Chapter 1: General Provisions

Article 1    These Measures are formulated pursuant to the provisions of the Company Law, the Securities Law, and other relevant laws and administrative regulations, for the purposes of regulating major asset reorganization of listed companies, protecting the lawful rights and interests of listed companies and investors, and promoting the constant improvement of the quality of listed companies, and maintaining the order of the securities market and the social public interest.    

Article 2    These Measures shall be applicable to asset trading behaviors, other than the daily business activities, conducted by a listed company and companies held or controlled by it, such as the purchase and sale of assets, or asset trading by other means that reach a specified proportion, thereby causing major changes to the main business, assets, or income of that listed company (hereinafter, "major asset reorganization").

Purchase of assets by a listed company by means of issuing shares shall be in compliance with the provisions of these Measures.

If a listed company, according to the fund raising purposes disclosed in the securities issuance documents that are verified and approved by the China Securities Regulatory Commission (hereinafter, the "CSRC"), uses the raised funds to purchase assets or make outbound investments, these Measures shall not apply.    

Article 3    Organizations and individuals shall not harm the lawful rights and interests of listed companies and their shareholders by way of major asset reorganization.    

Article 4    Where a listed company carries out major asset reorganization, the parties concerned shall disclose or provide information in a timely and fair manner, ensure the truthfulness, accuracy, and completeness of the information disclosed or provided, and shall be free from any false record, misleading statement, or major omission.    

Article 5    Directors, supervisors, and senior management personnel of a listed company shall, in a major asset reorganization, be faithful, diligent, and conscientious, maintain the safety of the company's assets, and protect the lawful rights and interests of the company and all the shareholders.    

Article 6    Securities service institutions and personnel that provide services for major asset reorganization shall abide by the relevant provisions of laws, administrative regulations, and relevant provisions of the CSRC, observe the business criteria and moral standards generally accepted in that sector, strictly perform their duties, and shall not seek illegitimate benefits. They shall bear liability for the truthfulness, accuracy, and completeness of the documents they have prepared and issued.    

Article 7    Organizations and individuals shall be obliged to keep confidential the information on major asset reorganization they have access to before such information is disclosed in accordance with the law.

Organizations and individuals are forbidden to conduct insider dealing, manipulate the securities market, or commit other illegal acts by using the information on major asset reorganization.    

Article 8    The CSRC shall regulate the major asset reorganization of listed companies in accordance with the law.    

Article 9    The CSRC shall establish a Listed Companies' Acquisitions and Restructuring Review Committee (hereinafter, "Merger, Acquisition, and Restructuring Committee") under the Public Offering Review Committee. The Merger, Acquisition, and Restructuring Committee shall vote on the application for major asset reorganization submitted thereto for deliberation, and present examination and verification opinions.    

 

Chapter 2: Principles and Standards for Major Asset Reorganization

Article 10    The major asset reorganization carried out by listed companies shall comply with the following requirements:

(1) It shall meet the industrial policies of the State and the provisions of laws and administrative regulations on environmental protection, land administration, anti-monopoly, etc.;

(2) It will not cause inconformity of the listed company with the stock listing conditions;

(3) The price of assets involved in the major asset reorganization is fair, and there exists no circumstance that harms the lawful rights and interests of the listed company and the shareholders;

(4) The ownership of the assets involved in the major asset reorganization is clear, and there exists no legal obstacle in the change of owner or transfer of such assets, and the relevant creditor's rights and debts are legally handled;

(5) It is conducive to strengthening the listed company's sustained operational capacity, and there exists no circumstance which may lead to a result that the main assets of the listed company are cash or the listed company has no specific operational business after the reorganization;

(6) It is good for the listed company to maintain independence from its actual controller or affiliated parties in terms of business, assets, finance, personnel, organization, etc., and comply with the relevant provisions of the CSRC on the independence of listed companies; and

(7) It is good for the listed company to form or maintain a healthy and effective legal person governance structure.    

Article 11    Purchase or sale of assets by a listed company or a company held or controlled by it shall constitute major asset reorganization provided it meets any of the following standards:

(1) The total amount of assets purchased or sold accounts for 50 percent or more of the total amount of end-of-period assets of that listed company in the consolidated financial and accounting report of the latest accounting year that has been audited;

(2) The business income from the purchased or sold assets in the latest accounting year accounts for 50 percent or more of the business income in the consolidated financial and accounting report of the same period that has been audited; or

(3) The net assets purchased or sold account for 50 percent or more of the end-of-period net assets in the consolidated financial and accounting report of the latest accounting year that has been audited, and exceed RMB 50 million.

