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These Provisions are formulated as follows for the purpose of further implementing and carrying out the Opinions of the State Council on Promoting the Reform and Opening-up and the Stable Development of the Capital Market (No. 3 [2004] of the State Council), forming a restrictive mechanism for preventing listed companies from abusing their control and effectively protecting the legitimate rights and interests of investors, especially the general public investors: I. IMPLEMENTING ON A TRIAL BASIS A SYSTEM UNDER WHICH THE GENERAL PUBLIC SHAREHOLDERS OF A COMPANY VOTE ON ITS MAJOR DECISIONS (1) While the floating and non-floating shares are separated, as a transitional measure, a listed company shall establish and improve a system under which its general public shareholders vote on its major decisions. None of the following decisions or matters may be carried out or proposed to be carried out unless they have been adopted by the company/s shareholders' assembly in accordance with the laws, regulations and the articles of association of the company and at least 50% of the votes as held by its general public shareholders voting thereon are cast in favor of them: 1. issuance of additional shares (including issuance of overseas listed foreign shares and other certificates of stock), issuance of convertible bonds and allotment of shares to the company's existing shareholders (excluding those for which the shareholder having an actual control of the company has committed to subscribe in full and pay in cash); 2. major asset reorganization, in the case where the total price of the assets purchased exceeds the audited net book value of those assets by 20% or more; 3. repayment by a shareholder of debt owed to the company with shares that the shareholder holds in the company; 4. overseas listing of any affiliate of the company that has a great impact on the company; and 5. other matters that would have a significant impact on the interest of the general public shareholders during the development of the company. After circulating a notice of a meeting of the shareholders' assembly, the company shall make another announcement of the meeting of the shareholders' assembly within three days from the date of recording the shares. When announcing resolutions of its general shareholders' meeting, the company shall disclose the number of general public shareholders who voted on the resolutions, total shares held by such general public shareholders, percentage of such shares to the total general public shares and the voting result, and disclose the shareholding and votes of the first ten principal general public shareholders who voted on the resolutions. (2) A listed company shall actively adopt measures to have more general public shareholders attend its shareholders' assembly meetings. Listed companies are encouraged to provide general public shareholders with an online voting platform for their shareholders' assembly meetings in addition to spot meetings. Each listed company shall provide its shareholders with an online voting platform for votes on matters as listed in (1). On-line voting at a shareholders' assembly meeting of a listed company must be conducted in accordance with the relevant implementation measures. (3) Each listed company shall effectively guarantee the right of its general public shareholders to participate in its shareholders' assembly meetings. The shareholders may vote either personally or by proxy. A company's board of directors, independent directors and shareholders that meet the necessary requirements may collect votes of the company's shareholders that may be cast at the shareholders' assembly meeting. The general public collection of votes of a listed company's shareholders must be conducted in accordance with the relevant implementation measures. (4) All listed companies shall effectively guarantee the right of the general public shareholders to select directors and supervisors. When directors or supervisors are elected at a shareholders' assembly meeting, the opinions of the general public shareholders shall be fully taken into consideration, and it is encouraged to adopt a cumulative voting system. In these Provisions, a cumulative voting system means that when directors or supervisors are elected at a company's shareholders' assembly meeting, each share with voting power shall represent a number of votes equal to the number of director or supervisor candidates up for vote, and a shareholder may either give all his votes to one candidate or distribute his votes among any number of the candidates. (5) To formulate or amend its articles of association, a listed company must implement the foregoing provisions and the relevant implementation measures and have the articles concerned listed clearly. II. IMPROVING THE INDEPENDENT DIRECTOR SYSTEM AND GIVING FULL PLAY TO THE ROLE OF INDEPENDENT DIRECTORS (1) Each listed company shall set up an independent director system. Each independent director shall be devoted to his duty, safeguard the interests of the company and, especially, pay attention to the legitimate rights and interests of the company's general public shareholders. (2) Each independent director shall perform his duty independently and without any influence of the principal shareholder of the company, person who actually controls the company, or any entity or individual who has common interests with the company or such principal shareholder or person. (3) Major connected transactions and the retaining or dismissal of an accounting firm shall be subject to the approval of at least half of the independent directors before proposed for deliberation by the board of directors. With the approval of all independent directors, an independent director may independently retain external auditing and consulting institutions to make audit or give advice with regard to any specific matters of the company, and the expenses thus incurred shall be borne by the company. (4) Each listed company shall establish an independent director working system, under which, the