Measures on the Takeover of Listed Companies

Decree of the Chinese Securities Regulatory Commission  No.10

September 28, 2002

Chapter I General Provisions

Article 1 These Measures are formulated, in accordance with the
Company Law, the Securities Law, and other laws and relevant rules
and regulations, for the purpose of standardizing the activities of
the takeover of the listed companies, promoting the optimum
distribution of the resources of the securities markets, protecting
the lawful rights and interests of the investors, and safeguarding
the normal order of the securities market.
Article 2 The takeover of the listed companies as mentioned in these
Measures refers to an act which entitles a purchaser to the
practical control right of or the potential practical control right
of a listed company if, through activities of the transfer of shares
in the stock exchange, or through lawful means other than the
activities of transfer of shares in the stock exchange, the
purchaser holds a certain proportion of the shares issued by the
said listed company.
Article 3 A purchaser may, by agreement or by offer, or through
transaction in the manner of public centralized trading at the
competing price, take over a listed company, and obtain the
practical control right of a listed company.
Where a purchaser takes over a listed company, he shall adhere to
the provisions stipulated by these Measures, and shall perform the
obligations of making timely report and announcement in accordance
with the provisions stipulated by these Measures.
Article 4 The activities of the takeover of the listed companies
shall be conducted in line with the principles of openness, fairness
and impartiality. The relevant parties shall be faithful and
reliable, and shall consciously safeguard the order of the
securities market.
Article 5 Information reported and announced by the relevant parties
involved in the takeover of the listed companies shall be truthful,
accurate, and complete, and shall not contain a falsehood,
misleading statement or major omission.
No individuals shall spread false information, disturb the market
order, or undertake other fraudulent activities by taking advantage
of the takeover of the listed companies.
Article 6 Takeover of the listed companies may be conducted through
payment by cash, by lawfully transferable securities, or by other
means prescribed by laws, or rules and regulations.
Article 7 A purchaser shall not damage the lawful rights and
interests of the company under takeover and its shareholders by
taking advantage of the takeover of the listed company.
Any purchaser who is incompetent for the practical performance shall
be forbidden to enter into the takeover of a listed company; company
to be taken over shall not provide the purchaser with financial aids
in any form.
Article 8 The holding shareholders and other practical controller of
a listed company shall bear good faith to the company under their
control and other shareholders.
A purchaser shall be faithful and reliable to the listed company
under takeover and other shareholders of the listed company, and
shall provide completely effective guarantees to perform the
specific matters which the purchaser has promised.
Article 9 Directors, supervisors and senior management persons of a
listed company shall have the obligation of good faith to the listed
company which they work for and to the shareholders of such listed
company.
Where a listed company changes its directors or its directors quit
their positions during the term of the takeover, such listed company
shall explain the reasons and make it publicly known.
Article 10 The Chinese Securities Regulatory Committee (hereinafter
referred to as CSRC) shall supervise the activities of the takeover
of the listed companies.
The stock exchange and the securities registration and clearing
institution shall, pursuant to the duties and responsibilities
authorized by the CSRC and their respective work regulations,
supervise the daily activities of the takeover of the listed
companies.
Article 11 The CSRC may establish a special committee composed of
professionals, which shall provide opinions on whether a specific
transaction constitutes a takeover of a listed company, on how the
parties shall perform their relevant duties, on whether the specific
transaction matters will affect the continuous listing status of the
listed company under takeover, and as to other entities and
procedural matters.
Chapter II Provisions on Takeover by Agreement
Article 12 Where a listed company is taken over by agreement, the
purchaser shall submit to the SCRC a report on the takeover of the
listed company the next day after the conclusion of the agreement;
at the same time, the purchaser shall submit a copy of the report to
the office under the SCRC located in the place where the listed
company lies, send a copy of the report to the stock exchange,
notify the listed company that is taken over, and make a suggestive
announcement of the summary of the report on the takeover of the
listed company.
If the SCRC fails to offer objection within 15 days from the date of
receiving the report on the takeover of the listed company, the
purchaser may make an announcement of the report on the takeover of
the listed company, and perform the takeover agreement.