If the purchase or sale of assets does not reach the standards specified in the preceding paragraph, but the CSRC discovers that there exist major problems that may harm the lawful rights and interests of the listed company or the investors, the CSRC may, according to the principle of prudent supervision and administration, order the listed company to disclose the relevant information, suspend the transactions, and submit relevant application documents pursuant to the provisions of these Measures.    

Article 12    As from the day when the control power is changed, where the total assets that a listed company has purchased from the purchaser account for more than 100% of the total amount of the end-of-period assets of the listed company in the consolidated financial and accounting report of the previous accounting year that has been audited before the change of its control power, in addition to meeting the requirements prescribed in Articles 10 and 42 herein, the operational entity from which the assets are purchased by the listed company shall meeting the conditions that it has been running successively for at least three years and the annual net profit in the latest two accounting years is positive and accumulatively exceeds RMB 20 million. If the assets purchased by the listed company belong to special industries of finance, venture capital investment, etc., the CSRC shall formulate separate regulations.

After the major asset reorganization specified in the preceding paragraph is completed, the listed company shall abide by the relevant provisions of the CSRC on corporate governance and normal operation of listed companies, maintain independence from its controlling shareholder, actual controller and other enterprises under its control in terms of business, assets, finance, personnel, organization, etc., and have no horizontal competition or affiliated transactions that are obviously unfair with its controlling shareholder, actual controller and other enterprises under its control.    

Article 13    In the calculation of the proportion specified in Articles 11 and 12 herein, the following provisions shall be complied with:

(1) If the assets purchased are equity, the total amount of the assets is the product of the total amount of the assets of the invested enterprise and the equity percentage of the investment or the transaction amount, whichever is higher; the business income is the product of the business income of the invested enterprise and the equity percentage of the investment; net assets amount is the product of the total net assets of the invested enterprise and the equity percentage of the investment or the transaction amount, whichever is higher. If the assets purchased are equity interests, the total amount of assets, business income, and amount of net assets shall be the product of the total amount of the assets, business income, and amount of net assets of the invested enterprise and the proportion of equity interests that investment accounts for respectively.

If the listed company obtains the share controlling right of the invested enterprise by purchasing the equity interests of the latter, the total amount of assets shall be the total amount of assets of the invested enterprise, or the amount of transaction, whichever is higher; the business income shall be the business income of the invested enterprise; and the amount of net assets shall be the amount of net assets of the invested enterprise, or the amount of transaction, whichever is higher. If the listed company losses the share controlling right of the invested enterprise by selling the equity interests of the latter, the total amount of assets, business income, or amount of net assets shall be the total amount, business income, and amount of net assets of the invested enterprise respectively.

(2) If the assets purchased are non-equity assets, the total amount of assets shall be the book value of the assets or the amount of transaction, whichever is higher; and the amount of net assets shall be the difference between the relevant assets and the book value of the debts or the amount of transaction, whichever is higher. If the assets sold are non-equity assets, the total amount of assets and net assets shall be the book value of the assets and the difference between the relevant assets and book value of the debts respectively. If the non-equity assets do not involve debts, the standards for net assets specified in Item (3) of Paragraph 1 of Article 11 herein shall not apply.

(3) If the listed company purchases and sells assets at the same time, the relevant proportions for the purchase and sale of assets shall be calculated respectively, and the higher proportion shall prevail; and

(4) If the listed company purchases and sells the same or relevant assets within 12 months in a row, the corresponding amount shall be calculated separately on an accumulative basis. Asset trading activities that have been submitted to and approved by the CSRC in accordance with the provisions of these Measures do not need to be included in the accumulative calculation; however, this does not apply to the circumstances prescribed by Article 12 herein.

Subject matters for the transaction that are owned or controlled by the same trading party, or fall within the same or similar business scope, or fall under other circumstances acknowledged by the CSRC, may be determined as the same or relevant assets.     

Article 14    For the purposes of Article 2 of these Measures, asset trading conducted by other means shall include:

(1) Establishment of a new enterprise with others, increase or decrease of capital of the existing enterprises;

(2) Operating or leasing the assets of other enterprises under entrustment, or entrusting others to operate or lease the operating assets;

(3) Accepting conditional assets donations, or donating assets to other parties; and

(4) Other circumstances acknowledged by the CSRC according to the principle of prudent regulation.

If the aforementioned asset trading constitutes, in nature, purchase or sale of assets, and the relevant proportion that is calculated according to the standards specified in these Measures reaches 50 percent or more, the listed company shall perform information disclosure and other relevant obligations and submit application documents according to the provisions of these Measures.    