secretary of the board of directors shall conscientiously support the independent director in his performance of duties. A listed company shall ensure that the independent director shall enjoy the right to information as enjoyed by other directors, be promptly provided with the relevant materials and information, regularly informed of the company's operation situation and, where necessary, may conduct on-the-spot inspection. (5) An independent director shall attend the meetings of the board of directors on time, keep abreast of the production, management and operation of the company, conscientiously inquire about and obtain facts and data that are required for decision making. An independent director shall present annual working reports to the company's shareholders' assembly meeting, giving accounts of the performance of his duties. (6) No independent director may be dismissed without justification before the expiry of his term. Any early dismissal of an independent director shall be disclosed by the listed company. III. STRENGTHENING THE INVESTORS RELATION MANAGEMENT AND ENHANCING THE QUALITY OF INFORMATION DISCLOSURE. (1) Each listed company shall, in strict accordance with laws, regulations and listing rules, accurately, completely and fully disclose information in a timely manner. Each listed company shall disclose information in such a manner as being convenient for the general public to read, understand and have access to such information. (2) Each listed company shall conscientiously conduct the investors relation management, establish and improve an investors relation management system and have the secretary of its board of directors take charge of the company's investors relation management. (3) Each listed company shall conscientiously disclose information, treat all of its shareholders fairly and avoid selective disclosure. (4) Each listed company shall exert more efforts to communicate with its investors (especially the general public investors) through a special line for investors' inquiries, having an investors' relation column in its website, regularly interviewing the general public shareholders and promptly answering questions of interest to the general public investors. IV. EACH LISTED COMPANY SHALL IMPLEMENT A PROACTIVE PROFIT DISTRIBUTION POLICY. (1) When determining its profit distribution plan, a listed company shall pay attention to the investors' reasonable return on investment. (2) Each listed company shall have its profit distribution policy incorporated in its articles of association. (3) Where no draft plan for profit distribution in cash is proposed by the board of directors of a listed company, the reasons for such non-distribution shall be disclosed in a periodic report, and the independent director shall render independent comments on that; no listed company may issue additional shares or convertible bonds to the general public or allot shares to its existing shareholders, if it did not make any profit distribution in cash in the last three years. (4) In the case of any irregular appropriation of a listed company's fund by any of the company's shareholders, the listed company shall deduct the dividend otherwise payable to the shareholder for repayment of the appropriated fund. V. STRENGTHENING THE SUPERVISION OVER LISTED COMPANIES AND SENIOR OFFICERS (1) The controlling shareholder of a listed company and the person who actually controls the company bear the duty of good faith towards the company and the company's general public shareholders. Neither the controlling shareholder of a listed company nor the person actually controlling the company may unlawfully appropriate any fund of the company, unlawfully provide any guarantee to any of the company's related parties, or impair the legitimate rights or interests of the company or the company's general public shareholders by means of connected transactions, profit distribution, asset reorganization or external investment. Any controlling shareholder of a listed company or any person who actually controls a listed company who brings damage to the company or the company's general public shareholders shall be subject to legal responsibility. (2) In the case of any unlawful appropriation of a listed company's fund by the company's controlling shareholder or the person who actually controls the company or in the case of any unlawful guarantee provided by a listed company to any of its related parties, before that has been corrected, CSRC shall accept no application by the company for re-financing; in the case of any unlawful appropriation of a listed company's fund by the company's controlling shareholder or the person who actually controls the company, before that has been corrected, CSRC shall accept no application by the company for public offer of securities nor other applications. (3) All senior officers of a listed company shall be devoted to their duties and act in the best interest of the company and all shareholders of the company. If any senior officer of a listed company is not devoted to his duty and is in the breach of the duty of good faith, such acts shall be placed on his record of creditworthiness and be made public at an appropriate time; in the case of a gross violation, the offender shall be subject to market restriction; where any damage has been brought to the company or the company's general public shareholders, the offender shall be liable for such damage. (4) No listed company may appoint as a senor officer of the company any person who is, according to the Company Law of the People's Republic of China, prohibited from being a director, supervisor or manager, who has been subjected to market restriction by CSRC and still in the period of such restriction or who was declared a disqualified candidate by the relevant stock exchange at any time during the last two years. VI. SCOPE OF APPLICATION These Provisions shall apply to companies listed at Shanghai and Shenzhen Stock Exchanges. VII. OTHERS These Provisions shall come into force as of the date of issue. |
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