Measures for the Administration of the Equity of Insurance Companies

Revised on April 15 2014. Latest revision can be found at: www.chinalawandpractice.com/Article/3344524/Measures-for-the-Administration-of-the-Equity-of-Insurance-Companies-Revised.html

(Promulgated by the China Insurance Regulatory Commission on May 4 2010 and effective as of June 10 2010.)

Order of the CIRC [2010] No.6

Part One: General provisions

Article 1: These Measures have been formulated pursuant to laws and administrative regulations such as the PRC Company Law and the PRC Insurance Law in order to maintain the stable operation of insurance companies, protect the lawful rights and interests of investors and the insured, and strengthen oversight of the equity of insurance companies.

Article 2: For the purposes of these Measures, the term “insurance company” means an insurance company that has been established with the approval of the China Insurance Regulatory Commission (the CIRC), has been registered in accordance with the law and the capital contributions to which or shareholdings of which by foreign shareholders account for less than 25% of its registered capital.

Article 3: The CIRC shall exercise oversight over the equity of insurance companies in accordance with relevant laws and administrative regulations.

Part Two: Investment in the equity of insurance companies

Section One: General stipulations

Article 4: The capital contribution or shareholding percentage of any single shareholder (including its affiliated parties) of an insurance company may not exceed 20% of the insurance company's registered capital.

The CIRC may, based on an adherence to the principles of strategic investment, governance structure optimisation, avoidance of intra-industry competition and safeguarding of stable development, following approval, release a major shareholder from the foregoing restriction on shareholding percentage if it satisfies the provisions of Article 15 hereof.

Article 5: Two or more insurance companies that are controlled by the same organisation or between or among which there is a control relationship may not engage in the same insurance business that presents a conflict of interest or that would involve competition between or among them, unless otherwise provided by the CIRC.

Article 6: The shareholders of an insurance company shall make their capital contributions in cash, and may not make their capital contributions in the form of non-monetary property such as physical goods, intellectual property or leaseholds.

The capital contributions of the shareholders of an insurance company shall be verified by an accounting firm that shall issue a certificate in respect thereof.

Article 7: Shareholders shall invest in an insurance company with their own legally-sourced funds, and may not make their investment by using bank loans or other form of funds not owned by them.

Article 8: No entity or individual may entrust a third party or accept the entrustment of a third party to hold equity of an insurance company, unless otherwise provided by the CIRC.

Article 9: An insurance company shall register its shareholders and carry out business registration procedures on the strength of the approval document from the CIRC and the documents filed for the record with the CIRC.

An insurance company shall ensure that the particulars of its shareholders recorded in its articles of association, register of shareholders and business registration documents are consistent with reality.

Article 10: A shareholder shall truthfully inform the insurance company of its controlling shareholder, de facto controller and changes thereto and shall give a written account to the insurance company of any affiliation and what type of affiliation it has with other shareholders of the insurance company or the de facto controller of such shareholders.

The insurance company shall report to the CIRC in a timely manner on the controlling shareholders and de facto controllers of its shareholders, changes thereto and affiliations between its shareholders.

Article 11: The shareholders and de facto controller of an insurance company may not use affiliated transactions to harm the interests of the company.

If a shareholder uses an affiliated transaction to materially harm the interests of the insurance company thereby jeopardising its solvency, the CIRC shall order it to rectify the matter. Until it effects such rectification as required, the CIRC may restrict its shareholder rights. If it refuses to rectify the matter, the CIRC may order it to transfer the equity of the insurance company that it holds.

Section Two: Shareholder qualifications

Article 12: Those investing in the equity of insurance companies shall be enterprise legal persons in the People's Republic of China and overseas financial institutions that satisfy the conditions set forth in these Measures, except in cases where shares of a listed insurance company are purchased on a stock exchange.

Where the CIRC provides otherwise on investment in the equity of insurance companies, such provisions shall apply.

Article 13: A domestic enterprise legal person wishing to invest in the equity of an insurance company shall satisfy the following conditions:

(1) having a good and stable financial position and being profitable;

(2) having a good credibility record and tax payment record;

(3) not having a record of major violations of laws or regulations during the most recent three years;

(4) if the investor is a financial institution, satisfying the requirements in respect of prudential regulatory indicators of the relevant financial regulator; and

(5) satisfying other conditions as specified in laws, administrative regulations and by the CIRC.