 

Chapter 3: Procedures for Major Asset Reorganization

Article 15    Where a listed company conducts preliminary negotiation on matters related to major asset reorganization with the other trading party, it shall promptly take necessary and sufficient confidential measures, formulate strict and effective confidential rules, and restrict the scope of personnel who may know of the relevant sensitive information. If the listed company and the other trading party engage a securities service institution, they shall promptly sign a confidentiality agreement with that securities service institution.

If, before the listed company announces the resolution of the board of directors on major asset reorganization, relevant information has been circulated on the media, or unusual fluctuations occur to the stock transactions of the company, the listed company shall promptly make public announcement of the relevant plan, scheme, situation of the relevant matters, relevant progress, and risks, etc., and handle other relevant matters in accordance with the information disclosure rules.    

Article 16    A listed company shall engage an independent financial advisor, a law firm, and an accounting firm that has relevant securities business qualifications, and other securities service institutions to issue opinions on the major asset reorganization.

The independent financial advisor and law firm shall, in a prudent manner, verify whether or not the major asset reorganization constitutes affiliated transaction, and express explicit opinions according to the relevant facts determined in the verification. If the major asset reorganization involves affiliated transaction, the independent financial advisor shall express explicit opinions regarding the impact of the present reorganization on the non-affiliated shareholders of the listed company.

If the pricing for the asset trading is on the basis of asset evaluation result, the listed company shall engage an asset evaluation institution that has corresponding securities business qualifications to issue an asset evaluation report.

If the securities service institution adopts the professional opinions of other securities service institutions or personnel in the opinions it issues, it shall still conduct due diligence, verify the contents of the professional opinions it has adopted, and be responsible for the conclusions derived from using the professional opinions of other securities service institutions or personnel.    

Article 17    After a listed company and the other trading party concludes an appointment contract with a securities service institution, the securities service institution shall not be replaced without any justifiable cause. Where a replacement of the securities service institution is truly needed under justifiable grounds, the specific reasons for the replacement and statements of the securities service institution shall be disclosed in the application materials.    

Article 18    Where a listed company intends to purchase assets, it shall provide a profit forecast report for the assets to be purchased. Where a listed company intends to carry out major asset reorganization as specified in Items (1), (2) and (3) of Paragraph 1 of Article 28 herein and purchase assets by means of share issuance, it shall also provide its profit forecast report. The profit forecast report shall be subject to audit by an accounting firm that has relevant securities business qualifications.

If the listed company fails to provide the aforesaid profit forecast report with a good reason, it shall explain such reason, make special risk indications in the written report for major asset reorganization (or written report for purchase of assets by means of share issuance, the same below), and, in the part of discussion and analysis by the management, elaborate in detail the impact of the reorganization on the sustained operation capacity and future development of the company.    

Article 19    If, in major asset reorganization, pricing of relevant assets is based on the asset evaluation result, the asset evaluation institution shall, in principle, adopt two or more evaluation methods to conduct the evaluation.

The board of directors of a listed company shall express explicit opinions on the independence of the evaluation institution, reasonableness of the evaluation hypothesis, relevance between the evaluation method and evaluation purpose, and the fairness of pricing. Independent directors of the listed company shall express independent opinions on the independence of the evaluation institution, reasonableness of the evaluation hypothesis, and fairness of pricing.    

Article 20    Major asset reorganization of a listed company shall be subject to a resolution by the board of directors in accordance with the law, and shall be submitted to the general board of shareholders for approval.

The board of directors of the listed company shall make explicit judgment on whether or not the major asset reorganization constitutes an affiliated transaction, and disclose the same as a subject matter of the resolution of the board of directors.

Independent directors of the listed company shall express independent opinions on the major asset reorganization on the basis of full understanding of the relevant information. If the major asset reorganization constitutes an affiliated transaction, independent directors may engage an independent financial adviser separately to express opinions on the impact of that transaction on the non-affiliated shareholders of the listed company. The listed company shall actively assist the independent directors to access the relevant materials, and, by arranging field investigation, organizing securities service institutions to report the relevant information, or by other ways, provide necessary support and convenience for independent directors to perform their duties.    

Article 21    A listed company shall, on the next working day after the board of directors makes a resolution on major asset reorganization, disclose at least the following documents, and send the copies to the dispatched institution of the CSRC at the place where the listed company is located (hereinafter, the "dispatched institution"):

(1) Resolution of the board of directors and opinions of the independent directors; and

(2) The major asset reorganization plan of the listed company.

Written report on the major asset reorganization, independent financial advisory report, legal opinions, and the auditing report, asset evaluation report, and verified profit forecast report that are involved in the reorganization shall, at the latest, be announced at the same time with the announcement on convening the general meeting of shareholders.

