Measures for the transfer of state-owned assets of financial enterprises

Secondly, the regulatory scope of the Measures includes listed and non-listed state-owned financial enterprises. China SAFE Investments Limited (a Hong Kong-incorporated subsidiary of the State Administration of Foreign Exchange) also falls under the regulatory scope of the Measures (Articles 5 and 61). Meanwhile, the Measures require that the state-owned assets of financial enterprises shall be transferred mainly by transactions through assets and equity exchanges and securities trading systems. In case there exist special requirements for the transferee – by relevant regulations of the state or an internal reorganisation of assets in financial controlling (group) companies or any other special reasons – the state-owned assets of financial enterprises may be directly transferred by agreement after approval by the State Council or the Ministry of Finance.

Thirdly, the Measures make detailed provisions on the transfer of state-owned assets and equity of non-listed companies, transfer of state-owned shares of listed companies, transfer directly by agreement of state-owned assets, and other relevant matters. For example, the Measures point out that the state-owned assets and equity of non-listed enterprises shall be publicly transferred on the legally-established assets and equity exchanges at the provincial level or above; during assets and equity trading, the initial listed price shall not be lower than the asset evaluation results which have been examined and approved or been submitted for filing purposes; as to the share transfer of a state-owned equity financial enterprise, if the proportion of net shares accumulatively transferred within one complete accounting year is less than 5% of the total capital shares of the listed company, the transfer may be decided by the transferor according to internal decision-making procedures (see Article 31 of the Measures).

Background

On one hand, the Measures are a refinement of the PRC Law on State-owned Assets of Enterprises (中华人民共和国企业国有资产法) which became effective on May 1 2009. This law applies to the supervision and administration of state-owned assets of financial enterprises and provides that if such supervision and administration is otherwise stipulated by laws and regulations, those provisions shall prevail.

On the other hand, the Measures represent a significant effort by the Ministry of Finance to respond to the shock of “non-tradable shares” of the PRC securities market. Confronted with the continuing deterioration of the global economy, many foreign shareholders in China's banking sector have started to reduce their shareholdings; meanwhile, the general market estimation of China's banking sector is also deterioriating due to the impact of the financial tsunami. Under this background, the Ministry of Finance is eager to conciliate the capital market, and calm public panic arising from the shock of non-tradable shares.

Provisions on change of shareholdings
On June 30 2007, the State-owned Assets Supervision and Administration Commission of the State Council (Sasac) and the China Securities Regulatory Commission jointly issued the Tentative Measures for the Administration of the Transfer of Shares of Listed Companies Held by State-owned Shareholders (中国证券监督管理委员会国有股东转让所持上市公司股份管理暂行办法). In accordance with these Tentative Measures, the transfer programme of assets and equity shall not be implemented by state-controlled shareholders until it is reported to the appropriate state-owned assets supervision and administration organs level by level for examination and approval. Therefore, relevant change of shareholdings in listed companies by state-owned shareholders is now under the supervision of both the Ministry of Finance and Sasac. (For example, equity transfer of a local state-controlled listed company shall be reported to the finance department for approval in accordance with the Measures and meanwhile shall be reported to Sasac for approval.)

Since 2003, the Ministry of Finance has issued a series of regulations concerning the management of state-owned financial assets, but still leaving many problems to be solved. It is concluded that the issuance of the Measures fills in an important gap of supervision of financial state-owned assets, and the Measures will certainly play an active role in maintaining social stability and a stable market.