中国证券法英文版Chinese Securities Law (English Version 1)

中国证券法英文版Chinese Securities Law (English

Version 1)

Securities Law of the People’s Republic of China

Decree No. 43 of the President of the People’s Republic of China Passed by the 6th Session of the Standing Committee of the Ninth National People’s Congre ss on 29 December 1998

Revised in accordance with the Decision on Revision of the “Securities Law of the

People’s Republic of China” passed by the 11th Session of the Standing Committee of the Tenth National People’s Congress on 28 August 2004

Revised by the 18th Session of the Standing Committee of the Tenth National People’s Congress on 27 October 2005

Chapter I — General Principles

Article_1

This Law is promulgated for the purposes of standardizing issuance and trading of securities, protecting the legal rights and interests of the investors, safeguarding social and economic order and public

interest and promoting the development of the socialist market economy.

Article_2

The provisions of this Law shall apply to the issuance and trading

of shares, corporate bonds and other securities determined by the State Council within the People’s

Republic of China in accordance with the provisions of the law. Where there are no relevant provisions in this Law, the provisions of the Company Law of the People’s

Republic of China and other laws and administrative regulations

shall apply.

The provisions of this Law shall apply to the trading of listed treasury bonds and securities investment fund units. Where there are special provisions in other laws and administrative regulations, such provisions shall prevail.

The administrative measures on issuance and trading of securities derivatives shall be formulated by the State Council in accordance with the principle of this Law.

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Article_3

Issuance and trading of securities shall comply with the principles of transparency, equity and fairness.

Article_4

Parties engaging in issuance and trading of securities shall enjoy equal legal status and shall comply with the principles of voluntary participation, compensation and honesty and trustworthiness.

Article_5

Issuance and trading of securities shall comply with the provisions of laws and administrative regulations; fraud, insider trading and manipulation of the securities market shall be prohibited.

Article_6

The securities industry and banking industry, trust industry and insurance industry shall implement industry operations and administration separately; securities companies, banks, trust organizations and insurance organizations shall be established separately, unless otherwise provided by the State.

Article_7

The securities regulatory authorities of the State Council shall implement unified supervision and administration on the securities market nationwide in accordance with the provisions of the law.

The securities regulatory authorities of the State Council may establish representative offices based on the actual needs to perform supervision and administration duties as authorized.

Article_8

Under the prerequisite of unified State supervision and administration on issuance and trading of securities and the securities industry association shall be established in accordance with the provisions of the law to implement self-governance.

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Article_9

State audit authorities shall carry out audit and supervision over stock exchanges, securities companies, securities registration and settlement organizations and securities regulatory authorities in accordance with the provisions of the law.

Chapter II — Issuance of Securities

Article_10

Public offering of securities shall satisfy the criteria provided in the laws and administrative regulations and obtain the approval of the securities regulatory authorities of the State Council or authorized department(s) of the State Council in accordance with the provisions of the law. No organization or inpidual shall issue securities for public offering without obtaining prior approval in accordance with the provisions of the law.

The following situations shall be deemed as a public offering:

(1) offering of securities to non-specific targets;

(2) offering of securities to more than 200 specific targets; and

(3) other offerings provided by the laws and administrative regulations. Private offering of securities shall not carry out advertising, open solicitation and disguised publicity campaigns.

Article_11

Issuers applying to make a public share offering or to issue convertible corporate bonds by way of underwriting in accordance with the provisions of the law or to make a public offering of other securities which require a sponsor as provided by the laws and administrative regulations shall appoint a qualified organization to act as a sponsor.

A sponsor shall comply with business rules and industry norms and

the principles of honesty and trustworthiness and due diligence to

conduct due diligence review on the application documents and information disclosure of the issuer and supervise the conduct of the issuer.

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The qualifications of sponsors and the relevant administrative measures on sponsors shall be provided by the securities regulatory authorities of the State Council. Article_12

Public offering of shares for the establishment of a company limited by shares shall satisfy the criteria stipulated in the Company Law of the People’s Republic of China

and other requirements provided by the securities regulatory authorities of the State Council; an application for share offering and the following documents shall be submitted to the securities regulatory authorities of the State Council: (1) articles of association of the company ;

(2) founders’ agreement;

(3) name of the founders, shares subscribed by the founders, type of capital contribution and capital verification certificate;

(4) prospectus;

(5) name and address of the receiving bank; and

(6) name of the underwriter and the relevant agreement.

The sponsor’s letter for issuance issued by the sponsor shall be submitted if a sponsor

is appointed in accordance with the provisions of this Law.

