Ministry of Foreign Trade and Economic Cooperation, Questions Relevant to the Conversion of Non-listed Foreign Investment Shares of Foreign-invested Companies Limited by Shares into B Shares for Circulation Supplementary Circular

Issued: August 16 2002
Applicability: For the purposes of this Circular, "foreign-invested companies limited by shares" refers to foreign-invested companies limited by shares established with the approval of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) in accordance with the Certain Questions on the Establishment of Foreign-funded Companies Limited by Shares Tentative Provisions and those established before the issue of the Tentative Provisions with the approval of departments authorized by MOFTEC in accordance with the Questions Relevant to the Establishment of Sino-foreign Companies Limited by Shares Circular (Section Two).

Main contents: The Circular permits the conversion of non-listed foreign investment shares of foreign investment companies limited by shares into B shares for trading in the B share market (Section One). Such conversion shall be subject to certain conditions in addition to those normally required of listing and issuing of shares. For instance, the company shall conform with the industrial policies for foreign investment and have been profitable for the last two years. The shareholders of the non-listed foreign investment shares shall have performed the special obligations and responsibilities required of them by the articles of association, shareholder's agreement and other legal documents (including, but not limited to, shareholder loans, loan security, technology transfers and trademark licences). Moreover, they shall have held such shares for over one year and will continue to hold such shares for over one year after the conversion (Section Three). Application for such conversion shall be made to a local provincial department in charge of foreign trade and economic cooperation and final approval shall come from MOFTEC. The applicant shall also seek the approval of China Securities Regulatory Commission within one year after obtaining MOFTEC's approval. After obtaining both approvals, the applicant shall change its Foreign-invested Enterprise Approval Certificate and its company registration with MOFTEC and the industry and commerce administration respectively (Section Four).
Related legislation: Certain Questions on the Establishment of Foreign-funded Companies Limited by Shares Tentative Provisions, Jan 10 1995, CLP 1995 No.6 p52; Questions Relevant to the Establishment of Sino-foreign Companies Limited by Shares Circular, 1992 and Ministry of Foreign Trade and Economic Cooperation and China Securities Regulatory Commission, Foreign Investment Issues Relating to Listed Companies Several Opinions, Nov 8 2001, CLP 2001 No.10 p93