China Securities Regulatory Commission, State-owned Assets Supervision and Administration Commission of the State Council, Ministry of Finance, People's Bank of China and Ministry of Commerce, Guiding Opinions on the Reform Regarding the Separation of Equity Ownership and Trading Rights of Listed Companies

Promulgated: August 23 2005

Main contents: The Opinions state that the separation of equity ownership and trading rights refers to the segregation of shares of companies listed on the A-share market as non-tradable and tradable shares based on whether they can be listed and traded on the stock exchange (Item Two). The reform regarding the separation of equity ownership and trading rights (the Reform) is the arrangement made for the listing and trading of non-tradable shares, the purpose of which is not to reduce state shareholding through the capital markets (Item Four). Holders of non-tradable shares of a listed company shall extensively solicit comments from the concerned holders of tradable shares of the A-share market to determine the Reform plan after consultations. The concerned shareholders of the A-share market may, with reference to the procedure of shareholders' general meeting, convene a meeting and vote by categories. The method of paying consideration applied between non-tradable shareholders and tradable shareholders to balance the interests between the shareholders is a rewarding attempt and shall continuously be fine-tuned during the implementation of the Reform (Item Eight). Companies initially offering shares to the public shall no longer distinguish between tradable and non-tradable shares. A company with A-share equity that plans to be listed offshore or an A-share listed company that plans to have its spin-off subsidiary listed offshore shall do so after completing the Reform (Item 10). The Reform is to settle the issue of the balance of interests among concerned shareholders of the A-share market. For A-share listed companies that also have H or B shares, the issue of the separation of equity ownership and trading rights shall be settled by the concerned shareholders of the A-share market through consultations. For a bank-type A-share listed company that holds a foreign-invested enterprise approval certificate and foreign-invested shares, its Reform plan shall be subject to the examination and approval of the relevant departments of the State Council after it has been adopted by the relevant shareholders' meeting. Changes in the proportion of foreign-invested shares in the Reform plan shall, in principle, not affect the relevant preferential policy already enjoyed by the concerned listed company. After the expiry of the moratorium, if the foreign shareholder reduces its shareholding, such shall be handled in accordance with the relevant state provisions (Item 11).
Related legislation: Several Opinions on Promoting the Reform, Opening up and Stable Development of the Capital Markets, Jan 31 2004, CLP 2004 No.7 p.75 and Measures for the Administration of the Reform Regarding the Separation of Equity Ownership and Trading Rights of Listed Companies