Where the laws and administrative regulations provide that the establishment of a company requires approval, the relevant approval documents shall be submitted. Article_13

A company proposing to making a public offering of new shares shall satisfy the following requirements:

(1) it has a proper and well-functioning organization structure;

(2) it has made profits in consecutive years and is in good

financial standing; (3) its financial accounting documents in the past three years do not contain any fraudulent entries and it has not committed a major violation of law; and (4) other requirements provided by the securities regulatory authorities of the State Council.

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Private offering of new shares by listed companies shall satisfy the criteria stipulated by the securities regulatory authorities of the State Council and the approval of the securities regulatory authorities of the State Council is required.

Article_14

A company proposing to make a public share offering shall submit an application for share offering and the following documents to the securities regulatory authorities of the State Council:

(1) business license of the company;

(2) articles of association of the company;

(3) resolution of a shareholders’ general meeting;

(4) prospectus;

(5) financial accounting report;

(6) name and address of the receiving bank; and

(7) name of the underwriter and the relevant agreement.

The sponsor’s letter for issuance issued by the sponsor shall be submitted if a sponsor

is appointed in accordance with the provisions of this Law.

Article_15

Companies shall use the proceeds from their public share offering

for the usage purpose set out in the prospectus. Where the proceeds are proposed to be used for a different usage purpose, a resolution of a shareholders’ general meeting is required. Where a company uses the proceeds for a different usage purpose arbitrarily and fails to make correction or such act is not ratified by a shareholders’ general meeting, it shall be prohibited from making a public offering of new shares.

Article_16

A public offering of corporate bonds shall satisfy the following requirements: (1) the net assets of a company limited by shares shall not be less than RMB30 million; the net assets of a limited liability company shall not be less than RMB60 million;

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(2) the cumulative balance of corporate bonds shall not exceed 40% of the company’s net assets;

(3) the average distributable profits in the past three years are sufficient to pay out interest for one year of the corporate bonds;

(4) the usage purpose of the proceeds shall comply with State industrial policies; (5) the coupon rate of the corporate bonds shall not exceed the coupon rate stipulated by the State Council; and

(6) other requirements stipulated by the State Council.

The proceeds from a public offering of corporate bonds shall be used for approved purpose(s) only and shall not be used to make up for losses or to pay for non-production expenses.

Listed companies issuing convertible corporate bonds shall, in addition to the requirements stipulated in item (1), satisfy the requirements stipulated in this Law for public offering of shares; and shall obtain the approval of the securities regulatory authorities of the State Council.

Article_17

Companies proposing to make a public offering of corporate bonds

shall submit the following documents to the authorized department(s) of the State Council or the securities regulatory authorities of the State Council:

(1) business license of the company;

(2) articles of association of the company ;

(3) method of offering of corporate bonds;

(4) asset valuation report and capital verification report; and

(5) other documents required by the authorized department(s) of the State Council or the securities regulatory authorities of the State Council.

The sponsor’s letter for issuance issued by the sponsor shall be submitted if a sponsor

is appointed in accordance with the provisions of this Law.

Article_18

Under any of the following circumstances, a company shall not make another public offering of corporate bonds:

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(1) its previous public offering of corporate bonds was not fully subscribed; (2) it has defaulted on corporate bonds issued by way of a public offering or other debts or is late in repayment of principal and interest and such default has not been resolved; or

(3) it has violated the provisions of this Law in changing the usage purpose of the proceeds from a public offering of corporate bonds arbitrarily.

Article_19

The format and method of submission of application documents for issuance of securities to be submitted by issuers for approval to issue securities shall be stipulated by the approval authorities or department(s) in accordance with the provisions of the law.

Article_20

Application documents submitted by issuers to the securities regulatory authorities of the State Council or the authorized

department(s) of the State Council for issuance of securities shall be true, accurate and complete.

Securities service organizations and their personnel issuing the relevant documents for issuance of securities shall perform the

statutory duties strictly and ensure that the documents issued are true, accurate and complete.

Article_21

Issuers proposing to make an initial public offering of shares shall, upon submission of the application documents, disclose the relevant application documents in accordance with the provisions of the

securities regulatory authorities of the State Council.

Article_22

The securities regulatory authorities of the State Council shall establish an issuance review committee in accordance with the provisions of the law to review applications for issuance of shares.

The issuance review committee shall comprise professionals of the securities regulatory authorities of the State Council and the relevant external experts; the

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committee shall vote on applications for issuance of shares and give their review opinion.

Measures on composition of the issuance review committee, tenure of

the committee members and work procedures of the committee shall be stipulated by the securities regulatory authorities of the State Council.