Article 14: An overseas financial institution wishing to invest in the equity of an insurance company shall satisfy the following conditions:

(1) having a good and stable financial position and having been consistently profitable during the most recent three financial years;

(2) having total assets of not less than US$2 billion as at the end of the most recent year;

(3) having a long-term credit rating of A or above during the most recent three years as rated by an international rating agency;

(4) not having a record of major violations of laws or regulations during the most recent three years;

(5) satisfying the requirements in respect of prudential regulatory indicators of the financial regulator of the place where it is located; and

(6) satisfying other conditions as specified in laws, administrative regulations and by the CIRC.

Article 15: A major shareholder that holds at least 15% of the equity of an insurance company or that, although holding less than 15%, nonetheless directly or indirectly controls the insurance company shall additionally satisfy the following conditions:

(1) having the capacity to make ongoing capital contributions and having been consistently profitable during the most recent three financial years;

(2) having relatively substantial funding strengths, and net assets of not less than Rmb200 million; and

(3) having a good reputation and enjoying a leading position in its industry.

Part Three: Changes in equity

Article 16: A change of a shareholder of an insurance company whose capital contribution accounts for at least 5% of its registered capital, in the case of a limited liability company, or that holds at least 5% of its shares, in the case of a company limited by shares, shall require the approval of the CIRC.

Article 17: When an investor's holding of a listed insurance company's shares acquired on a stock exchange reaches at least 5% of its outstanding shares, the insurance company shall report the same to the CIRC for its approval within five days from the date on which such fact occurred. The CIRC has the authority to require an investor that does not satisfy the qualification conditions set forth in these Measures to transfer the shares that it holds.

Article 18: When a change of a shareholder whose capital contribution or shareholding percentage accounts for less than 5% of the registered capital of an insurance company occurs, the insurance company shall report the change in equity to the CIRC for the record within 15 days after the execution of the equity transfer agreement, except in the case of a listed insurance company.

Article 19: If the procedures for the amendment of business registration are not completed within three months after the approval or record filing of a transfer of an insurance company's equity by or with the CIRC, the insurance company shall report to the CIRC in writing in a timely manner.

Article 20: If an insurance company proposes to make an initial public offering or to seek post-listing additional financing, it shall secure the regulatory opinion of the CIRC.

Article 21: If an insurance company proposes to make an initial public offering or to seek post-listing additional financing, it shall satisfy the following conditions:

(1) having a sound governance structure;

(2) not having a record of major violations of laws or regulations during the most recent three years;

(3) having a sound internal control system and having a relatively high risk-management level; and

(4) satisfying other conditions as specified in laws, administrative regulations and by the CIRC.

Article 22: An insurance company shall report to the CIRC in writing within 15 days from the date of learning that any of the following circumstances applies to a shareholder:

(1) the equity of the insurance company that it holds has been subjected to preservation measures or enforcement in a legal action;

(2) it has pledged the equity of the insurance company that it holds or such pledge has been lifted;

(3) it has changed its name;

(4) it has been merged or divided;

(5) it has been dissolved, gone bankrupt, been closed down or gone into receivership; or

(6) another circumstance has arisen that could cause a change in the equity of the insurance company that it holds.

Article 23: If equity of an insurance company is disposed of by way of an auction, the insurance company shall inform the auctioneer of the relevant provisions of these Measures before the auction. An investor that acquires equity of an insurance company by way of an auction shall satisfy the qualification conditions set forth in these Measures and the same shall be reported to the CIRC for approval or the record in accordance herewith.

Article 24: When a shareholder pledges the equity of an insurance company that it holds, it shall execute an equity pledge contract and may not harm the interests of the other shareholders or the insurance company.

Article 25: An insurance company shall strengthen the management of the pledge and the lifting of pledges of its equity, record relevant information on pledges in the register of shareholders and assist shareholders in a timely manner in carrying out pledge registration with the relevant authority.

Article 26: A pledgee of equity of an insurance company that acquires the equity of the insurance company shall satisfy the qualification conditions set forth in these Measures and the same shall be reported to the CIRC for approval or the record in accordance herewith.

Part Four: Application materials

Article 27: The application materials submitted by an applicant shall be true, accurate and complete.