Article 13 Where a listed company is taken over by agreement, if the
purchaser continues to increase shareholding or aggrandizing the
control of the listed company after he comes to hold or control 30
percent of the shares issued by the listed company, he shall issue a
takeover offer to all shareholders of the listed company to be taken
over, which indicates a proposal to buy all the shares held by all
the shareholders; if the takeover offer complies with the provisions
stipulated in Chapter IV of these Measures, the purchaser may submit
an application to the SCRC for exemption; upon exemption, the listed
company may be taken over by agreement.
Article 14 Where a listed company is taken over by agreement, if the
shares the purchaser plans to hold or control excess 30 percent of
the shares issued by the listed company, the purchaser shall issue a
takeover offer to all shareholders of the listed company to be taken
over, which indicates a proposal to buy all the shares held by all
the shareholders; if the takeover offer complies with the provisions
stipulated in Chapter IV of these Measures, the purchaser may submit
an application to the SCRC for exemption; upon exemption, the listed
company may be taken over by agreement.
Article 15 When the listed company to be taken over receives the
notification sent by the purchaser, its board of directors shall
state a timely opinion on the potential influence which the takeover
may impose upon the listed company; simultaneously the independent
director shall express his independent opinion when he is engaged in
the development of the opinion of the board of directors. If the
board of directors of the listed company under takeover deems it
necessary, the board may employ professional institutions such as an
independent financial consultant to offer them consultative opinion
in the name of the listed company. The opinion of the board of
directors of the listed company under takeover, the opinion of the
independent director, and the opinion of the professional
institution shall be made known to the general people.
Where a listed company is taken over by the management, or staff
members, the independent director of the company under takeover
shall state his independent review on the potential influence which
the takeover may impose upon the listed company. The independent
director shall demand the company to employ such professional
institutions as an independent financial consultant to offer
consultative opinion, which plus the opinion of the independent
director shall be made publicly known. The fees for the financial
consultant shall be borne by the company to be taken over.
Article 16 In the case of the transfer of shares held by
institutions authorized by the state, or the transfer of shares
which is subject to administrative examination and approval, the
relevant parties to the takeover agreement shall not effect the
takeover by agreement before examination and approval is provided by
the competent administrative department.
Article 17 The relevant parties to the takeover agreement shall, in
accordance with the regulations and requirements drawn up by the
stock exchange or the securities registration and clearing
institution, apply for the transfer of shares and the registration
of change of ownership.
The stock exchange and the securities registration and clearing
institution shall not handle the transfer of shares and the
registration of change of ownership if, inconsistent with
provisions, no report or announcement is performed, or no
application is submitted.
Article 18 Where a listed company is taken over by agreement, the
relevant parties shall, on an ad hoc basis, entrust a securities
registration and clearing institution with custody of the shares
planned to be transferred and with deposit of the cash to be used as
the payment with the designated bank.
Article 19 By agreement, if the transfer of shares issued by a
listed company and quoted for trading on the stock exchange results
in the purchaser''s practical control right or feasible control
right of the said company, the following procedures shall be
applicable:
1. after the takeover report on the listed company is announced, the
relevant parties shall entrust the securities company to apply for
transfer of shares and registration of change of ownership; the
entrusted securities companies shall apply to the stock exchange and
the securities registration and clearing institution for suspension
of trading and ad hoc custody of the shares scheduled to take over;
if the shares of a listed company are suspended for trading or
entrusted with custody on a ad hoc basis, an announcement shall be
made;
The stock exchange may, in light with the needs of the management of
the securities market, decide on the suspension of listing of the
shares which are quoted and traded on the stock exchange.
2. the transferee shall, on the next day from submitting an
application for transfer of shares, make announcement of the matters
of the transfer agreement and the name of the securities company
that accepts the entrustment, and inform the listed company of
these.
