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China Securities
Regulatory Commission, China Banking Regulatory Commission
Circular of China Securities Regulatory
Commission and China
Banking Regulatory Commission on Regulating the External
Guaranties Provided by Listed Companies
Zheng Jian Fa [2005] No.120
Listed
companies and financial institutions in the banking sector,
With a view to
regulating the external guaranties provided by listed companies as well
as the examination and approval of
financial institutions in the banking sector on the loans as guaranteed
by listed companies and effectively preventing the
risks arising from the external guaranty of listed companies and the
credit risks of financial institutions, and in
accordance with the provisions of such laws and regulations as the
Company Law of the People¡¯s Republic of China, the
Securities Law of the People¡¯s Republic of China, the Law of the
People¡¯s Republic of China on Banking Regulation and
Supervision, and the Guaranty Law of the People¡¯s Republic of China,
relevant issues concerning the external guaranty as
provided by listed companies are hereby notified as follows:
1. We should
regulate the external guaranty as provided by listed companies and
strictly control the risks arising
therefrom.
(1) Any guaranty as provided by a listed company shall be subject to the
deliberation of the board of directors or the
shareholders¡¯ meeting;
(2) The authority of the shareholders¡¯ meeting or the board of directors
regarding the examination and approval of an
external guaranty as well as the responsibility assuming system in the
case of any violation of the said authority of
examination and approval or the procedures for examination and
deliberation shall be stated in the articles of association of
a listed company;
(3) A external guaranty subject to the examination and approval of the
shareholders¡¯ meeting may not be submitted to
the shareholders¡¯ meeting for examination and approval until
the board of directors has reviewed the external guaranty. A
external guaranty that shall be subject to the examination and
approval of the shareholders¡¯ meeting shall include but not be
limited to the following circumstances:
a) Any guaranty as provided after the total amount of
guaranties provided by a listed company and its controlling
subsidiaries exceeds 50% of the net assets upon the latest
auditing;
b) A guaranty as provided to a guaranteed party whose
asset-liability ratio is higher than 70%;
c) A guaranty, the amount of which exceeds 10% of the net
asset upon the latest auditing; and
d) A guaranty as provided to the shareholder, actual
controller or the related party.
Where the shareholders¡¯ meeting deliberates on a guaranty to
be provided to a shareholder, or an actual controller or a
related party, the shareholder, actual controller or related
associated party may not take part in the voting. A resolution
on the external guaranty shall be subject to approval of
shareholders with half or more of the voting rights held by
shareholders present at the meeting.
(4) As to a external guaranty subject to the examination and
approval of the board of directors, it shall be subject to
approval of 2/3 of the directors present at the meeting of the
board of directors upon deliberation, and a resolution shall
be made thereafter;
(5) A guaranty subject to the examination and approval of the
board of directors or the shareholders¡¯ meeting of a listed
company shall be timely disclosed in a newspaper for
information disclosure as designated by China Securities
Regulatory Commission. The content as disclosed shall include
the resolution of the board of directors or the shareholders¡¯
meeting as well as the total amount of external guaranty of a
listed company and its controlling subsidiaries to other
parties and the total amount of guaranties provided by the
listed company to its controlling subsidiaries until the day
when the information is disclosed.
(6) Where a listed company undertakes the provision of loan
guaranty , it shall submit such materials as the articles of
association, the original of the resolution of the board of
directors or the shareholders¡¯ meeting with respect to the
guaranty and the designated newspaper, on which the relevant
issues concerning the guaranty are published.
(7) As to the guaranty provided by a controlling subsidiary
of a listed company, the aforesaid provisions shall be
referred to. The controlling subsidiary shall timely inform
the listed company of performing the information disclosure
obligations after its board of directors or its shareholders¡¯
meeting makes the relevant resolution.
2. We should regulate the examination and approval of loan
guaranties by financial institutions in the banking sector and
effectively prevent the credit risks arising from the loans
guaranteed by listed companies and granted by financial
institutions.
