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	NOTICE OF THE CHINA SECURITIES REGULATORY COMMISSION ON THE RELEVANT WORK OF FURTHER REGULATION OF INITIAL PUBLIC OFFERING

	(No. 116 [2003] of the China Securities Regulatory Commission promulgated on September 19, 2003, which shall come into force as of October 1, 2003)


SUBJECT : INITIAL PUBLIC OFFERING
ISSUING DEPARTMENT : CHINA SECURITIES REGULATORY COMMISSION
ISSUE DATE : 09/19/2003
IMPLEMENT DATE : 10/01/2003
LENGTH : 693 words
TEXT :

To fulfill the essential spirit of the Company Law on the conditions for public offering by joint stock limited companies, improve the quality of IPO companies (hereinafter referred to issuers) and promote the restructuring of the securities market, the relevant work of further regulating IPO is hereby notified as follows:

I. As from January 1, 2004, an issuer applying for IPO shall be a joint stock limited company of at least three years from the day it was established.

Waivers will be granted to a joint stock limited company restructured from a state-owned enterprise on an integral basis, a joint stock limited company derived from a limited liability company on an integral basis, or an issuer approved by the State Council to be exempted for the term requirement in the preceding paragraph.

II. An IPO applicant must have been engaged in the same business for the recent three years, during which there should not have been any change of its de facto controller nor significant change to its management. In case of significant change of an issuer's operations due to significant purchase, sale, replacement of assets, corporate merging or splitting, significant increase or reduction of registered capital, or other significant assets restructuring activities, an application for public offering shall not be made until three years later after the relevant activities are completed.

III. An IPO applicant shall act on the Notice on Conducting Survey for the Restructuring of the Enterprises Planning Initial Public Offering (No.259 [1998] of the CSRC) to achieve independence of personnel and finance and integrity of assets. Besides, an IPO applicant shall meet the following requirements:

(1) No competition in the same industry with its controlling shareholder or de facto controller, its wholly owned subsidiaries or entities under its control;

(2) Being capable of conducting independent operations by directly facing the market: for the recent year and the latest period, no more than 30% of its revenue derived from its main operations or raw material (or services) purchases is derived, respectively, from its controlling shareholder (or de facto controller), its wholly owned subsidiaries or entities under its control;

(3) Having a complete set of operations: for the recent year and the latest period, no more than 30% of its revenue from its main operation or raw material (services) purchases is derived, respectively, from commissioned sales or purchases with its controlling shareholder (or de facto controller), its wholly owned subsidiaries or entities under its control;

(4) Having necessary assets for operations: for the recent year and the latest period, no more than 30% of its revenue from its main operations relies on the assets provided by its controlling shareholder (or de facto controller), its wholly owned subsidiaries or entities under its control, through contract undertaking, commissioned operations, leasing or other forms alike;

(5) No administrative post other than board director with its controlling shareholder (or de facto controller) is assumed by its chairman, vice chairman of the board of director, general manager or vice general manager, financial chief, or secretary to the board of directors; and no salary is paid by its controlling shareholder (or de facto controller) to any of such persons; and

(6) No other serious flaws in terms of independence.

IV. An issuer shall establish an institution of independent directors by referring to the Guiding Opinions on Establishing the Institution of Independent Directors in Listed Companies. During an IPO application, no less than one third of the board members must be independent directors, among which there must be at least one professional accountant (a professional accountant refers to a person having a senior professional title or being an CPA).

V. Funds raised in IPO shall be used for defined purposes. Investment projects shall go through careful study and assessment. The amount of funds raised cannot exceed more than twice as the audited net assets figure at the end of the preceding year.

VI. The relevant requirements for listed companies will be formulated separately.

The present Notice, which takes effect as of October 1, 2003, does not apply to the issuers passing the review of the Public Offering Review Committee under the China Securities Regulatory Commission before October 1, 2003.