3. the stock exchange shall, within 3 work days from the date on
which it receives the application, complete the examination and
rectification, and decide on whether to affirm the application or
not;
4. if the stock exchange affirms the application for transfer of
shares, the entrusted securities company shall, in the name of both
the transferor and transferee, apply to the securities registration
and clearing institution for registration of the change of
ownership; the transferee shall, within 2 days after the completion
of the registration of the change of the ownership, make the
registration publicly known.
if the stock exchange refuses to affirm the application, the
entrusted securities company shall on the same date when it receives
the notification from the stock exchange, inform both the transferor
and transferee of the shares and the company under takeover of the
refusal to affirm the application, and shall, in the name of the
transferor and transferee, apply to the securities registration and
clearing institution for elimination of the temporary custody of the
said shares; the transferor shall, within 2 work days from the date
on which he is informed of the refusal to affirm the application,
make announcement of the matter;
5. after the registration of the change of the ownership of the
shares, the entrusted securities company shall, in the name of the
transferee, apply to the securities registration and clearing
institution for elimination of the temporary custody of the said
shares; the transferee shall, within 2 work days from the date of
submitting the application for the elimination of the custody, make
announcement of the matter; the said section of shares shall resume
trading in the stock exchange.
Article 20 Where Holding shareholders of a listed company or other
practical controllers of a listed company transfer their practical
control rights of the listed company, if they fail to repay their
debts in full to the company; or if they fail to eliminate the
guarantee which the company has provide for their debts; or if there
exist other matters that damage the interests of the company, the
board of directors of the listed company shall, for the company,
employ an audit institution, which shall make special rectification
and examination of the relevant matters and produce a report on the
rectification and examination, and demand the holding shareholders
of the listed company or other practical controllers of the listed
company offer feasible resolutions. The board of directors of the
listed company and the independent director shall state their
respective review on the feasibility of the resolution. The listed
company under takeover shall make announcement of the report on the
rectification and examination, as well as announcement of the
resolution, and of the respective opinion of the board of directors
and the independent director.
If the holding shareholders or other practical controllers refuse to
make resolutions, the board of directors, or the independent
director shall adopt completely effective legal measures to protect
the interests of the company.
Article 21 If, upon approval by the SCRC and the stock exchange, the
shareholders of a listed company transfer by public collection the
shares they hold which are issued by the listed company, the
transfer shall be entrusted to the securities company, specific
procedures and requirement for which shall be consistent with the
professional provisions stipulated by the stock exchange.
Article 22 Where a purchaser holds, controls the shares of a listed
company by means of administrative distribution or transfer of the
state-owned shares, by ruling of the courts, by inheritance, and by
donation, which entitles him to the practical or possible control of
a listed company, these regulations shall be applicable.
Chapter III Provisions on Takeover by Offer
Article 23 When the number of shares held or controlled by a
purchaser comes to 30 percent of the shares issued by a listed
company, the purchaser shall, on the next day after such
shareholding becomes a fact, submit a report on the takeover of the
said company to the CSRC. At the same time the purchaser shall
submit a copy of the report to the office under the CSRC located in
the place where the listed company lies, send a copy of the report
to the stock exchange, and make an announcement. Without performing
the obligation of reporting and announcing in accordance with these
Measures, the purchaser shall not continue to increase the
shareholding or aggrandize the control right.
Where the purchaser prescribed in the proceeding paragraph continues
to increase the shareholding or aggrandizing the control right, the
purchaser shall, in the form of offer takeover, send an offer to all
the shareholders of the said company which indicates that the
purchaser attempts to buy all the shares which they hold; if the
takeover complies with the provisions stipulated in Chapter IV of
these Measures, an application may be submitted to the CSRC for the
exemption.
Where the purchaser prescribed in the proceeding paragraph has
produced a report on and made announcement of the takeover of the
listed company before it comes to hold or control 30 percent of the
shares issued by a listed company, the purchaser may make a report
only on the difference between the statement of this report and the
statement of the former one and make it publicly known.
Article 24 When the number of shares held or controlled by a
purchaser accounts for less than 30 percent of the shares issued by
a listed company, if the purchaser increases the shareholding of the
said company by offer, the proportion of shares the purchaser
schedules to takeover shall not account for less than 5 percent;
upon the completion of the scheduled takeover, the proportion of
shares held or controlled by the purchaser shall not exceed 30
percent; if the proportion is planned to exceed 30 percent, an offer
shall be sent to all the shareholders of the said company which
indicates that the purchaser attempts to buy all the shares which
they hold; if the case complies with the provisions prescribed in
Chapter IV of these Measures, an application for exemption may be
submitted to the CSRC.
