Measures for the Administration of the Takeover of Listed Companies (Revised in 2014)

(Promulgated by the China Securities Regulatory Commission on October 23 2014, and effective as of November 23 2014.)

Order of the CSRC No.108

Part One: General provisions

Article 1: These Measures have been formulated pursuant to the Securities Law, the Company Law and other related laws and administrative regulations in order to regulate takeovers of listed companies and related share interest changes, protect the lawful rights and interests of listed companies and investors, maintain the order of the securities market, safeguard the public interest and promote the optimal allocation of securities market resources.

Article 2: Takeovers of listed companies and related share interest changes must comply with laws and administrative regulations, and the provisions of the China Securities Regulatory Commission (the CSRC). Concerned parties shall act in good faith, abide by social and commercial ethics, consciously maintain the order of the securities market and accept supervision by the government and public.

Article 3: Takeovers of listed companies and related share interest changes must comply with the principles of transparency, fairness and impartiality.

A party with a disclosure obligation in a takeover of a listed company and related share interest changes shall fully disclose its interests in the listed company and changes in such interests and strictly perform its reporting, announcement and other statutory obligations in accordance with the law. Until relevant information is disclosed, such party shall bear an obligation of confidentiality in respect thereof.

The information reported and announced by a party with a disclosure obligation must be true, accurate and complete, and may not contain any false or misleading statements or material omissions.

Article 4: Takeovers of listed companies and related share interest changes may not jeopardise state security or the public interest.

If a takeover of a listed company and related share interest changes involve such matters as state industrial policy, industry access, transfer of state-owned shares, etc., the approval of the relevant state departments shall be required before the same can be effected.

If a foreign investor wishes to take over a listed company and carry out related share interest changes, it shall obtain the approval of the relevant state departments, and such takeover shall be governed by the laws of China and be subject to Chinese judicial and arbitral jurisdiction.

Article 5: An acquirer may become the controlling shareholder of a listed company by acquiring shares thereof, become the de facto controller of a listed company through an investment relationship, agreement or other arrangement or may obtain control of a listed company through a combination of the foregoing methods.

An acquirer includes the investor and other persons acting in concert.

Article 6: No one may use the takeover of a listed company to harm the lawful rights and interests of the target company or its shareholders.

A listed company may not be taken over if:

(1) the acquirer is encumbered by a relatively large debt that it failed to discharge upon the due date and such circumstance persists;

(2) the acquirer has committed or is suspected of having committed a major violation of the law during the most recent three years;

(3) the acquirer has committed a serious breach of trust in the securities market during the most recent three years;

(4) the acquirer is a natural person characterised by any of the circumstances specified in Article 146 of the Company Law; or

(5) other circumstances where the takeover of a listed company is prohibited as specified in laws or administrative regulations or by the CSRC.

Article 7: The controlling shareholder or de facto controller of a target company may not abuse its rights as a shareholder to harm the lawful rights and interests of the target company or its other shareholders.

If a target company's controlling shareholder or de facto controller and its affiliated parties harm the lawful rights and interests of the target company or its other shareholders, the said controlling shareholder or de facto controller shall, prior to transferring its control over the target company, actively eliminate such harm. If it fails to eliminate such harm, it shall make arrangements to use the proceeds from the sale of the relevant shares to eliminate all of the harm and for any portion of the harm that the proceeds are insufficient to eliminate, it shall provide a sufficient and valid security bond or arrangement and, pursuant to the company's articles of association, seek the approval therefor of the shareholders' general meeting of the target company.

Article 8: The directors, supervisors and senior management personnel of a target company bear obligations of loyalty and due diligence to the company and shall treat equitably all of the potential acquirers seeking to take over the company.

The decisions and measures taken by the board of directors of the target company with respect to the takeover shall be conducive to safeguarding the interests of the company and its shareholders. The board of directors may not abuse its powers to erect inappropriate barriers to the takeover, use company resources to provide financial assistance in any form to the acquirer or harm the lawful rights and interests of the company or its shareholders.