(1) All the financial institutions in the banking sector
shall, in strict compliance with such laws and regulations as
the Guaranty Law of the People¡¯s Republic of China, the
Company Law of the People¡¯s Republic of China, and the
Interpretation of the Supreme People¡¯s Court on Some Issues
Concerning the Application of the Guaranty Law of the People¡¯s
Republic of China, reinforce the examination of the
application for loan as guaranteed by a listed company,
effectively prevent the relevant credit risks and shall timely
upload the information on loans and guaranties into the credit
management system.
(2) All financial institutions in the banking sector shall,
according to this Circular, the articles of association of the
listed company concerned as well as other relevant provisions,
seriously examine the following matters:
a) Completeness and compliance with relevant laws and
regulations of the application materials submitted by the
listed company for the loan it guarantees;
b) Performance of the listed company in respect of the
procedures for the examination and approval of the board of
directors or the shareholders¡¯ meeting on its external
guaranty;
c) Performance of information disclosure obligations of the
listed company;
d) Guaranty capability of the listed company; and
e) Other matter concerning the accommodator¡¯s
creditworthiness and payment capability.
(3) Financial institutions in the banking sector shall,
according to such provisions as the Guidance for Commercial
Banks on the Fulfillment of Credit Authorization Work, improve
the internal control system so as to control credit risks.
(4) As to application for loans as guaranteed by a
controlling subsidiary of a listed company, the above
provisions shall be referred to.
3. We should strengthen the supervision and coordination and
intensify the responsibility prosecution for any rule-breaking
provision of external guaranty by listed companies.
(1) The China Securities Regulatory Commission and branches
thereof and the China Banking Regulatory Commission and the
branches thereof shall strengthen supervision and
coordination, share information with each other, jointly
establish a supervision and coordination mechanism, jointly
intensify the prosecution of the violation of an listed
company by concealing information on guaranty or providing a
guaranty illegally or the violation of a financial institution
in the banking sector by unlawfully granting a loan, and affix
legal liabilities to the parties concerned according to law.
(2) A listed company or any senior manager thereof such as
director, supervisor or manager which violates the provisions
of this Circular, shall be ordered to make rectification and
correction by the China Securities Regulatory Commission, and
shall be punished according to law. If a suspected crime is
involved in the case, it shall be transferred to the judicial
organ.
(3) Where a financial institution in the banking sector
violates laws or regulations, the relevant institution and the
parties concerned shall be punished by the China Banking
Regulatory Commission. If a suspected crime is in the case,
they shall be subjected to legal liabilities by means of
transferring the case to the judicial organ.
4. Other Matters
(1) All listed companies shall revise and improve their
articles of association according to the aforesaid provisions.
All financial institutions in the banking sector shall
incorporate the guaranty provided by the listed companies into
the uniform credit granting system, and shall, in strict
accordance with the relevant provisions, carry out examination
and approval as well as administration with respect to
guaranties.
(2) The term ¡°financial institutions in the banking sector¡±
as mentioned in the present Circular shall be defined
according to that as used in the Law of the People¡¯s Republic
of China on Banking Regulation and Supervision. The term
¡°external guaranty¡± as mentioned herein shall mean the
guaranty provided by a listed company to others, including the
guaranty provided by a listed company to its controlling
subsidiary. The term ¡°the total amount of the external
guaranty of a listed company and its controlling subsidiaries¡±
as mentioned herein shall mean the sum of the total amount of
guaranties provided by a listed company to other parties and
the total amount of guaranty provided by its controlling
subsidiaries to other parties, including the guaranty provided
by a listed company to its controlling subsidiaries.
(3) This Circular shall apply to all listed financial
companies.
(4) Where the Circular on the Relevant Issues concerning the
Provision of Guaranty by Listed Companies to Other Parties(
Zheng Jian Gong Si Zi [2000] No. 61 ) and the Circular on Some
Issues concerning the Fund Flow Between a Listed Company and
its Associated Parties as well as the Guaranties Provided by a
Listed Company (Zheng Jian Fa [2000] No. 56 ) has any conflict
with the provisions of this Circular, this Circular shall
prevail.
(5) The present Circular shall go into effect as of January
1, 2006..
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