The contents and format of information disclosure documents as specified in Item (2) of Paragraph 1, and Paragraph 2 of this article shall be stipulated separately.

The listed company shall, in at least one newspaper or periodical designated by the CSRC, announce the resolution of the board of directors, opinions of the independent directors, and summary of the written report on major asset reorganization, and shall, disclose the full text of the written report on the major asset reorganization and the report or opinions issued by the relevant securities service institutions on the website of the stock exchanges.

Article 22    A resolution on major asset reorganization made by the general board of shareholders of a listed company shall, at least, include the following matters:

(1) Method, subject matter and counterparty of the present major asset reorganization;

(2) Transaction price or price range;

(3) Method of pricing or basis of pricing;

(4) Attribution of the profits and losses of the relevant assets from the base day of pricing to the delivery date;

(5) Contractual obligations of and liability for breach of contract for transferring the ownership of the relevant assets;

(6) Validity period of the resolution;

(7) Specific authorization to the board of directors for handling the matters concerning the present major asset reorganization; and

(8) Other matters that are required to be specified.         

Article 23    A resolution of the general meeting of shareholders of a listed company on the matters concerning major asset reorganization shall be adopted by at least two thirds of the voting rights held by the shareholders present at the meeting.

If the matters concerning the major asset reorganization by the listed company are affiliated to the company's shareholders or their affiliated parties, the affiliated shareholders shall withdraw when the general board of shareholders conducts voting on such matters.

If the counterparty has reached an agreement or a tacit understanding with the controlling shareholder of the listed company on accepting the transfer of the equity interests of the listed company or on recommending directors to the listed company, and such agreement or tacit understanding may cause changes to the actual controlling rights of the listed company, the controlling shareholder and its affiliated parties shall withdraw from voting.

Where the listed company convenes a general meeting of shareholders on matters concerning the major asset reorganization, the meeting shall be a live meeting, and the listed company shall provide online voting or other lawful ways for the convenience of the shareholders to participate in the meeting.

Article 24    A listed company shall announce a resolution on the major asset reorganization on the next working day after that resolution is made by the general board of shareholders, and shall prepare application documents according to the relevant provisions of the CSRC, and entrust an independent financial advisor to make the declaration to the CSRC within three working days, with a copy thereof sent to the dispatched institution at the same time.    

Article 25    All the directors, supervisors, senior management personnel of a listed company shall make a commitment to ensure that the application documents for major asset reorganization are free from any false record, misleading statement, or major omission.    

Article 26    The CSRC shall, according to the statutory conditions and statutory procedures, make a decision of approval or non approval of the application for major asset reorganization.

Where the CSRC puts forward feedback opinions during the period of verification, requesting the listed company to make written explanations, the listed company shall, within 30 days as of receipt of the feedback opinions, provide written opinions in reply with the cooperation of the independent financial advisor. If the listed company fails to provide such opinions within the specified time limit, it shall, on the next day after the expiration date, make public announcement of the progress of the present major asset reorganization and the specific reasons for the failure to provide such opinions in a timely manner.

Article 27    If, during the period of verification by the CSRC, the listed company intends to make a change to the transaction target, subject matter of transaction, transaction price, etc., and such change constitutes a major adjustment to the reorganization plan, the listed company shall submit the changed reorganization plan to the general board of shareholders for deliberation after it is adopted through voting by the board of directors, and submit application documents for major asset reorganization again to the CSRC in accordance with the provisions of these Measures and make a public announcement at the same time.

If, during the period of verification by the CSRC, the board of directors of a listed company shall make a resolution to terminate or withdraw the application for major asset reorganization, it shall explain the reasons and make a public announcement, and submit the resolution to the general board of shareholders for deliberation in accordance with the provisions of the articles of association of the company.    

Article 28    Major asset reorganization of a listed company shall, in any of the following circumstances, be submitted to the Merger, Acquisition, and Restructuring Committee for verification:

(1) It conforms to the provisions of Article 12 herein;

(2) The total amount of assets sold by the listed company or the total amount purchased thereby both account for 70 percent or more of the total amount of end-of-period assets of that listed company in the consolidated financial and accounting report of the latest accounting year that has been audited;

(3) The listed company sells all the business assets, and meanwhile purchases other assets; or

(4) Other circumstances that the CSRC deems, during its verification, that the submission to the Merger, Acquisition, and Restructuring Committee is necessary.

If the major asset reorganization does not fall in the circumstances specified in the preceding paragraph but has any of the following cases, the listed company may apply to the CSRC for submitting the present reorganization plan to the Merger, Acquisition, and Restructuring Committee for verification:

(1) The asset purchased by the listed company is a complete operational entity as specified in Article 50 herein, of which the business performance requires simulated calculation; or

(2) The listed company expresses its dissent from the feedback opinions of the relevant functional department under the CSRC.    