Article 9: When an acquirer intends to take over a listed company, it shall engage a professional firm registered in China that is qualified to engage in the financial consulting business as a financial consultant. If the acquirer fails to engage a financial consultant in accordance with the Measures, it may not proceed with the takeover of the listed company.

Financial consultants shall act with due diligence, comply with industry standards and professional ethics, maintain their independence and ensure the truthfulness, accuracy and completeness of the documents that they prepare and issue.

If a financial consultant deems that the acquirer intends to use the takeover of the listed company to harm the lawful rights and interests of the target company and its shareholders, it shall refuse to provide financial consultancy services to the acquirer.

A financial consultant may not abet, assist or collude with the client in preparing or disclosing report or announcement documents that contain false records, misleading statements or material omissions, engage in unfair competition or take advantage of the takeover of the listed company to seek illegitimate gains.

Article 10: The CSRC oversees the takeover of listed companies and related share interest changes in accordance with the law.

The CSRC will establish a special committee composed of professionals and relevant experts. The special committee may, at the request of the functional departments of the CSRC, provide advisory opinions on whether the takeover of a listed company will be constituted, whether circumstances prohibiting the takeover of a listed company exist and other relevant matters. The CSRC will render its decisions in accordance with the law.

Article 11: Stock exchanges shall formulate operational rules in accordance with the law, organise the transactions and provide services for the takeover of listed companies and the related share interest changes, carry out real time monitoring of related securities trading activities and monitor whether the parties with disclosure obligations in takeovers of listed companies and related share interest changes duly perform their disclosure obligations.

Securities depository and clearing institutions shall formulate operational rules in accordance with the law and provide services relating to such matters as securities registration, deposit, clearing, etc. for takeovers of listed companies and related share interest changes.

Part Two: Disclosure of interests

Article 12: The interests of an investor in a listed company include the shares registered under its name, and shares the voting rights attaching to which it actually controls but that are not registered under its name. The interests in a listed company of an investor and its persons acting in concert shall be calculated together.

Article 13: An investor and its persons acting in concert shall, within three days from the date on which, through securities transactions on a stock exchange, the shares of a listed company in which they have an interest reach 5% of the outstanding shares of such listed company, prepare a report on change in interests, submit the written report to the CSRC and the stock exchange, notify the listed company and announce the same. During the aforementioned period of time, they may not further buy or sell the listed company's shares.

Once the shares in which the aforementioned investor and its persons acting in concert have an interest reach 5% of the outstanding shares of the listed company, whenever the percentage of shares in which they have an interest increase or decrease through transactions on the stock exchange by a quantity equivalent to 5% of the outstanding shares of the listed company, they shall report and announce the same in accordance with the provisions of the preceding paragraph. They may not further buy or sell the listed company's shares during the reporting period or for two days after making the report and announcement.

Article 14: If an investor and its persons acting in concert intend to have their holding of the shares in a listed company in which they have an interest reach or exceed 5% of such company's outstanding shares through a transfer by agreement, they shall, within three days of the occurrence thereof, prepare a report on change in interests, submit the written report to the CSRC and the stock exchange, notify the listed company and announce the same.

Once the shares in which the aforementioned investor and its persons acting in concert have an interest reach 5% of the outstanding shares of the listed company, whenever the percentage of shares in which they have an interest increases or decreases by a quantity equal to or exceeding 5% of the outstanding shares of the listed company, they shall perform their reporting and announcement obligations in accordance with the provisions of the preceding paragraph.

The investors and their persons acting in concert mentioned in the two preceding paragraphs may not further buy or sell the listed company's shares before making the report and announcement. The relevant share transfer and registration of change of ownership procedures shall be carried out in accordance with Part Four hereof and the provisions of the stock exchange and the securities depository and clearing institution.

Article 15: If a change arises in the shares in which an investor and its persons acting in concert have an interest through an administrative allocation or change, the enforcement of a court ruling, succession, bestowal or other such method, thereby reaching the threshold specified in the preceding Article, they shall perform their reporting and announcement obligations in accordance with the preceding Article and carry out the procedures for registration of the change of the shares' ownership with reference to the provisions of the preceding Article.

