commerce shall not handle
the procedure of transfer and alteration registration.
6.
Parties in a transfer of state-owned shares and institutional shares of a listed corporation to a foreign investor shall go to the
SAFE office for foreign exchange registration of foreign investment before the equity transfer. In case re-transfer of foreign equity
is involved, parties in the re-transfer shall go to the SAFE office for alteration of the foreign exchange registration of foreign
capital before the equity transfer.
7.
Foreign investors shall pay the transfer price in freely convertible currencies. Foreign investors that have already invested in the
Chinese territory may, after checked and ratified by SAFE offices, pay with renminbi profits obtained from their investment. Foreign
investors may re-transfer their acquired shares 12 months after the transfer price is paid up.
8.
The transferors shall, within prescribed time limits, sell the foreign exchange proceeds obtained from transferring state-owned shares
and institutional shares with the approval of the SFAE office that is to be asked for by presenting the approval documents for the
transfers. After acquiring the state-owned shares and institutional shares of listed corporations, foreign investors may, after verification
by SAFE offices, purchase foreign exchange for overseas remittance with the net profits distributed by the listed corporations, proceeds
obtained from equity re-transfer, and funds obtained from the termination and liquidation of the listed corporations.
9.
After transferring state-owned shares and institutional shares to foreign investors, the listed corporations shall still stick to
original relevant policies, and shall not enjoy the treatment granted to foreign investment enterprises. Proceeds from the transfer
of state-owned shares shall be treated and used according to relevant regulations of the state.
10.
Provisions of this circular apply to transfer of state-owned shares and institutional shares of listed corporations to investors in
the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and the Taiwan region.
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