Article 29    A listed company shall, after it has received the notice of the CSRC on convening a meeting of the Merger, Acquisition, and Restructuring Committee to verify its application for major asset reorganization, promptly make a public announcement, and apply for the handling of trading suspension matters from the beginning of the meeting to the disclosure of the voting result.

A listed company shall, after receipt of the voting result of the Merger, Acquisition, and Restructuring Committee on its application for major asset reorganization, make a public announcement on the voting result on the next working day and apply for resumption of trading. It shall be stated in the announcement that the company will make another public announcement after receiving the decision from the CSRC whether the reorganization has been approved or not.    

Article 30    After a listed company receives the decision made by the CSRC on approval or disapproval of its application for major asset reorganization, it shall make a public announcement on the next working day.

If the CSRC approves its application, the listed company shall disclose the relevant documents according to the provisions on information disclosure rules while the public announcement on the approval decision is made.    

Article 31    If the CSRC approves the application for major asset reorganization by a listed company, the listed company shall implement the reorganization plan in a timely manner, formulate a written report on the implementation within three working days upon completion of the implementation, submit a written report to the CSRC and its dispatched institution, and the securities exchange, and make a public announcement.

The independent financial advisor and law firm engaged by the listed company shall verify the compliance and risks of the implementation of the major asset reorganization, transfer of the ownership of assets, and relevant follow-up matters, and express explicit conclusive opinions. Opinions expressed by the independent financial advisor and law firm shall be reported and announced together with the implementation report.    

Article 32    If the implementation of the present major asset reorganization has not been completed within 60 days upon receipt of the approval documents of the CSRC, the listed company shall report the implementation progress to the CSRC and its dispatched institution on the next working day after the expiration date, and make a public announcement. The listed company shall make public announcement every 30 days thereafter until the implementation is completed. If the listed company fails to complete the implementation within 12 months, the approval documents will become invalid.    

Article 33    If any important matter subject to disclosure according to the laws and regulations occurs during the implementation of the major asset reorganization, the listed company shall report to the CSRC and its dispatched institution in a timely manner. If that matter leads to a substantial change to the present reorganization, the reorganization shall be resubmitted to the CSRC for verification and approval.    

Article 34    When providing a profit forecast report in accordance with the provisions of Article 18 herein, the listed company shall make a separate disclosure of the difference between the actual profit and the predicted profit of the listed company and relevant assets in the relevant annual report after completion of the major asset reorganization, and the accounting firm shall issue special audit opinions for that.

Where an asset evaluation institution evaluates the assets to be purchased according to the present value method, hypothetical development method, and other evaluation methods that are based on the future prospective profit, and uses the evaluation result as the basis for pricing, the listed company shall, in its annual reports of the three years after the completion of the major asset reorganization, make a separate disclosure of the difference between the actual profit of relevant assets and the estimated profit of relevant assets in the evaluation report, and the accounting firm shall issue special audit opinions for that. The counterparty shall conclude an explicit and feasible compensation agreement with the listed company in the circumstance that the actual profit of the assets is lower than the estimated profit.    

Article 35    Where the major asset reorganization of a listed company falls in any of the following circumstances, the independent financial advisor shall, in a timely manner, issue verification opinions, report to the CSRC and its dispatched institution, and make a public announcement:

(1) Before the CSRC makes an approval decision, the listed company has made changes to the transaction target, subject matter of transaction, and transaction price, etc., and the changes constitutes a major adjustment to the original reorganization plan; or

(2) After the CSRC makes an approval decision, an important matter occurs to the listed company during its implementation of the reorganization, and that matter leads to a substantial change to the present reorganization.    

Article 36    An independent financial advisor shall, according to the relevant provisions of the CSRC, perform the duties of sustained supervision and guidance of the listed companies that implement major asset reorganization. The period of sustained supervision and guidance shall commence from the day when the CSRC approves the present reorganization, and shall not be less than one fiscal year. With regard to the implementation of a major asset reorganization prescribed in Article 12 herein, the period of sustained supervision and guidance thereof shall commence from the day when the CSRC approves the present reorganization, and shall not be less than three fiscal years.    

Article 37    An independent financial advisor shall, taking into consideration the annual reports of both the year when the listed company implements the major asset reorganization and the first fiscal year after the reorganization is completed, and, within 15 days upon disclosure of the annual report, issue sustained supervisory and guiding opinions regarding the following matters carried out in the major asset reorganization, report to the dispatched institution, and make a public announcement:

(1) Information on the delivery of the trading assets and transfer of ownership;

(2) Performance of the commitment of each party to the trading;

(3) Realization of the estimated profit;

(4) Current situation of the development of the businesses mentioned in the part of discussion and analysis by the management;

(5) Governance structure and operation status of the company; and

(6) Other matters that are different from the reorganization plan already published.

