Ministry of Finance, Questions Relevant to the Pledging of State-owned Shares of Listed Companies Circular

Published: October 25 2001
Effective: as of date of issue

Main contents: The Circular imposes certain restrictions on the pledge of State-owned shares of listed companies. First, those State-owned shares held by company sponsors may not be pledged during the lockout period; second, State-owned shares held by authorized representative entities of State-owned shareholders may only be pledged for these entities themselves or their wholly-owned or controlled subsidiaries; and thirdly, the amount of shares so pledged must not exceed 50% of the total held by them (Items Two, Three and Four). The pledge agreements entered into by such entities shall be filed with the provincial or higher level finance authority for the record, and each provincial financial authority shall report all such pledges to the Ministry of Finance by January 31 each year (Item Seven). Pledges made for obtaining bank loans or issuing corporate bonds shall be disclosed in accordance with relevant information disclosure requirements (Item Eight). If the debts are in default, the pledged shares shall be sold to discharge the debts and shall not be transferred directly to the creditors (Item Nine).

Related legislation: PRC, Company Law (Revised), Dec 25 1999, CLP 2005 No.10 p21; PRC, Security Law, Jun 30 1995, CLP 1995 No.6 p21 and Administration of Reduction of State Share Holdings to Raise Funds for Social Security Tentative Procedures, Jun 12 2001, CLP 2001 No.6 p10