State-owned Assets Supervision and Administration Commission of the State Council and Ministry of Finance, Assignment of Enterprise State-owned Assets and Equity to Management Tentative Provisions

Issued: April 11 2005
Applicability: The term "management" refers to the persons in charge or other members of the leadership team of the enterprise that is the subject of the assignment, or the persons in charge or other members of the leadership team of the work unit directly or indirectly holding the state-owned assets and equity of the enterprise that is the subject of the assignment. The term "assignment of enterprise state-owned assets and equity to management" refers to the acts of assignment with management or the enterprise established with capital directly or indirectly contributed by management as the assignee (Section Two).

Main contents: Regions or departments of which state-owned assets supervision and administration authorities have been established or of which the government has clearly specified the entities acting on and the entities responsible for the maintenance of and appreciation in the value of state-owned assets, may explore the assignment of state-owned assets and equity of small- and medium-sized state-owned and state-controlled (with state controlling shares) enterprises to management (unless otherwise stipulated by laws, regulations and departmental rules). The state-owned assets and equity of large-sized state-owned and state-controlled enterprises and their important wholly owned or controlled enterprises engaging in the main businesses of such large-sized enterprises, as well as the state-owned equity interest of listed companies, may not be assigned to management (Section Three). Work units holding state-owned assets and equity shall, in strict accordance with state provisions, entrust intermediaries to carry out audits on the enterprise that is the subject of the assignment. Management shall engage in fair bidding with other interested assignees. Assignment of enterprise state-owned assets and equity to management shall be conducted in public through assets and equity exchanges selected by state-owned assets supervision and administration authorities. When assigned with enterprise state-owned assets and equity, a manager shall provide proofs related to the source of the funds for the assignment and may not seek financing from state-owned and state-controlled enterprises including the enterprise that is the subject of the assignment. The state-owned equity or assets of such enterprises may not be used to provide guarantees, mortgages, pledges and discounts, etc. for management financing (Section Five). Where, after audit, a manager is found to be directly responsible for the decline in his enterprise's business results, he may not be assigned with the enterprise's state-owned assets and equity (Section Six). Where there are state-owned assets and equity remaining after the assignment of an enterprise's state-owned assets and equity to management, management that participated in the assignment may not become the state-owned shareholders' representatives of the enterprise after restructuring (Section Eight). Management may not be indirectly assigned with enterprise state-owned assets and equity by adopting such means as trust or entrustment (Section Nine).
Related legislation:«Regulating the Restructing of State-owned Enterprises Opinions» Circular, 2003; Administration of the Assignment of Enterprise State-owned Assets and Equity Tentative Procedures, Dec 31 2003, CLP 2004 No.1 p8; Issue of the «Standards for Small- and Medium- sized Enterprises Tentative Provisions» Circular, 2003; Statistical Classification of Small, Medium and Large-sized Enterprises Procedures (Tentative), 2003 and Separation of the Main and Secondary Businesses, the Restructuring of the Secondary Businesses and the Reassignment and Settlement of the Surplus Personnel of Medium and Large State-owned Enterprises Implementing Procedures, 2002