Article_23

The securities regulatory authorities of the State Council shall approve applications for issuance of shares based on the statutory requirements. The approval procedures shall be transparent and be

subject to supervision in accordance with the provisions of the law.

A personnel who participates in the examination and approval of an application for share issuance shall not be related to the applicant and shall not accept directly or indirectly gift(s) from the applicant or

hold shares of the subject application or contact the applicant

privately.

The authorized department(s) of the State Council shall approve applications for issuance of corporate bonds with reference to the provisions of the preceding paragraphs.

Article_24

The securities regulatory authorities of the State Council or the authorized department(s) of the State Council shall decide on approval

or non-approval of an application in accordance with the statutory requirements and procedures within three months from acceptance of the application documents; the period of time taken by the issuer to submit supplementary materials or make correction to its application documents

as instructed shall not be included in the three-month time limit;

unsuccessful applicants shall be informed of the reason for non-approval. Article_25

Where an application for issuance of securities is approved, the issuer shall announce the public offering documents in accordance with the provisions of the laws and

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administrative regulations prior to the public offering of

securities and place such documents at a designated venue for inspection by the public.

Prior to disclosure of information pertaining to the issuance of securities in accordance with the provisions of the law, insiders shall not disclose or pulge such information.

Issuers shall not issue securities prior to announcement of the

public offering documents.

Article_26

Upon approval of an application for issuance of securities and

before the securities are issued, if the securities regulatory

authorities of the State Council or the authorized department(s) of the State Council discover that the application does not satisfy the

statutory requirements or procedures, the approval shall be revoked to halt the issuance of securities. Where the securities have been issued but not listed, the issuer shall, upon revocation of the approval,

refund the issue price and interest computed based on bank interest rate for the same period to the securities holders; the sponsor shall bear

joint liability with the issuer, unless it can prove that it is not at fault; where the controlling shareholders and the actual controlling party are at fault, they shall bear joint liability with the issuer.

Article_27

Where there is a change in the business and gains of the issuer

after it has issued shares in accordance with the provisions of the law, the issuer shall bear the responsibility; the investment risks arising from such change shall be borne by the investors.

Article_28

Where the laws and administrative regulations provide that a public offering of securities to non-specific targets by an issuer is to be underwritten by a securities company, the issuer shall enter into an underwriting agreement with the securities company. Underwriting of securities may take the form of best efforts and firm commitment.

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Best efforts shall refer to the underwriting method under which a securities company sells the securities on behalf of the issuer and returns all unsold securities to the issuer upon expiry of the underwriting period.

Firm commitment shall refer to the underwriting method under which a securities company purchases all the securities from the issuer based on the agreement or purchases the unsold securities upon the expiry of the underwriting period. Article_29

Issuers proposing to make a public offering of securities shall have the right to appoint a securities company of their choice to be the underwriter in accordance with the provisions of the law. Securities companies shall not engage in improper competition to solicit for securities underwriting business.

Article_30

Securities companies engaging in securities underwriting shall enter into a best efforts agreement or firm commitment agreement with the issuer to set out the following matters:

(1) name and address of the parties and their legal representative;

(2) type, quantity, amount and issue price of the securities underwritten on a best efforts or first commitment basis;

(3) the best efforts underwriting period or firm commitment underwriting period and the date of commencement and expiry;

(4) date and method of payment for best efforts underwriting or firm commitment underwriting;

(5) expenses and method of settlement of best efforts underwriting or firm commitment underwriting;

(6) default liability; and

(7) other matters stipulated by the securities regulatory

authorities of the State Council.

Article_31

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Securities companies engaging in securities underwriting shall

verify the veracity, accuracy and completeness of the public offering documents; where the documents are found to contain fraudulent entries, misleading representation or major omission, selling activities shall not be conducted; where the selling activities have commenced, they

shall be suspended forthwith and correction measures shall be adopted. Article_32

Public offering of securities to non-specific targets which exceed RMB50 million in total par value shall be underwritten by a syndicate of underwriters; the syndicate of underwriters shall comprise the lead underwriter and securities companies participating in the underwriting.

Article_33

The maximum period for best efforts underwriting or firm commitment underwriting shall not exceed 90 days.

Securities companies shall ensure that the securities underwritten

on a best efforts basis or firm commitment basis shall be sold to subscribers first during the best efforts underwriting period or firm commitment underwriting period; securities companies shall not reserve securities underwritten on a best efforts basis for themselves or buy securities purchased and retained under the firm commitment underwriting agreement. Article_34

The issue price of shares issued at a premium shall be negotiated and determined by the issuer and the underwriter(s).

