China Securities Regulatory Commission, Guidelines on Contents and Formats for Information Disclosure by Companies that Offer Securities to the Public (No.23): Prospectuses for Public Offering of Corporate Bonds

中国证劵监督管理委员会公开发行证劵的公司信息披露内容与格式准则第 23 号 - 公开发行公司债劵募集说明书

October 02, 2007 | BY

clpstaff &clp articles &

Disclosure of risk factors required in corporate bond prospectuses.

Clp Reference: 3700/07.08.15 Promulgated: 2007-08-15 Effective: 2007-08-15

Issued: August 15 2007
Effective: As of date of issuance

Interpreting Authority: China Securities Regulatory Commission (CSRC)

Main Contents: A prospectus for a public offering of corporate bonds shall cover information concerning the details of the offering, risk factors, creditworthiness of the offeror, secured items (if any), plans for debt repayment and other safeguarding measures, bondholders' meeting, bond trustee, basic details of the offeror, financial accounting information, and use of the proceeds.

The offeror shall disclose the investment risks pertaining to the bonds, including interest rate risk, liquidity risk, repayment risk, risks specific to the contemplated bond arrangement, credit risk, and security (if any) or rating risk. The offeror shall conduct a quantitative analysis on these risk factors wherever possible. If it is impossible to do so, the offeror shall give a qualitative description of the risk factors. The offeror shall also disclose risks concerning the offeror such as financial risk, operational risk, management risk and policy risk. Where the risk factors may have a serious negative impact on the production and operation status, financial status and debt repayment ability of the offeror, the offeror shall make a "notice of material matters" (Articles 11 and 12).

Where the company anticipates that it will be unable to pay the principal and coupons of the bonds according to schedule or when the bonds mature, it shall adopt the following measures:

(1) refrain from distributing profits to shareholders;

(2) suspend the implementation of capital expenditure projects such as major investments in external parties, and mergers and acquisitions;

(3) reduce or suspend the wages and bonuses of directors and senior management personnel; and

(4) the principal responsible persons may not be transferred from their posts (Article 25).

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 Pilot Projects for the Offering of Corporate Bonds, Aug 14 2007, CLP 2007 No.8 p.77

clp reference:3700/07.08.15promulgated:2007-08-15effective:2007-08-15

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