China Securities Regulatory Commission, Administration of Acquisition of Listed Companies Measures

Promulgated: September 28 2002
Effective: December 1 2002
Applicability: Acquisition of a listed company refers to obtaining effective control over a listed company by means of a transfer of shares through a stock exchange or other means (Article 2).

Main contents: A party may acquire a company by negotiated acquisition, a share purchase offer or centralized bidding in a stock exchange (Article 3). The company being acquired may not provide financial assistance to the acquiring party (Article 7). Companies being acquired must announce any change in the composition of their board of directors (Article 9). The China Securities Regulatory Commission (CSRC) may establish a committee to check if certain transactions have constituted acquisition of listed companies and provide opinions on how the Measures should be carried out (Article 11).
Part Two prescribes Measures for performing negotiated acquisition. Once the acquiring party holds, or intends to hold, 30% or more of a company's shares, it must make any further purchase of shares through a tender offer to all shareholders of that company. Exemption from such tender offer must be obtained from the CSRC before carrying out negotiated acquisition (Article 13 and 14).
Part Three prescribes Measures that apply to acquisition by share purchase offer. When a party holds less than 30% of a company's shares and intends to increase its holding by making a purchase offer, the projected acquisition should not be less than 5% or more than 30% of the outstanding shares of the company (Article 24). After the acquiring party issues its purchase offer announcement, the company being acquired may not issue shares or convertible bonds, or repurchase outstanding shares (Article 33). An offer shall be valid for no less than 30 days and no longer than 60 days. During the term of validity the acquiring party may not retract its offer (Article 36). Shareholders, on the other hand, can withdraw their preliminary acceptance of the offer (Article 41).
Part Four establishes exemptions from obligations related to purchase offers. Acquiring parties that comply with Articles 49 and 51 of the Measures may apply to the China Securities Regulatory Commission for exemption from certain obligations (Article 48). These include employing the purchase-offer method when seeking to increase shares, issuing a tender offer and offering to purchase all shares of the company being acquired (Article 48).
Related legislation: 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