Article 25 Where a listed company is taken over by offer, the
purchaser shall submit to the CSRC a report on the offer takeover.
Simultaneously, the purchaser shall submit a copy of the report to
the office under the CSRC located in the place where the listed
company lies, send a copy of the report to the stock exchange,
notify the company to be taken over, and make a suggestive
announcement of the summary of the report on the offer takeover.
The stock exchange may, according to the needs of the securities
market, make decide on the suspension of the trading of the shares
of the listed company quoted and traded on the stock exchange.
Article 26 A report on the takeover by offer shall state the
following matters:
1. the name and domicile of the purchaser;
2. the purchaser''s decision on the takeover;
3. the name of the listed company under takeover;
4. the purpose of the takeover;
5. a detailed description of the shares to buy up and the total
number of the shares scheduled to buy up;
6. the term and price of the takeover;
7. the amount and guaranteed availability of the funds required for
the takeover;
8. the ratio between the total number of the issued shares of the
company to be taken over and the number of such shares held at the
time the offer takeover report is submitted;
9. the follow-up schedule after the completion of the takeover; and
10. other matters required by the CSRC.
Article 27 In the report on the takeover by offer, a purchaser shall
state whether the listing of the company under takeover shall be
planned to cease or not; if the listing of the company is to planned
be cease, special suggestion shall be highlighted in the report on
the offer takeover.
A purchaser shall state in the report on the offer takeover whether,
upon the completion of the takeover, the change of distribution of
the shareholding of the company under takeover may have influence
upon the continuous listing of the said company; if influence does
exist, the purchaser shall make specific programs to maintain the
continuous listing of the said company.
Article 28 A purchaser shall employ lawyers who shall undertake
verification and examination of the truthfulness, accuracy, and
completeness of the contents of the report on the offer takeover,
and who shall produce a lawful statement.
A purchaser shall employ such professional institutions as a
financial consultant who shall appraise the capability of a
purchaser to perform the takeover. The professional opinion of the
financial consultant shall be announced.
Article 29 Where a purchaser applies to revoke the takeover plan
after an application has be submitted to the CSRC for a takeover by
offer but before an offer is sent out, the purchaser shall not,
within 12 months from the date on which the application for the
revoke of the takeover is submitted to the CSRC, reapply for a
takeover of the listed company.
Article 30 If the CSRC fails to state objection within 15 days from
the date of the receipt of the report on the takeover by offer, the
purchaser may make announcement of the documents of the offer
takeover; if the CSRC objects, the purchaser shall make remedy or
supplement concerning the relevant matters. The time for the remedy
or supplement shall not be accounted into the time period specified
in this paragraph.
Article 31 The board of directors of the company under takeover
shall in the interest of the said company employ such professional
institution as a independent financial consultant to analyze the
financial status qua of the company under takeover. The independent
financial consultant shall state its review on matters such as the
fairness and rationality of the conditions for the takeover by
offer, and the potential influence of the takeover upon the said
company. The matters shall be made known to general people.
Where the management, and the staff members conduct the takeover of
a listed company, the independent director of a listed company shall
employ such institutions as an independent financial consultant to
analyze the financial status qua of the company under takeover. The
independent financial shall state its review on matters such as the
fairness and rationality of the conditions for the takeover by
offer, and the potential influence of the takeover upon the said
company. The matters shall be made known to general people.. The
fees for the consultants shall be borne by the company under
takeover.
Article 32 The board of directors of the company to be taken over
shall, within 10 days from the date on which a purchaser sends out
takeover offer, submit the report of the board of directors, and the
professional opinion of the independent consultant as well to the
CSRC. Simultaneously, the board of directors shall submit a copy of
the report and opinion to the office under the CSRC located in the
place where the listed company lies, send a copy of the report and
opinion to the stock exchange, and make announcement of the report
and opinion.
The statement of the board of directors of the listed company shall
provide advice for the shareholders as to whether to accept the
takeover offer or not. The independent director of the company under
takeover shall express independent opinion. Both the statement and
the opinion shall be made publicly known.
