China Securities Regulatory Commission, Strengthening the Administration of Legal Compliance in the Negotiated Transfer of Non-traded Shares of Listed Companies Circular

Issued: September 30 2001

Main contents: The Circular is concerned with the recent illegal over-the-counter auction of non-traded shares and requests the branches of China Securities Regulatory Commission (CSRC) to take persistent and effective measures to prevent such illegal trading (Paragraphs Two and Three). In the meantime, the Circular says that the negotiated transfer of non-traded shares shall be administered for legal compliance on the basic principle set out in the PRC, Company Law and the PRC, Securities Lawthat transfer of shares by shareholders must be conducted in lawfully established securities exchanges, namely, stock exchanges established with the approval of the State Council (Paragraph Four). Stock exchanges and securities registration and clearing companies are asked to formulate specific rules for negotiated transfers conducted through "open invitations for offers" (Paragraph Five). Stock exchanges and clearing companies are also asked not to conduct transfer and registration procedures for non-traded shares that are traded illegally (Paragraphs Six and Nine).

Related legislation: Central Committee of the Chinese Communist Party and State Council, Deepening the Reform in the Financial Sector, Straightening the Order of the Financial Sector and Preventing Financial Risks Circular, 1997; PRC, Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p21 and PRC, Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p31