Circular on Issues Relevant to the Conversion of Unlisted Foreign Investment Shares of Foreign-invested Companies Limited by Shares into Tradable B-shares

(Issued by the Ministry of Commerce on July 30 2008.)

Shang Zi Han [2008] No.59

Departments in charge of commerce of the provinces, autonomous regions, municipalities directly under the central government and cities with independent development plans:

With a view to promoting the healthy development of the domestic securities market, the relevant state departments have revised the examination procedure for applications for the listing and trading of foreign investment shares of Sino-foreign equity joint B-share companies that, before offering and listing, were unlisted (Conversion of Unlisted Foreign Investment Shares into Tradable B-shares). In order to duly carry out the harmonisation work following the revision of the relevant polices and procedures, we hereby notify you of relevant issues as follows:

1. The unlisted foreign investment shares of foreign-invested companies limited by shares that include B-shares shall be permitted to be converted and traded on the B-share market (Conversion of Unlisted Foreign Investment Shares into Tradable B-shares). The Conversion of Unlisted Foreign Investment Shares into Tradable B-shares shall be handled in accordance with the Several Opinions on Foreign Investment Issues Relating to Listed Companies (Wai Jing Mao Zi Fa [2001] No.538) issued by the former Ministry of Foreign Trade and Economic Cooperation and the China Securities Regulatory Commission on October 8 2001.

2. For the purposes of the preceding Article, the term “foreign-invested joint stock limited company” means a foreign-invested joint stock limited company whose establishment has been approved in accordance with the law. The unlisted foreign investment shares of a foreign-invested joint stock limited company whose establishment has not been approved in accordance with the law may not be converted and traded on the B-share market.

3. The Conversion of Unlisted Foreign Investment Shares into Tradable B-
Shares shall, in addition to satisfying the requirements of the state in respect of the listing and offering of shares, satisfy the following conditions:

(1) the applicant shall be a foreign-invested joint stock limited company established in accordance with provisions and procedures;

(2) the applicant shall comply with industrial policies for foreign investment;

(3) if, pursuant to the requirements of the applicant's articles of association, shareholder agreement, other legal document or laws or regulations, the holder of the unlisted foreign investment shares to be converted into tradable B-shares bears special obligations and responsibilities (including but not limited to providing a shareholder loan, providing security for a loan, technology transfer, trademark licence, etc.), the application for the Conversion of Unlisted Foreign Investment Shares into Tradable B-shares may only be made after the aforementioned obligations and responsibilities have been performed;

(4) during the two years preceding the application, the applicant has passed the joint annual inspection of foreign-invested enterprises, and it is engaged in normal production and business activities in accordance with the scope of business specified on its business licence and the trading in its shares is normal;

(5) the holder of the unlisted foreign investment shares to be converted into tradable B-shares has held the same for more than one year; and

(6) after the unlisted foreign investment shares are converted into tradable shares, the original shareholder must continue to hold the same for a period of more than one year.

4. The Conversion of Unlisted Foreign Investment Shares into Tradable B-shares shall be carried out in accordance with the following procedure:

(1) the applicant shall submit an application to the provincial-level department in charge of commerce of the place where it is located;

(2) the provincial-level department in charge of commerce of the place where the applicant is located shall complete its preliminary examination within 15 days from the date of receipt of the application; if it approves the application, it shall forward the same to the Ministry of Commerce for examination, and if it withholds its approval, it shall give the reasons therefor in writing;

(3) the Ministry of Commerce shall inform the forwarding department of its comments upon examination in writing within 30 days from the date of receipt of the application materials;

(4) if the Ministry of Commerce gives its approval, the applicant shall collect its new Foreign-invested Enterprise Approval Certificate from the Ministry of Commerce after issuing the relevant announcement and completing the relevant procedures with the stock exchange; and

(5) the applicant shall apply for, and carry out the procedures for, the amendment of its registration with the administration for industry and commerce within 30 days from the date of collecting its new Foreign-invested Enterprise Approval Certificate.

5. The application materials mentioned in Item (3) of Article 4 hereof refer to the following:

(1) the documents (including comments upon preliminary examination) forwarded by the provincial-level department in charge of commerce of the place where the applicant is located;

(2) the applicant's application letter for the Conversion of Unlisted Foreign Investment Shares into Tradable B-shares;

(3) the resolutions of the applicant's shareholders' general meeting concerning the Conversion of Unlisted Foreign Investment Shares into Tradable B-shares and amendment of the articles of association;

(4) the resolutions of the board of directors of the applicant;

(5) the (original of the) proposed amendments to the articles of association of the applicant and (a photocopy of) the existing articles of association;

(6) a written statement as to whether the holder of the unlisted foreign investment shares to be converted into tradable B-shares bears special obligations and responsibilities; if it does bear such obligations and responsibilities, a written description of the status of the performance thereof or a written undertaking that it will continue to perform the same;

(7) proof that the applicant underwent the joint annual inspection during the two years preceding the application;

(8) written proof issued by the applicant evidencing that the holder of the unlisted foreign investment shares to be converted into tradable B-shares has held the same for more than one year;

(9) a written undertaking by the holder of the unlisted foreign investment shares to be converted into tradable B-shares that, after the conversion thereof into tradable shares, it will continue to hold the same for a period of at least one year; and

(10) photocopies of the applicant's Foreign-invested Enterprise Approval Certificate and business licence.

6. The Supplementary Circular on Issues Concerning the Conversion of Unlisted Foreign Investment Shares of Foreign-invested Companies Limited by Shares into Tradable B-shares (Wai Jing Mao Zi Yi Han [2002] No.902) shall be repealed as of the date of issuance hereof.