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In order to further regulate the fund flow between listed companies and their respective controlling shareholders or other associated parties, effectively control the risks of listed companies in providing guaranty to any other party, protect the lawful rights and interests of investors, we hereby give our notice as follows regarding relevant issues in accordance with the "Company Law", the "Securities Law", the "Interim Regulation on Supervision and Administration of the State-owned Assets of Enterprises" and other laws and regulations: I. FURTHER REGULATING THE FUND FLOW BETWEEN LISTED COMPANIES AND THEIR RESPECTIVE CONTROLLING SHAREHOLDERS OR OTHER ASSOCIATED PARTIES The fund flow between listed companies and the controlling shareholders thereof or other associated parties, shall be in compliance with the following provisions: (1) Among the operational funds flowing between a controlling shareholder or any other associated party and a listed company, the possession of the listed company's funds shall be strictly restricted. The controlling shareholder and other associated party shall not demand the listed company to advance expenses such as wages, welfares, insurance premiums, advertisement fees, etc. for themselves, nor shall they assume costs or other expenditures for each other; (2) A listed company shall not provide by the following means any fund, either directly or indirectly, to a controlling shareholder or other associated party for use: 1. Lending the company's funds, gratuitously or non-gratuitously, to the controlling shareholder or other associated party for use; 2. Providing an associated party with entrustment loans through bank or non-bank financial institution; 3. Entrusting the controlling shareholder or other associated party to invest; 4. Issuing a commercial acceptance bill with no truthful transaction background to the controlling shareholder or other associated party; 5. Repaying debts on behalf of the controlling shareholder or other associated party; and 6. Other means ascertained by CSRC. (3) A certified public accountant shall, when auditing a listed company's annual financial statements, issue according to the above prescribed requirements a special statement on the information that the listed company' funds are possessed by the controlling shareholder or other associated party, while the company shall make an announcement regarding the special statement. II. STRICTLY CONTROLLING THE RISKS OF LISTED COMPANIES IN PROVIDING GUARANTY TO ANY OTHER PARTY All directors of a listed company shall prudentially treat and strictly control the debt risks occurring in the provision of guaranty to any other party, and shall bear several and joint liabilities in accordance with the law for the losses caused from irregular or inappropriate provision of guaranty to any other party. The controlling shareholder and other associated parties shall not compel the listed company to provide guaranty to others. A listed company providing guaranty to any other party shall abide by the following provisions: (1) A listed company shall not provide guaranty to the controlling shareholder or any other associated party holding less than 50% of the company's shares, or to any non-legal-person entity or individual; (2) The total amount of guaranty provided by a listed company to any other party shall not exceed 50% of net assets in the combined accounting statement of the recent accounting year; (3) A listed company's "Articles of Association" shall prescribe the procedures for approving the provision of guaranty to any other party, and the credit standards of guaranteed objects. The provision of guaranty to any other party shall be subject to the consent with signatures of not less than 2/3 members of the board of directors, or subject to the approval of the shareholders' general meeting. No debt guaranty shall be provided, either directly or indirectly, for the guaranteed objects with the ratio of liabilities to assets exceeding 70%; (4) A listed company providing guaranty to any other party must demand the other party to provide counter-guaranty, and the provider of the counter-guaranty shall have actual capacity to bear it; (5) A listed company must, strictly in accordance with the relevant provisions in the "Listing Rules" and the "Company's Articles of Association", carefully perform the obligation to disclose information on providing guaranty to any other party, and must, in accordance with the provisions, truthfully provide the certified public accountant with the company's all particulars on provision of guaranty to any other party; and (6) A listed company's independent director shall, in the annual report, make a special statement on the listed company's accumulative and current provision of guaranty to other parties and the implementation of the above provisions, and shall also render his independent opinions. III. MAKING GREATER EFFORTS TO CLEAN UP THE ALREADY EXISTING IRREGULAR POSSESSION OF FUNDS AND GUARANTEED PARTICULARS (1) A listed company shall, within 1 month as of promulgation of the present Notice, make a self-examination on the fund flow between itself and the controlling shareholder or other associated party, the possession of funds and the provision of guaranty to other parties in accordance with the present Notice. The self-examination report shall be submitted to a CSRC's dispatched office where the company is located within the prescribed time limit for record, and shall, after being examined or inspected by the dispatched office, be disclosed as a major event in the coming annual report. (2) The institution for supervision and administration of state-owned assets shall guide and coordinate state controlling listed companies to settle the problems of irregular possession of funds and those of associated guaranty, demand the relevant controlling shareholders to respect and maintain the decision-making power and the lawful rights and interests of the listed companies, promote