China Securities Regulatory Commission, Guidelines for Contents and Formats for Information Disclosures by Companies That Offer Securities to the Public (No.1): Prospectuses (Amended in 2006)

Promulgated: May 18 2006
Effective: as of date of promulgation

Main contents: The Guidelines are composed of:
Part One: General Provisions
Part Two: Prospectuses
Section 1: Cover, Spine, Title Page, Contents and Definitions
Section 2: Abstract
Section 3: Overview of the Offering
Section 4: Risk Factors
Section 5: Profile of the Issuer
Section 6: Business and Technology
Section 7: Intra-industry Competition and Affiliated Transactions
Section 8: Directors, Supervisors, Senior Management Personnel and Core Technical Personnel
Section 9: Corporate Governance
Section 10: Financial Accounting Information
Section 11: Management Discussion and Analysis
Section 12: Business Development Objectives
Section 13: Use of Proceeds
Section 14: Dividend Distribution Policy
Section 15: Other Important Matters
Section 16: Statements by Directors, Supervisors, Senior Management Personnel and Relevant Intermediaries
Section 17: Reference Documents
Part Three: Abstract of the Prospectus
Section 1: Alert on Significant Events
Section 2: Overview on the Offering
Section 3: Profile of the Issuer
Section 4: Use of Proceeds
Section 5: Risk Factors and Other Important Matters
Section 6: All the Concerned Parties and Schedule of the Offering
Section 7: Reference Documents
Part Four: Supplementary Provisions

A company applying for an initial public offering and for a listing of shares in the PRC shall prepare the prospectus and its abstract in accordance with these Guidelines, which are the required legal documents for applying to the China Securities Regulatory Commission for an initial public offering of shares, and disclose the same in accordance with the provisions (Article 2). The provisions in these Guidelines give the minimum information disclosure requirements for prospectuses. Regardless of whether it is expressly provided in these Guidelines, all information that would have a material effect on the investment decisions of investors shall be disclosed (Article 3). The issuer shall disclose the basic particulars of the offering, including price earnings ratio and price/net assets ratio (Article 23). A quantitative analysis of the disclosed risk factors shall also be conducted (Article 27). Issuers shall disclose the basic particulars of the promoters, major shareholders holding at least 5% of the shares and the de facto controller (Article 35). Issuers shall include the details relating to the capital stock, mainly including: (1) the top 10 natural person shareholders and their positions held in the issuer; (2) those with state-owned or foreign-invested shares, the names of the shareholders, and the number and proportion of the shares held; and (3) shareholdings of strategic investors and their profiles. Where state-owned shares are involved, "SS" shall be marked after the names of the state-owned shareholders, and "SLS" shall be marked after the names of the state-owned legal person shareholders (Article 36). Issuers shall, according to the nature and frequency of transactions, disclose affiliated transactions by recurring or incidental category and their effects on the financial status and business results (Article 54). Issuers shall also include the measures they intend to take to reduce affiliated transactions (Article 56). Issuers shall disclose details relating to the establishment of various specialized committees such as strategy, audit, nomination, salaries and assessment (Article 66). Articles 112 and 113 require the disclosure of the dividend distribution policies for the most recent three years, actual circumstances of dividend distribution, dividend distribution policy after the offering, as well as distribution arrangement for accumulated profits and decision making procedures already performed prior to the completion of the offering. Issuers are also required to disclose terms of contracts with a transaction amount of at least Rmb5 million or those that do not meet the aforementioned benchmark but have a material effect on production, operations, future development or financial status (Article 116). Article 117 requires that relevant details on security provided to outside parties be disclosed. Reference documents shall be listed at the end of a prospectus and disclosed on designated websites. Reference documents include:
(1) offering sponsorship letter;
(2) financial statements and audit reports;
(3) authentication report on internal controls; and
(4) legal opinions and lawyers' work reports (Article 128).
Related legislation: PRC Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p.21; PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31 and Measures for the Administration of Initial Public Offerings of Shares and the Listing Thereof, May 17 2006, CLP 2006 No.6 p.5