The Securities Association of China, Circular on Issues Relevant to Sponsors Engaging in Cases of Reform Regarding Separation of Equity Ownership and Trading Rights

Issued: July 15 2005
Effective: as of date of issue

Main contents: The Circular requires a sponsor to carry out due diligence review and verification on the listed company and the shareholdings of its holders of non-tradable shares. For those parts of the documents disclosed by the listed company and its holders of non-tradable shares not supported by the professional opinions of intermediaries and their signatories, the sponsor shall carry out adequate, extensive and rational reviews. A sponsor shall carry out an independent judgement on the information provided and content disclosed by the listed company, and shall have sufficient grounds to believe that there does not exist any substantial discrepancies between the judgement made and the content of the documents disclosed by the listed company (Section One(2)). A sponsor shall, in accordance with the appointment by the listed company, formulate plans for separation of equity ownership and trading rights, organize the compilation of the relevant documents, and issue a sponsor's opinion (Section One(3)). After the implementation of the listed company's plan for separation of equity ownership and trading rights, the sponsor shall continue to supervise the listed company and their holders of non-tradable shares to perform the relevant obligations undertaken in the plan (Section One(5)). Sponsors shall charge financial advisory fees at no less than the standard rate of Rmb1 million and sponsor fees at no less than the standard rate of Rmb1.5 million (Section Two).
Related legislation: Opinions on Proper Handling of the Pilot Reform Projects Regarding Separation of Equity Ownership and Trading Rights and Circular on Issues Relevant to Pilot Reform Projects Regarding the Separation of Equity Ownership and Trading Rights of Listed Companies, Apr 29 2005, CLP 2005 No.5 p.35