Interpretation of the CIRC Opinions on Standardising the Articles

The Articles of Associations Prevail in Case of Discrepancies with Shareholders' Agreements

The Opinions provide that where the rights and obligations of shareholders are specially provided in a promoters' agreement, shareholders' capital contribution agreement or any other shareholders' agreement of an insurance company, the company shall, at the same time, amend the relevant provisions of its articles of association accordingly. It is further required that the articles of association of an insurance company shall make clear that if there is any discrepancy between the promoters' agreement, shareholders' capital contribution agreement or other shareholders' agreements and the articles of association, the articles of association shall prevail.

To Clarify the Division of Powers and Standardize the Delegation of Powers

The Opinions provide that the shareholders' meeting of an insurance company shall not delegate its statutory powers to the board of directors or other institutions or individuals and that the board of directors shall not delegate its statutory powers to other institutions or individuals of the company on a general basis or for an indefinite term. In conjunction with Article 39 of the 2008 CIRC Guidelines for Operation of the Board of an Insurance Company, in adhering to the principle of “one issue generating one delegation”, the board of directors of an insurance company may delegate its statutory powers to the chairman of the board, the directors or other individuals or institutions with respect to specific issues only where the delegation of powers becomes necessary.

From the management perspective, the Opinions provide that where an insurance company has the positions of chief executive officer (CEO) and general manager at the same time, their respective powers and means of election should be specified in its articles of association. The Rules on Administration of Qualifications of Senior Management Personnel of Insurance Companies do not expressly refer to CEO as the senior management personnel. CEO is generally considered as an officer of a company who is principally responsible for the business activities of the company and is usually an additional title held by the chairman of the board, the general manger or other senior management personnel such as vice chairman or executive deputy general manager. Pursuant to the provisions of the Opinions, an insurance company may establish a position of CEO at the management level of the company, of which the scope of powers shall be distinct from the powers of the General Manager.

Conflicts between the Opinions and other CIRC Guidelines

In order to standardize the governance structure of insurance companies, the CIRC issued a series of opinions and guidelines, including the 2006 Guiding Opinions on Standardizing the Governance Structure of Insurance Companies (for Trial Implementation) (Guiding Opinions (Trial)), the 2007 Interim Measures on Administration for Related Party Transactions of Insurance Companies (Interim Measures) and the Opinions. There exist conflicts between the Opinions, the Guiding Opinions (Trial) and Interim Measures in respect of related shareholders' declaration and powers to review material related party transactions.

• Related Shareholders' Declaration – pursuant to the Opinions, the articles of association of an insurance company shall request shareholders to declare to the company any related party transactions between shareholders holding more than 5 per cent of the equity interests of the company. However, the Guiding Opinions (Trial) provides that where any affiliated relationship is established between the shareholders of an insurance company, the shareholders concerned must declare to the board of directors such relationship in a voluntary manner.

• Powers to Review Material Related Party Transactions – pursuant to the Opinions, the articles of association of an insurance company shall specify the powers to review and methods of resolution in connection with material related party transactions. Pursuant to Article 11 of the Interim Measures, “material related party transactions” shall be defined on the basis of the transaction amount and ratio of the transaction amount to net assets of an insurance company. Meanwhile, Article 14 of the Interim Measures provides that “the material related party transactions shall be approved by the board of directors or the shareholders' meeting”. However, the Guiding Opinions (Trial) provide that “the material related party transactions shall be reviewed by the audit committee under the board of directors and submitted to the board for approval”.

With respect to the conflicts, we understand that since the Guiding Opinions (Trial), the Opinions and the Interim Measures are all guidelines issued by the CIRC and are all providing an equal impact in the market. Where there are discrepancies between the Guiding Opinions (Trial), the Opinions and Interim Measures, the Opinions and Interim Measures shall be applicable on a priority basis since the Guiding Opinions (Trial) were issued earlier.

Llinks Law Offices

21F, South Tower, Shanghai Stock Exchange Building

528 Pudong Road South, Shanghai 200120 PRC

T: (86 21) 6881 8100

F: (86 21) 6881 6880

Website: www.llinkslaw.com