China Securities Regulatory Commission, Several Questions Concerning Major Asset Purchases, Sales and Exchanges by Listed Companies Circular

Issued: December 10 2001
Effective: January 1 2002
Applicability: For the purposes of the Circular, an asset purchase, sale or exchange shall be deemed "major" if the total value of the acquired, sold or exchanged assets accounts for at least 50% of the total assets stated in the latest audited consolidated statement of the listed company, if the net value of such assets accounts for at least 50% of the net assets stated in the latest audited consolidated statement of the listed company, or if the main business revenue generated by such assets accounts for at least 50% of the main business revenue stated in the latest audited consolidated statement of the listed company (Section One).

Main contents: If a listed company carries out a major asset purchase, sale or exchange, according to the Circular, it shall ensure that, following the transaction, it remains qualified for share listing, capable of continued operation and clear of any claims over the titles of the assets and that there is no obvious harm to the interests of the listed company and its shareholders (Section Four). Once a preliminary intent of the transaction is reached, the company shall appoint a qualified accounting firm, law firm, financial advisor and asset valuation institution to issue opinions on the transaction, and the independent directors of the company shall provide an opinion on whether the transaction is beneficial to the company and the shareholders and particularly on whether it will lead to an affiliated transaction or competing business (Section Five). On the basis of such opinions, the board of the company shall produce a resolution on the transaction, which together with other related documents, shall be submitted to the China Securities Regulatory Commission (CSRC) and its local office (Section Six). Where the values of the transactions referred to earlier reach 70%, the listed company shall request the CSRC share issuance examination committee to examine and verify the transaction (Section Eight). If the transaction passes CSRC examination, the company may convene a shareholders?meeting in which the transaction shall be discussed and decided by resolution (Section 10).
Related legislation: Share Issuance Examination Committee Regulations, Sep 16 1999, CLP 1999 No. 9 p7; Conducting Investigation on the Reform of Enterprises That Propose to Issue Shares and List Circular and Administration of Offerings of New Shares by Listed Companies Procedures, Feb 25 2001, CLP 2001 No.4 p24

Repealed legislation: Regulation of Major Asset Purchases or Sales by Listed Companies Circular, Jun 26 2000, CLP 2000