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China Securities Regulatory Commission, China Banking Regulatory Commission
Circular of China Securities Regulatory Commission and China Banking Regulatory Commission on Regulating the External Guaranties Provided
by Listed Companies
Zheng Jian Fa [2005] No.120
Listed companies and financial institutions in the banking sector,
With a view to regulating the external guaranties provided by listed companies as well as the examination and approval of financial
institutions in the banking sector on the loans as guaranteed by listed companies and effectively preventing the risks arising from
the external guaranty of listed companies and the credit risks of financial institutions, and in accordance with the provisions of
such laws and regulations as the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China,
the Law of the People’s Republic of China on Banking Regulation and Supervision, and the Guaranty Law of the People’s Republic of
China, relevant issues concerning the external guaranty as provided by listed companies are hereby notified as follows:
1.
We should regulate the external guaranty as provided by listed companies and strictly control the risks arising therefrom.
(1)
Any guaranty as provided by a listed company shall be subject to the deliberation of the board of directors or the shareholders’ meeting;
(2)
The authority of the shareholders’ meeting or the board of directors regarding the examination and approval of an external guaranty
as well as the responsibility assuming system in the case of any violation of the said authority of examination and approval or the
procedures for examination and deliberation shall be stated in the articles of association of a listed company;
(3)
A external guaranty subject to the examination and approval of the shareholders’ meeting may not be submitted to the shareholders’
meeting for examination and approval until the board of directors has reviewed the external guaranty. A external guaranty that shall
be subject to the examination and approval of the shareholders’ meeting shall include but not be limited to the following circumstances:
a)
Any guaranty as provided after the total amount of guaranties provided by a listed company and its controlling subsidiaries exceeds
50% of the net assets upon the latest auditing;
b)
A guaranty as provided to a guaranteed party whose asset-liability ratio is higher than 70%;
c)
A guaranty, the amount of which exceeds 10% of the net asset upon the latest auditing; and
d)
A guaranty as provided to the shareholder, actual controller or the related party.
Where the shareholders’ meeting deliberates on a guaranty to be provided to a shareholder, or an actual controller or a related party,
the shareholder, actual controller or related associated party may not take part in the voting. A resolution on the external guaranty
shall be subject to approval of shareholders with half or more of the voting rights held by shareholders present at the meeting.
(4)
As to a external guaranty subject to the examination and approval of the board of directors, it shall be subject to approval of 2/3
of the directors present at the meeting of the board of directors upon deliberation, and a resolution shall be made thereafter;
(5)
A guaranty subject to the examination and approval of the board of directors or the shareholders’ meeting of a listed company shall
be timely disclosed in a newspaper for information disclosure as designated by China Securities Regulatory Commission. The content
as disclosed shall include the resolution of the board of directors or the shareholders’ meeting as well as the total amount of external
guaranty of a listed company and its controlling subsidiaries to other parties and the total amount of guaranties provided by the
listed company to its controlling subsidiaries until the day when the information is disclosed.
(6)
Where a listed company undertakes the provision of loan guaranty , it shall submit such materials as the articles of association,
the original of the resolution of the board of directors or the shareholders’ meeting with respect to the guaranty and the designated
newspaper, on which the relevant issues concerning the guaranty are published.
(7)
As to the guaranty provided by a controlling subsidiary of a listed company, the aforesaid provisions shall be referred to. The controlling
subsidiary shall timely inform the listed company of performing the information disclosure obligations after its board of directors
or its shareholders’ meeting makes the relevant resolution.
2.
We should regulate the examination and approval of loan guaranties by financial institutions in the banking sector and effectively
prevent the credit risks arising from the loans guaranteed by listed companies and granted by financial institutions.
(1)
All the financial institutions in the banking sector shall, in strict compliance with such laws and regulations as the Guaranty Law
of the People’s Republic of China, the Company Law of the People’s Republic of China, and the Interpretation of the Supreme People’s
Court on Some Issues Concerning the Application of the Guaranty Law of the People’s Republic of China, reinforce the examination
of the application for loan as guaranteed by a listed company, effectively prevent the relevant credit risks and shall timely upload
the information on loans and guaranties into the credit management system.
(2)
All financial institutions in the banking sector shall, according to this Circular, the articles of association of the listed company
concerned as well as other relevant provisions, seriously examine the following matters:
a)
Completeness and compliance with relevant laws and regulations of the application materials submitted by the listed company for the
loan it guarantees;
b)
Performance of the listed company in respect of the procedures for the examination and approval of the board of directors or the shareholders’
meeting on its external guaranty;
c)
Performance of information disclosure obligations of the listed company;
d)
Guaranty capability of the listed company; and
e)
Other matter concerning the accommodator’s creditworthiness and payment capability.
(3)
Financial institutions in the banking sector shall, according to such provisions as the Guidance for Commercial Banks on the Fulfillment
of Credit Authorization Work, improve the internal control system so as to control credit risks.
(4)
As to application for loans as guaranteed by a controlling subsidiary of a listed company, the above provisions shall be referred
to.
3.
We should strengthen the supervision and coordination and intensify the responsibility prosecution for any rule-breaking provision
of external guaranty by listed companies.
(1)
The China Securities Regulatory Commission and branches thereof and the China Banking Regulatory Commission and the branches thereof
shall strengthen supervision and coordination, share information with each other, jointly establish a supervision and coordination
mechanism, jointly intensify the prosecution of the violation of an listed company by concealing information on guaranty or providing
a guaranty illegally or the violation of a financial institution in the banking sector by unlawfully granting a loan, and affix legal
liabilities to the parties concerned according to law.
(2)
A listed company or any senior manager thereof such as director, supervisor or manager which violates the provisions of this Circular,
shall be ordered to make rectification and correction by the China Securities Regulatory Commission, and shall be punished according
to law. If a suspected crime is involved in the case, it shall be transferred to the judicial organ.
(3)
Where a financial institution in the banking sector violates laws or regulations, the relevant institution and the parties concerned
shall be punished by the China Banking Regulatory Commission. If a suspected crime is in the case, they shall be subjected to legal
liabilities by means of transferring the case to the judicial organ.
4.
Other Matters
(1)
All listed companies shall revise and improve their articles of association according to the aforesaid provisions. All financial institutions
in the banking sector shall incorporate the guaranty provided by the listed companies into the uniform credit granting system, and
shall, in strict accordance with the relevant provisions, carry out examination and approval as well as administration with respect
to guaranties.
(2)
The term “financial institutions in the banking sector” as mentioned in the present Circular shall be defined according to that as
used in the Law of the People’s Republic of China on Banking Regulation and Supervision. The term “external guaranty” as mentioned
herein shall mean the guaranty provided by a listed company to others, including the guaranty provided by a listed company to its
controlling subsidiary. The term “the total amount of the external guaranty of a listed company and its controlling subsidiaries”
as mentioned herein shall mean the sum of the total amount of guaranties provided by a listed company to other parties and the total
amount of guaranty provided by its controlling subsidiaries to other parties, including the guaranty provided by a listed company
to its controlling subsidiaries.
(3)
This Circular shall apply to all listed financial companies.
(4)
Where the Circular on the Relevant Issues concerning the Provision of Guaranty by Listed Companies to Other Parties( Zheng Jian Gong
Si Zi [2000] No. 61 ) and the Circular on Some Issues concerning the Fund Flow Between a Listed Company and its Associated Parties
as well as the Guaranties Provided by a Listed Company (Zheng Jian Fa [2000] No. 56 ) has any conflict with the provisions of this
Circular, this Circular shall prevail.
(5)
The present Circular shall go into effect as of January 1, 2006.
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