State-owned Assets Supervision and Administration Commission of the State Council, Implementing Opinions on Regulating the State-owned Enterprise Restructuring Work

Issued: December 19 2005
Applicability: The term 'management' refers to the persons in charge and other members of the leadership team of state-owned and state-controlled enterprises. The term "shareholding through further capital contribution and enlargement in share capital by management" does not include incentive equity and stock options granted to management.

Main contents: Management personnel who are recruited by competition for job positions in such ways as public recruitment or internal competition for positions within the enterprise, or those who have made major contributions to the development of the enterprise, may hold equity of the enterprise through further capital contribution and enlargement in share capital, but the shareholding of management may not attain to the level of controlling shareholding or relative controlling shareholding. Management personnel intending to hold equity of their enterprise through further capital contribution and enlargement in share capital may not participate in the formulation of the restructuring plan, determination of the price of converting state-owned assets and equity into shares and selection of intermediary institutions, as well as in significant matters in the appraisal of fixed assets and circulating funds, financial audits, audits for leaving office and asset appraisal. Under any of the following circumstances, management personnel may not hold the equity of the restructured enterprise through further capital contribution and enlargement in share capital: (1) those determined by an audit to bear direct responsibilities for the decline in the business results of the restructured enterprise; and (2) those who are unable to provide relevant proof that the sources of the capital contribution for the shareholding are lawful (Section Five).
Related legislation: Tentative Measures for the Administration of the Assignment of Enterprise State-owned Assets and Equity, Dec 31 2003, CLP 2004 No.1 p.8; Tentative Provisions for the Assignment of Enterprise State-owned Assets and Equity to Management, Apr 11 2005, CLP 2005 No.4 p.11; PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31 and Tentative Regulations for Supervision and Administration of Enterprise State-owned Assets, May 27 2003, CLP 2003 No.6 p.36