The independent financial advisor shall also take into consideration the annual reports of the second and third fiscal years after the major asset reorganization stipulated in Article 12 herein is completed, and, within 15 days upon disclosure of the annual report, issue sustained supervisory and guiding opinions regarding the matters stipulated in Items (2) to (6) of the preceding paragraph, report to the dispatched institution, and make a public announcement.    

 

Chapter 4: Information Management for Major Asset Reorganization

Article 38    Where a listed company plans and implements a major asset reorganization, the relevant information disclosure obligor shall, on a fair basis, disclose to all the investors the relevant information that may cause great impact on the trading price of the stocks of the listed company (hereinafter, "sensitive information for stock price"), and shall not, on a selective basis, disclose the information to specific targets in advance.   

Article 39    The shareholders and actual controller of a listed company, and other relevant institutions and personnel that participate in the planning, argumentation, decision-making, and other steps of a major asset reorganization shall promptly and accurately report the relevant information to the listed company, and cooperate with the listed company to disclose the information in a prompt, accurate, and complete manner. If the listed company knows of the sensitive information for stock price, it shall apply for trading suspension with the securities exchange and disclose such information.    

Article 40    A listed company and its directors, supervisors, and senior management personnel, counterparty of a major asset reorganization and its affiliated parties, directors, supervisors, and senior management personnel or person-in-charge of the counterparty and affiliated parties, securities service institution and practice personnel engaged by parties to the trading, relevant organization and personnel that participate in the planning, argumentation, decision-making, examination and approval, and other steps of the major asset reorganization, and other relevant organization and personnel that know of or may know of the sensitive information for stock price due to lineal relationship, provision of service, and business contact, shall, before the sensitive information for stock price of the major asset reorganization is disclosed, bear the obligations of keeping such information confidential, and shall be forbidden from using such information to conduct insider trading.    

Article 41    Where a listed company plans the matters related to major asset reorganization, it shall record in detail the progress of each specific step during the planning, including the specific time, location, participating organization and personnel, contents of negotiation and resolution, etc., that are related to the negotiation of relevant plans, formation of relevant intent, and conclusion of relevant agreement or letter of intent. It shall also make a written memorandum of the trading progress and keep it appropriately. All the personnel that participate in each specific step shall sign in the memorandum immediately for confirmation.

Where the listed company predicts that it is difficult to keep confidential the planned matters of major asset reorganization or such matters have already been divulged, it shall, in a timely manner, apply for trading suspension with the securities exchange, until the relevant information is truthfully, accurately, and completely disclosed. During the period of trading suspension, the listed company shall make public announcement of the status of the event at least once in a week.

Where abnormal fluctuation occurs to the stock trading price of a listed company due to market hearsay on major asset reorganization, the listed company shall, in a timely manner, apply for trading suspension with the securities exchange, and verify whether or not there exist reorganization matters that affect the stock trading price of the listed company and make clarification, and shall not refuse to perform the information disclosure obligations on the ground of the uncertainties of the relevant matters.    

 

Chapter 5: Special Provisions on Purchase of Assets through Issuance of Shares

Article 42    Purchase of assets by a listed company through issuance of shares shall comply with the following provisions:

(1) It is conducive to enhancing the asset quality of the listed company, improving the financial status, and strengthening sustained profit making ability; it is beneficial to the listed company for reducing affiliated transactions, avoiding horizontal competition, and enhancing independence;

(2) A CPA has issued an auditing report with unqualified opinions for the financial and accounting report of the listed company for the latest year and latest period. If the CPA issues a qualified opinion, adverse opinion, or disclaimer of opinion in the auditing report, the financial and accounting report shall be subject to special verification by the CPA to confirm that the major impact of the matters relating to the qualified opinion, adverse opinion, or disclaimer of opinion has been eliminated or will be eliminated through the present trading;

(3) Assets purchased by the listed company through issuance of shares shall be business assets with clear ownership, and the formalities for transfer of its ownership shall be completed within the agreed time limit; and

(4) Other conditions specified by the CSRC.