Where the purchaser make major alteration of the conditions for the
takeover offer, the board of directors of the listed company under
takeover shall make a supplementary report on the alteration of the
conditions for the takeover offer, and the independent director
shall state independent review. Both the report and the review shall
be made publicly known.
Article 33 Strategies and measures adopted by the directors,
supervisors and senior management of a company under takeover
concerning the purchasing activities shall not damage the legal
rights and interests of the company and its shareholders.
If a purchaser has made a suggestive announcement, the board of
directors of the company that is taken over may continue to perform
the concluded contracts or decisions made by the shareholders''
meeting, but shall not suggest the following matters:
1. issuing shares;
2. issuing company bonds that can be converted into shares;
3. repurchasing the shares issued by the listed company;
4. modifying the articles of association of the company;
5. concluding contracts that may have great influence on the assets,
debts, rights or interests, or operation results of the company,
with exception of the conclusion of contracts concerning the normal
business of the company; and
6. disposing or purchasing assets with a great value, or readjusting
the major business of the company, with exception of the
readjustment of the business or redistribution of the assets for the
companies that are confronted with grim financial difficulty.
Article 34 The purchaser shall abide by the following principle when
he decides on the price of the takeover by offer:
1. the price at which the same kind of shares quoted and traded is
taken over by offer shall not be lower than the higher price listed
as follows:
(1) the highest price at which a purchaser buy the said kind of
shares of the company under takeover quoted and traded within 6
months prior to the date on which the suggestive announcement is
made;
(2) 90 percent of the arithmetic average value of the daily added
average price at which the said kind of shares of the company under
takeover quoted and traded within 30 trading days prior to the date
on which the suggestive announcement is made;
2. the price at which shares not quoted and traded are taken over
shall not be lower than the higher price listed as follows:
(1) the highest price which a purchaser pays for the shares issued
by the listed company which are not quoted and traded within 6
months prior to the date on which the suggestive announcement is
made;
(2) the net asset value of per share of the company under takeover
which is audited in the last announcement.
Under special circumstances, if the principle for the determination
of the prices prescribed in the proceeding paragraph needs to be
readjusted, the purchaser shall seek consent from the CSRC in
advance. If the price offered by the purchaser is obviously unfair,
the CSRC may demands the purchaser to make readjustment.
Article 35 Where a purchaser pays for the takeover in cash, the
purchaser shall, at the same time when a suggestive announcement is
made, deposit not less than 20 percent of the total amount of the
guaranteed funds for the performance in the account of a bank
designated by the securities registration and clearing institution,
and shall undertake procedures to freeze the account.
Where a purchaser pays for the takeover with lawfully transferable
company bonds, the purchaser shall, at the same time when a
suggestive announcement is made, entrust the securities registration
and clearing institution with the custody of the total securities
that the purchaser will use to pay for the takeover, except that the
securities are not included in custody pursuant to the regulations
of the securities registration and clearing institution.
Where a purchaser revokes the takeover plan, if the purchaser is not
involved in inappropriate investigation, the purchaser may submit an
application for unfreezing the guaranteed funds for the performance
and for unfreezing the custody of securities.
Article 36 The effective term of a takeover offer shall not be less
than 30 days, but not be more than 60 days, except that competing
offers occur.
Within the effective term of a takeover offer, the purchaser shall
not withdraw the takeover offer.
Article 37 Where a purchaser modifies the conditions for the
takeover offer within the effective term of the takeover offer, the
purchaser shall submit a written report to the CSRC in advance,
represent a copy of the report to the office under the CSRC located
in the place where the listed company lies, send a copy of the
report to the stock exchange, and notify the company to be taken
over; no implementation shall be effected, and no announcement shall
be made without approval by the CSRC.
Article 38 Within 15 days prior to the expiration of the takeover
offer, a purchaser shall not modify the terms of a takeover offer,
except that competing offers exist.
Where there exist competing offers, if, within less than 15 days
prior to the expiration of the offer, the purchaser who initially
offers the takeover modifies the conditions for the offer, the term
shall be prolonged; the prolonged term shall not be less than 15
days, but shall not go beyond the expiration date of the last
competing offer.
