State-owned Assets Supervision and Administration Commission of the State Council, Reform Regarding the Separation of Equity Ownership and Trading Rights of State-controlled Listed Companies Guiding Opinions

Issued: June 17 2005

Main contents: The Opinions lay down the criteria for setting the minimum shareholding of the controlling shareholder of state-controlled listed companies after the reform regarding the separation of equity ownership and trading rights (Reform): 1) in significant industries and key sectors concerning state security and lifelines of the national economy, and in basic and pillar industries of the national economy, the controlling power of state-owned capital should be sustained so as to ensure the dominant position of the state-owned economy in the national economy; 2) for state-controlled listed companies that constitute the main business of the controlling shareholder or having a significant impact on the development of the controlling shareholder, the controlling shareholder shall based on its own actual development and the development needs of the listed company study and determine the minimum shareholding in the listed company; and 3) for state-controlled listed companies in other industries and sectors, the controlling shareholder shall rationally set the minimum shareholding in the listed company so that such controlling shareholder will gain if its shareholding is advanced and an orderly process will be ensured if its shareholding is withdrawn (Section Three). The Opinions also stipulate that if the minimum shareholding of a state-owned shareholder of a state-controlled listed company needs to be adjusted after a certain period following the completion of the Reform. Such adjustment shall be made in an orderly and standardized manner according to the Opinions and relevant regulatory requirements. If necessary, the state-owned shareholder may increase its shareholding through the capital markets so as to consolidate and enhance its controlling status (Section Five).
Related legislation: State Council, Promoting the Reform, Opening Up and Stable Development of the Capital Markets Several Opinions, Jan 31 2004, CLP 2004 No.7 p.75 and PRC Company Law (2nd Revision), Aug 28 2004, CLP 2004 No.8 p.6