In order to promote industrial integration and strengthen synergies with the existing main business, a listed company may, when its control power does not change, purchase assets from specific targets other than its controlling shareholder, actual controller or affiliated parties under its control by means of issuing shares, of which the volume shall not be less than 5% of the total share capital of the listed company after the share issuance. If the volume is less than 5% of the total share capital of the listed company after the share issuance, the trading amount of the assets to be purchased by a listed company in main board or small and medium-sized board shall not be lower than RMB 100 million while the trading amount of the assets to be purchased by a listed company in the growth enterprise market shall not be lower than RMB 50 million.

After a specific target that subscribes the shares issued non-publicly by a listed company with cash or assets, if the listed company uses the funds raised through the same issuance of shares to purchase assets from that specific target, such an act shall be deemed as purchasing assets through issuance of shares.    

Article 43    A listed company that purchases assets through issuance of shares may, at the same time, raise part of the supporting funds, of which the pricing method shall be subject to the relevant existing regulations.    

Article 44    The price for the shares issued by a listed company shall not be lower than the average trading price of stocks of the company for the 20 trading days before the resolution of the board of directors on the present purchase of assets through issuance of shares is announced.

The formula for calculating the average trading price as mentioned in the preceding paragraph shall be: average trading price of stocks of the company for the 20 trading days before the resolution of the board of directors is announced = total trading amount of stocks for the 20 trading days before the resolution is announced / total trading volume for the 20 trading days before the resolution is announced.    

Article 45    Shares of a listed company obtained by a specific target through subscription with assets shall not be transferred within 12 months as of the completion of the issuance of such shares, and shall not be transferred within 36 months in any of the following circumstances:

(1) The specific target is the controlling shareholder or actual controller of the listed company, or an affiliated party controlled by the company;

(2) The specific target obtains the actual controlling power of the listed company through subscribing the shares of the present issuance; or

(3) When the specific target obtains the shares of the present issuance, it has not been 12 months since the specific target owns the rights and interests to the assets that are used to purchase the shares.    

Article 46    Application of a listed company for purchase of assets through issuance of shares shall be submitted to the Merger, Acquisition, and Restructuring Committee for examination and verification.    

Article 47    Where a listed company purchases assets through issuance of shares, thereby rendering the shares held or controlled by the specific target reaching the statutory proportion, the listed company shall perform the relevant obligations in accordance with the provisions of the Measures for the Administration of Acquisition of Listed Companies (Decree No. 56 of the CSRC).

If, through subscription of the issued shares of a listed company, the proportion of shares held or controlled by a specific target exceeds 30 percent or continues to increase after it reaches 30 percent, and the general board of shareholders of the listed company agrees that it can be exempted from sending out a tender offer, the specific target may, at the same time when the listed company submits the application for issuance of shares to the CSRC, file an application for exemption from the obligation of tender offer.    

Article 48    After the CSRC verifies and approves the application of a listed company to purchase assets by issuing shares, the listed company shall implement the same in a timely manner. After the relevant assets purchased from the specific target is transferred to the listed company, the independent financial advisor and law firm engaged by the listed company shall verify the compliances and risks of the matters related to the change of ownership of the assets and relevant follow-up matters, and express explicit opinions. The listed company shall, within three working days upon completion of the change of ownership, make a public announcement on the information regarding the change of ownership, and submit a written report to the CSRC and its dispatched institution. The announcement and report shall include the conclusive opinions of the independent financial advisor and the law firm.

After a listed company completes the report and public announcement specified in the preceding paragraph, it may, at the securities exchange and the securities registration and settlement company, apply for securities registration for the specific target that subscribes shares.    

 

Chapter 6: Application for Issuance of New Shares or Corporate Bonds after Major Asset Reorganization

Article 49    After the completion of the major asset reorganization that is verified and approved by the Merger, Acquisition, and Restructuring Committee, the performance before the present major asset reorganization may be subject to simulated calculation during the examination and verification if the listed company's application for public offering of new shares or corporate bonds complies with all of the following conditions:

(1) The assets that enter the listed company are complete operational entities;

(2) After completion of the present major asset reorganization, the commitment of the reorganizing party is performed as scheduled, and the listed company is in stable and sound operation; and

(3) After the completion of the present major asset reorganization, the profits realized for the listed company and the relevant assets reach the predicted profit-making level.

If the listed company fails to meet the conditions for public issuance of securities as specified by the CSRC before the present major asset reorganization, or the present reorganization causes the change of the actual controller of the listed company, the application of the listed company for public issuance of new shares or corporate bonds shall not be filed within less than one accounting year as of completion of the present reorganization transaction.    