Article 39 Where the basic facts disclosed in the written report on
the takeover offer are subject to major changes, the purchaser
shall, within 2 work days from the date on which these changes
occur, submit a written report to the CSRC, at the same time,
present a copy of the report to the office under the CSRC located in
the place where the listed company lies, send a copy of the report
to the stock exchange, notify the listed company, and make
announcement of the matter.
Article 40 A purchaser shall entrust the securities company to
submit an application to the securities registration and clearing
institution for the ad hoc custody of the shares preliminarily
accepted by an offeree.
Shares preliminarily accepted by the offeree in the custody of the
securities registration and clearing institution shall not be
transferred in any form within the term of the takeover offer.
Article 41 Holders of preliminarily accepted shares shall have the
right to withdraw the preliminary acceptance prior to the expiration
of the offer; the securities registration and clearing institution
shall, according to the application of the holders of the
preliminarily accepted shares, eliminate the ad hoc custody of the
shares preliminarily accepted.
Within the effective time period of the takeover offer, a purchaser
shall announce the number of shares preliminarily accepted and the
revoked number of the shares preliminarily accepted on the website
of the securities registration and clearing institution every day.
Article 42 Within the time period for takeover by offer, the
purchaser shall, according to the conditions for the takeover offer,
buy all the shares preliminarily accepted by the shareholders of the
company; if the number of shares preliminarily accepted exceed the
number of shares planned to buy up, the purchaser shall buy up the
shares preliminarily accepted at the same ratio.
Within 3 work days upon the expiration of the takeover offer, the
securities company that accepts the entrustment shall submit an
application to the securities registration and clearing institution
for the clearing of the transferred shares and the registration of
the change of the ownership of the shares, and eliminate the
temporary custody of the shares that exceed the proportion of the
shares scheduled to take over.
Article 43 Within 3 work days upon the expiration of the takeover
offer, a purchaser shall submit a written report on the takeover
offer to the CSRC, send a copy of the report to the office under the
CSRC located in the place where the listed company lies, present a
copy of the report to the stock exchange, notify the company under
takeover, and make announcement of the matter.
Article 44 After the making of a suggestive announcement, but prior
to the expiration of the takeover offer, a purchaser shall not buy
or sell shares of the company under takeover in a way different
from, or on terms in excess of, those as prescribed in the offer.
Article 45 Where competing offers occur, the board of directors of
the company under takeover shall fairly treat all of the purchasers
of takeover by offer.
Article 46 A purchaser who plans to send out a competing offer
shall, at least 5 days prior to the expiration of the initial offer,
submit a written report on the takeover offer to the CSRC, present a
copy of the report to the office under the CSRC that is located in
the place where the listed company lies, send a copy of the report
to the stock exchange, and notify the company to be taken over, and
make a suggestive announcement of the summary of the report on the
takeover offer; if the CSRC fails to provide disagreement within 15
days after the receipt of the report on the takeover offer, the
purchaser shall make the documents on the takeover offer known to
the general public.
Article 47 If a purchaser attempts to continuously buy the shares of
the same listed company which are held by the shareholders, and upon
the completion of takeover, the shares held or controlled by the
purchaser comes to or exceeds 5 percent of the total number of the
shares issued by the listed company, this matter shall be regarded
as an act of takeover offer, which shall be conducted in accordance
with the provisions on the takeover offer prescribed in these
Measures.
Chapter IV Exemption from Obligations For the Takeover Offer
Article 48 If a matter complies with the provisions specified in
Article 49 and Article 51, a purchaser may apply to the CSRC for the
following exemptions:
1. exemption from a takeover offer to increase shares;
2. exemption from sending out a takeover offer to all the
shareholders of the company to be taken over;
3. exemption from a takeover offer to buy up all the shares issued
the company to be taken over.