Article 28: When applying to establish an insurance company, a written application and the following materials of each of the investors shall be submitted to the CIRC:

(1) the investor's basic particulars, including a photocopy of its business licence, its scope of business, organisational and management framework, its position in the industry, the source of its investment funds, its investments in third parties and details of its and its affiliates' investment in the equity of other financial institutions;

(2) its financial accounting report for the preceding year audited by an accounting firm, or, if the investor is an overseas financial institution or a major shareholder, its financial accounting reports for the most recent three years audited by an accounting firm;

(3) proof of its payment of taxes for the most recent three years and its credit record issued by a credit agency;

(4) its major shareholders and de facto controller and an account of its affiliations with other investors in the insurance company, or, if no such affiliations exist, a statement to that effect;

(5) its capital contribution agreement or share subscription agreement and documentation evidencing that its shareholders' meeting, shareholders' general meeting or board of directors consents to the investment, and if it is subject to a competent authority, documentation evidencing that the competent authority consents to the investment;

(6) if it is a financial institution, a report on prudential regulatory indicators and the regulatory opinion issued by the financial regulator of the place where it is located;

(7) a statement to the effect that it does not have a record of major violations of laws or regulations during the most recent three years; and

(8) other materials as specified by the CIRC.

Article 29: If a change is to be made to its registered capital, an insurance company shall submit a written application and the following materials to the CIRC:

(1) the resolution on the increase or reduction of its registered capital adopted by its shareholders meeting or shareholders' general meeting;

(2) the plan for, and a feasibility study report on, the registered capital increase or reduction;

(3) the equity structure after the registered capital increase or reduction;

(4) a capital verification report and proof of the shareholders' capital contributions or capital reductions;

(5) the names of withdrawing shareholders, their basic particulars and the amount by which the capital is reduced;

(6) if a new shareholder is added, the relevant materials specified in Article 28 hereof shall be submitted; and

(7) other materials as specified by the CIRC.

Article 30: When a shareholder transfers equity of an insurance company and the transferee's capital contribution or shareholding percentage reaches at least 5% of the insurance company's registered capital, the insurance company shall submit a written application and the equity transfer agreement to the CIRC, except in the case of the purchase of a listed insurance company's shares on a stock exchange.

If the transferee is a new shareholder, the relevant materials specified in Article 28 hereof shall additionally be submitted.

Article 31: When a shareholder transfers equity of an insurance company and the transferee's capital contribution or shareholding percentage does not reach 5% of the insurance company's registered capital, the insurance company shall submit an equity transfer report and the equity transfer agreement to the CIRC, except in the case of the purchase of a listed insurance company's shares on a stock exchange.

If the transferee is a new shareholder, the relevant materials specified in Article 28 hereof shall additionally be submitted.

Article 32: When an insurance company is to make an initial public offering or to seek post-listing additional financing, it shall submit the following materials:

(1) the resolution on the initial public offering or post-listing additional financing adopted at the company's shareholders' general meeting and the resolution authorising the board of directors to handle relevant matters;

(2) the initial public offering or post-listing additional financing plan;

(3) the equity structure after the initial public offering or post-listing additional financing;

(4) an account of the company's solvency and corporate governance;

(5) an account of the company's business performance and financial position; and

(6) other materials as specified by the CIRC.

Part Five: Supplementary provisions

Article 33: If all of the capital contributions or the shareholding percentages of the foreign shareholders account for at least 25% of the registered capital of a company, relevant provisions on the administration of foreign-funded insurance companies shall apply, unless otherwise provided by the CIRC.

Article 34: These Measures shall apply to the administration of the equity of insurance group (holding) companies and insurance asset management companies, but where laws, administrative regulations or the CIRC provide otherwise, such provisions shall apply.

Article 35: If an insurance company violates these Measures by increasing (or reducing) its registered capital, changing a shareholder or adjusting its equity structure without authorisation, the CIRC shall penalise it in accordance with relevant provisions.

Article 36: The CIRC is in charge of interpreting these Measures.

Article 37: These Measures shall be effective as of June 10 2010. The Tentative Provisions for Investing in the Equity of Insurance Companies (Bao Jian Fa [2000] No.49) issued by the CIRC on April 1 2000 and the Circular on Matters Relevant to Regulating the Acceptance of Foreign Equity Investment by Chinese-invested Insurance Companies (Bao Jian Fa [2001] No.126) issued on June 19 2001 shall be repealed simultaneously.