Share Issuance Examination Committee of China Securities Regulatory Commission, Examination Work Associated with the Issue of New Shares by Listed Companies Guidance Opinion

Promulgated: May 11 2001
Effective: as of date of promulgation

Main contents: According to the Opinion, members of the Share Issuance Examination Committee shall pay particular attention to and make independent judgment on certain questions when examining an application for the issue of new shares. The Opinion lists 16 such questions, and sets out the specific elements that the committee members shall be most concerned with in examining each of these questions. For example, one of the questions is whether or not the issuer of the proposed shares is independent, in terms of staff, financial accounts and assets, from the legal persons or other entities that have actual control over it (Section Two(1)). To determine if such independence exists, the committee members shall consider whether the issuer shares staff, office, production premises or bank accounts with the controlling entity, whether the issuer has its own financial department, accounting system and procurement and marketing system, and whether the assets of the issuer are clearly separate from those of the controlling person in ownership. Other key questions include whether the proceeds from share issue are effectively applied (Section Two(3)), whether the issuer has sound financial policies (Section Two(5)), whether the issuer has a complete, reasonable and effective internal control system (Section Two(8)) and whether the issuer has the capabilities and a promising prospect (Section Two(9)).
Related legislation: PRC, Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p31; PRC, Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p21; Administration of Offerings of New Shares by Listed Companies Procedures, Mar 28 2001, CLP 2001 No.4 p24 and China Securities Regulatory Commission, Share Issuance Examination Committee Regulations, Sep 16 1999, CLP 1999 No.9 p7