Article 50    For the purposes of these Measures, an operational entity shall comply with the following conditions:

(1) Operational business and operational assets are independent and complete, and no major change has occurred thereto within the latest two years;

(2) It has been under continuous operation by the same actual controller for more than two years before it enters the listed company;

(3) It has independent accounts, or, in the event of having no independent accounts, there is a clear division between it and the income and expenses relating to the operating business in terms of accounting; and

(4) The listed company concludes employment contracts with the chief senior management personnel of the said operational entity, or by adopting other means, make proper arrangement with regard to the continual operation and management of the said operational entity after the completion of the transaction.    

 

Chapter 7: Regulation and Legal Liabilities

Article 51    With regard to any listed company that implements major asset reorganization without approval, it shall be ordered to make corrections, and regulatory talks, issuance of a warning letter, and other regulatory measures may be adopted. If the case is serious, warning or fines may be imposed on the listed company, and measures of banning the entry into the market may also be adopted for the relevant personnel subject to liability.    

Article 52    Where a listed company or other information disclosure obligor fails to submit the reports relating to the major asset reorganization in accordance with the provisions of these Measures, or there exist false records, misleading statements, or major omissions in the reports submitted, the violating party shall be ordered to make corrections, and punishment shall be imposed thereon in accordance with Article 193 of the Securities Law. If the case is serious, the violating party shall be ordered to cease the reorganization activities, and measures of banning the entry into the market may also be adopted for the relevant personnel subject to liability.    

Article 53    Where a listed company or other information disclosure obligor fails to disclose major asset reorganization information according to the relevant provisions, or there exist false records, misleading statements, or major omissions in the information disclosed, the violating party shall be ordered to make corrections, and punishment shall be imposed thereon in accordance with Article 193 of the Securities Law. If the case is serious, the violating party shall be ordered to cease the reorganization activities, and measures of banning the entry into the market may also be adopted for the relevant personnel subject to liability. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.    

Article 54    If, during the major asset reorganization, any director, supervisor, or senior management personnel of a listed company fails to perform the obligations of being faithful, diligent, and conscientious, thereby rendering the reorganization plan harmful to the interests of the listed company, the violating party shall be ordered to make corrections, and regulatory talks, issuance of a warning letter, and other regulatory measures may be adopted. If the case is serious, measures of banning the entry into the market may also be adopted for the relevant personnel subject to liability. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.    

Article 55    If any securities service institution or its practice personnel that issues, for the major asset reorganization, financial advisory report, auditing report, legal opinions, assets evaluation report, or other professional documents, fails to perform the obligations of being faithful, diligent, and conscientious and violates industrial standards and business rules, or fails to perform the obligations of making a report and public announcement or the obligations of sustained supervision and guidance, the violating party shall be ordered to make corrections, and regulatory talks, issuance of a warning letter, and other regulatory measures may be adopted. In the event of a serious case, punishment shall be imposed in accordance with Article 226 of the Securities Law.

If there are false records, misleading statements, or major omissions in documents prepared or issued by the securities service institution or its practice personnel specified in the preceding paragraph, the violating party shall be ordered to make corrections, and punishment shall be imposed thereon in accordance with Article 223 of the Securities Law. In the event of a serious case, measures of banning the entry into the market may be adopted. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.    

Article 56    After the completion of the major asset reorganization, if, not due to any reason that the management of the listed company is unable to know in advance or unable to control afterwards, the profit realized by the listed company or the purchased assets fails to reach 80 percent of the predicted amount in the profit forecast report or asset evaluation report, or there exist large discrepancies between the actual operations and the contents of the management discussion and analysis contained in the major asset reorganization report, the chairman of the board of directors and the general manager of the listed company, and the accounting firm, financial advisor, asset evaluation institution and its practice personnel that bear corresponding liability shall, at the same time when the listed company discloses annual report, make explanations in the same newspaper or periodical, and make a public apology to the investors. If the profit fails to reach 50 percent of the predicted amount, regulatory talks, issuance of warning letter, ordering to make regular report, and other regulatory measures may be adopted against the listed company, the relevant institution, and their personnel subject to liability.    

Article 57    If any person that has access to the major asset reorganization information, before the relevant information is publicized in accordance with the law, divulges such information, purchases or sells or suggests others purchasing or selling the securities of the relevant listed company, disseminate false information by using the major asset reorganization, manipulates the securities market, or carries out fraudulent activities, punishment shall be imposed in accordance with Articles 202, 203, and 207 of the Securities Law. If any suspected crime is involved therein, the case shall be transferred to the judicial organ for investigation of criminal liability in accordance with the law.   

 

Chapter 8: Supplementary Provisions

Article 58    These Measures shall take effect as of May 18, 2008. The Notice on Certain Issues Related to the Major Purchase, Sale, and Swap of Assets by Listed Companies (Zheng Jian Gong Si Zi [2001] No. 105) promulgated by the CSRC shall be repealed simultaneously.