Article 16: If an investor and its persons acting in concert are not the largest shareholder or de facto controller of the listed company and the shares in which they have an interest reach or exceed 5% of the outstanding shares of the company but have not reached 20% thereof, they shall prepare a simplified report on change in interests containing the following information:

(1) the names and domiciles of the investor and his/her persons acting in concert; if the investor and its persons acting in concert are legal persons, their names, places of registration and their legal representatives;

(2) the objective of the shareholding and whether they intend to continue increasing their interest in the listed company during the following 12 months;

(3) the name of the listed company, and the class, quantity and percentage of shares;

(4) the date on which the shares of the listed company in which they have an interest reached or exceeded 5% of the outstanding shares of such company or the date on which the increase or decrease in the shares in which they have an interest reached 5%, and the means by which this was accomplished;

(5) a brief description of their buying and selling of the company's shares through securities transactions on the stock exchange during the six months prior to the change in their interest; and

(6) other information that the CSRC or stock exchange requires to be disclosed.

If the aforementioned investor and its persons acting in concert are the largest shareholder or de facto controller of the listed company and the shares in which they have an interest reach or exceed 5% of the outstanding shares of such listed company but have not reached 20% thereof, they shall additionally disclose the information specified in the first paragraph of Article 17 hereof.

Article 17: If the shares in which an investor and the persons acting in concert have an interest reach or exceed 20% of the outstanding shares of the listed company, but do not exceed 30% thereof, they shall prepare a detailed report on change in interests in which they shall disclose the following information, in addition to the information that they are required to disclose under the preceding Article:

(1) the controlling shareholders or de facto controllers of the investor and its persons acting in concert and charts of their equity control relationships;

(2) the price for acquiring the relevant shares, the amount required therefor and the source of the funds or other payment arrangement;

(3) whether the business in which the investor, its persons acting in concert and their controlling shareholders or de facto controllers engage in is in inter-affiliate competition‏ or potentially in inter-affiliate competition‏ with that of the listed company and whether continuing affiliated transactions exist between them; if there is inter-affiliate competition‏ or continuing affiliated transactions between them, whether relevant arrangements have been made to ensure that the investor, its persons acting in concert and their affiliated parties are not in inter-affiliate competition‏ with the listed company and that they preserve its independence;

(4) the follow-up plan to make adjustments to the listed company's assets, business, personnel, organisational structure, articles of association, etc. during the following 12 months;

(5) the material transactions between the listed company and the investor and its persons acting in concert during the preceding 24 months;

(6) the absence of the circumstances specified in Article 6 hereof; and

(7) the capacity to provide relevant documents in accordance with Article 50 hereof.

If the aforementioned investor and its persons acting in concert are the largest shareholder or de facto controller of the listed company, they shall additionally engage a financial consultant to issue a review opinion on the information disclosed in the aforementioned report on change in interests, except in the case of an administrative allocation of, or change in, state-owned shares, a share transfer between different entities under the control of the same de facto controller or shares obtained in a succession. If the investor and its persons acting in concert undertake not to exercise the voting rights attaching to the relevant shares for at least three years, they may be exempted from engaging a financial consultant and providing the documents specified in Item (7) of the preceding paragraph.

Article 18: If an investor and its persons acting in concert have disclosed a report on a change in interests and, within six months from the date of the disclosure of such report, are required to submit and publish another report on the change in interests due to a change in the shares in which they have an interest, they may limit their report and announcement to that information that is different from that in the previous report. If more than six months have elapsed since the previous disclosure, the investor and its persons acting in concert shall prepare a report on the change in interests and perform their reporting and announcement obligations in accordance with this Part.

Article 19: If the shares in which an investor and its persons acting in concert have an interest change due to a reduction in the listed company's share capital in such a way that the circumstance specified in Article 14 hereof arises, the investor and its persons acting in concert shall be exempted from performing their reporting and announcement obligations. The listed company shall announce the changes in the shares in which its shareholders have an interest that resulted from such reduction