Article_35

Upon expiry of the best efforts underwriting period or firm commitment underwriting period, the issuance shall be deemed as unsuccessful if the shares sold to investors are below 70% of the proposed size of public share offering. The issuer shall refund the

issue price and interest computed based on bank interest rate for the same period to the subscribers.

Article_36

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Upon expiry of the best efforts underwriting or firm commitment underwriting period of a public share offering, the issuer shall file

the outcome of share issuance with the securities regulatory authorities of the State Council within the stipulated period for records.

Chapter III — Trading of Securities

Section 1 — General Provisions

Article_37

The securities traded by the buyer and seller in a securities transaction shall be securities which are issued and delivered in accordance with the provisions of the law. Securities which are not issued in accordance with the provisions of the law shall not be traded.

Article_38

Shares, corporate bonds and other securities which are issued in accordance with the provisions of the law shall not be traded within the moratorium on transfer stipulated by the law.

Article_39

Shares, corporate bonds and other securities issued by way of a public offering in accordance with the provisions of the law shall be listed and traded on stock exchanges established in accordance with the provisions of the law or on other securities trading venue approved by the State Council.

Article_40

Trading of securities listed on stock exchanges shall take the form of open centralised trading method or other methods approved by the securities regulatory authorities of the State Council.

Article_41

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Securities traded by buyers and sellers may be in script form or other forms stipulated by the securities regulatory authorities of the State Council.

Article_42

Securities trading shall be in the form of spot transaction or other forms stipulated by the State Council.

Article_43

The personnel of stock exchanges, securities companies, securities registration and settlement organizations and the securities regulatory authorities and other personnel prohibited by the laws and

administrative regulations from trading in shares shall not buy and sell shares directly or using an alias or hold shares in the name of another

person or accept gifts of shares from others during their term of appointment or the statutory period.

The aforesaid personnel shall transfer such shares held by him/her in accordance with the provisions of the law prior to taking up an appointment of the aforesaid posts. Article_44

Stock exchanges, securities companies and securities registration and settlement organizations shall keep information of accounts opened and maintained by their customers confidential in accordance with the provisions of the law.

Article_45

A securities service organization and its personnel involved in the issuance of an audit report, an asset valuation report or a legal opinion etc for a share issuance shall not buy or sell such shares within the underwriting period of the shares and within six months from the expiry of the underwriting period.

With the exception of the provisions in the preceding paragraph, a securities service organization and its personnel involved in the issuance of an audit report, an asset valuation report or a legal opinion for a listed company shall not buy or sell the shares of the listed company during the period from its acceptance of the appointment by the listed company to the 6th day after the announcement of the aforesaid document(s).

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Article_46

Securities transaction fees shall be reasonable and the fee items, rates and payment method shall be made public.

Fee items and rates of and administrative measures on securities transaction fees shall be standardized and stipulated by the relevant department(s) of the State Council. Article_47

The gains made by a director, supervisor or senior management personnel of a listed company holding 5% of more of the shares of the listed company from selling shares of the company within six months from the purchase of such shares or buying shares of the company within six months from the sale of such shares shall belong to the company; the board of directors of the company shall collect such gains. However, an underwriter which holds 5% or more of the shares of a listed company from buying the unsold shares in accordance with the underwriting agreement shall not be subject to the six-month moratorium for selling of such shares.

Where the board of directors of the company fails to perform the duties stipulated in the preceding paragraph, the shareholders shall have the right to demand that the board of directors perform the duties within 30 days. Where the board of directors of the company fails to perform the duties within the aforesaid period, the shareholders shall have the right to file a lawsuit directly in their own name with a people’s court to protect the interests of the company.

Where the board of directors of the company fails to perform the duties in accordance with the provisions of the first paragraph, the

directors who are accountable shall bear joint liability in accordance with the provisions of the law.

Section 2 — Listing of Securities

Article_48

An applicant applying for listing of securities shall submit its application to the stock exchange for examination and approval by the stock exchange in accordance with the provisions of the law and enter

into a listing agreement with the stock exchange.

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Stock exchanges shall arrange for listing of treasury bonds in accordance with the decision of the authorized department(s) of the

State Council.

Article_49

An organization which is qualified to act as a sponsor shall be appointed as a sponsor for listing applications for shares, convertible corporate bonds or other securities which require a sponsor as

stipulated by the laws and administrative regulations. The provisions of Article 11(2) and 11(3) shall apply to sponsors for listing applications.

Article_50

A company limited by shares applying for a listing of shares shall satisfy the following requirements:

(1) the shares have been approved by the securities regulatory authorities of the State Council and have been issued by way of a public offering;

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