lawful management of the listed companies, improve the corporate governance structure, and increase the listed companies' market competitive strength. (3) The board of directors of a listed company shall, with regard to the possession of historically formed funds and the provision of guaranty to other parties, formulate practical and feasible settlement measures, guarantee the amount of funds possessed in violation of the present Notice and the amount of the might-be debts formed in the provision of guaranty to other parties, and decrease them by at least 30% in each accounting year. (4) The funds of a listed company, which are possessed by an associated party, shall be paid off in cash in general. On the condition that the current laws and regulations are conformed to, it may probe into a means of financial innovation to pay off the debts, provided that it has to submit the means to the relevant department for approval pursuant to statutory procedures. (5) Strictly controlling the associated parties to pay off the possessed funds of listed companies with non-cash assets. If an associated party plans to pay off the possessed funds of a listed company with non-cash assets, it shall abide by the following provisions: 1. The assets used to offset the debts must fall within the listed company's business category, and be beneficial to increase the listed company's independence and core competitive strength and to reduce associated transactions, and may not be assets not yet put into use or assets without objective and clear net book value; 2. A listed company shall retain an intermediation institution with qualification for the business of securities and futures to evaluate the assets that meet the conditions for offsetting debts with assets, and shall consider the evaluated value of the assets or the audited net book value as the basis for fixing the price of the assets used to offset the debts, provided that the final price shall not damage the listed company's benefits, and the current value of the possessed funds be fully taken into consideration for discount. The auditing report and the evaluation report shall be announced to the public; 3. An independent director shall render his independent opinions regarding the proposal of the listed company's associated party on offsetting debts with assets, or retain an intermediation institution with qualification for the business of securities and futures to issue an independent financial consulting report; 4. The proposal of the listed company's associated party on offsetting debts with assets shall be submitted to CSRC for approval. If CSRC considers this proposal does not conform to the present Notice, or is obviously under the circumstance of damaging the benefits of the company and of medium or small investors, it may stop the implementation of this proposal; and 5. The proposal of the listed company's associated party on offsetting debts with assets must be examined and approved by the shareholders' general meeting, and the shareholders of the associated party shall withdraw from voting. IV. LAWFULLY INVESTIGATING THE LIABILITIES FOR IRREGULAR POSSESSION OF FUNDS AND PROVISION OF GUARANTY TO OTHER PARTIES (1) CSRC and the State-owned Assets Supervision and Administration Commission of the State Council (hereinafter referred to the SASAC) and other institutions shall strengthen supervision and cooperation, jointly establish a supervision and coordination mechanism for regulating the acts of state controlling shareholders, make greater efforts to investigate and punish irregular possession of funds and provision of guaranty to other parties, and lawfully investigate the relevant parties' legal liabilities. (2) Where a listed company or any of its directors, supervisors or senior managers violates the present Notice, CSRC shall order it to make a rectification, impose a punishment in accordance with the law, and shall, within 12 months as of finding the listed company's violation of the present Notice, refuse to accept its application for further financing. (3) Where a listed company's controlling shareholder violates the present Notice or does not timely pay off the funds possessed by it irregularly, CSRC shall refuse to accept its application for publicly issuing securities or other matters subject to approval, and shall circularize its records on bad credits to the SASAC, China Banking Regulatory Commission and the relevant local government. Where a state controlling shareholder violates the present Notice, the institution for supervision and administration of state-owned assets shall impose upon the directly responsible person in charge and the directly liable persons in accordance with the law a disciplinary sanction of not severer than removal from posts; if the violation causes any loss to the benefits of the listed company or other shareholders, the violator shall bear corresponding liability for compensation. If the directly responsible person in charge or a directly liable person of a non-state controlling shareholder violates the present Notice, thus causing any loss to the listed company or seriously damaging the benefits of other shareholders, he shall bear the liability for compensation, and be punished by the relevant department in accordance with the law. If a crime is constituted, criminal liabilities shall be investigated in accordance with the law. V. OTHERS "Associated party" mentioned in the present Notice shall be defined in accordance with the "Enterprise Accounting Rules ¨C Disclosure of Relations and Transactions with Associated Parties" of the Ministry of Finance. For the subsidiary companies incorporated into a listed company's combined accounting statements, their provision of guaranty to other parties and the fund flow between themselves and the associated parties shall be subject to the governance of the present Notice. VI. EFFECTIVE DATE The present Notice shall come into force on the date of its promulgation. |
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