Article 49 Under any of the following circumstances, a purchaser may
apply to the CSRC for exemption:
1. if the transfer of shares issued by a listed company occurs among
entities who are under control of a same practical controller who,
upon the completion of the transfer of shares, continues to be the
practical controller of the said listed company, and the transferee
promises to perform the issuers'' obligations;
2. if the listed company is confronted with sever financial
difficulty, the purchaser buys up the shares in order to save the
said company, and has offered reliable and feasible redistribution
programs;
3. if the listed company, according to the decision of the
shareholders'' general meeting, issues new shares, which makes the
shares held or controlled by the purchaser exceed 30 percent of the
shares issued by the said company;
4. if based on the ruling of the court, an application for transfer
of shares is effected, which makes the shares held or controlled by
a purchaser exceed 30 percent of the shares issued by the said
company; and
5. other circumstances determined by the CSRC to satisfy the needs
to adapt to the development and change of the securities market and
to protect the investors'' lawful rights and interests.
Article 50 Where a purchaser submit an application to the CSRC for
exemption, if the documents on the application meet the stipulated
requirements, and if the purchaser has undertaken the obligation to
disclose the information according to provisions, the CSRC shall
make a decision to accept the application; if the documents on the
application fail to meet the stipulated requirements, or if the
purchaser fails to undertake the obligation to disclose the
information according to provisions, the CSRC shall not accept the
application.
Within 3 months after the receipt of the application for exemption,
the CSRC shall decide on whether to exempt the specific matters
which the purchaser claims in the application or not; if the
exemption is permitted, the purchaser may continue to increase the
shareholding or increase the controlling of shares.
Article 51 Under any of the following circumstances, relevant
parties may submit documents on application for exemption to the
CSRC:
1. if a shareholder, who lawfully holds or controls more than 50
percent of the shares issued by a listed company, continues to
increase shares, exaggerate controlling, but the shares he holds
does not exceed 75 percent of the shares issued by the listed
company;
2. if the reduction of shares by the listed company makes the shares
held by the purchaser exceed 30 percent of the shares issued by the
company;
3. if, due to the normal business to underwrite shares, a securities
company holds more than 30 percent of the shares issued by a listed
company, but the securities company shows no sign or attempt to
practically control the listed company , and suggests that the
excessive shares should be transferred to unrelated parties in
proper time period;
4. if, due to the normal banking business undertaken by a bank, the
shares held by the bank exceed 30 percent of the shares issued by
the listed company, but the bank shows no sign or attempt to
practically control the listed company , and it suggests a program
that it should transfer the excessive part to unrelated parties in
proper time period;
5. if, due to administrative distribution and transfer of
state-owned assets, a party holds or controls more than 30 percent
of the shares issued by a listed company;
6. if, due to inheritance, a party holds or controls more than 30
percent of the shares issued by a listed company; and
7. other circumstances determined by the CSRC to satisfy the needs
to adapt to the development and change of the securities market and
to protect the investors'' lawful rights and interests.
If the CSRC fails to offer disagreement within 5 work days from the
receipt of the application documents that satisfy the stipulated
provisions, a party may apply to the stock exchange and the
securities registration and clearing institution for transfer of
shares and registration of change of ownership of the shares.
Article 52 The takeover offer sent out by a purchaser shall apply to
all the shareholders of the company to be taken over; but in the
case of the limitation of entity qualification, and the type of
shares, and in the case of special provisions stipulated by laws,
administrative rules and regulations, the purchaser may apply for
exemption to the CSRC.
Article 53 If a purchaser applies for exemption, the purchaser shall
employ a lawyers'' office to provide specific professional opinions
on the exempted matters; according to the provisions stipulated in
Subparagraphs 2, 3 of Article 49, the purchaser who applies for
exemption, shall employs professional institutions such as a
financial consultant to provide professional opinion.
Chapter V Measures for Supervision and Legal Liability
Article 54 If in violation of the provisions stipulated by these
Measures, a purchaser holds more than 30 percent of the shares
issued by a listed company, initiative correctness shall be made; if
the matter fails to be corrected, the stock exchange shall handle
the matter in accordance with the professional provisions; if the
purchaser refuses to correct the matter, the CSRC shall order the
purchaser to put it right. Prior to the correctness, the purchaser
shall not designate directors, supervisors, senior management
persons for the company to be taken over; during the time period for
the correctness, the CSRC shall refuse to accept any documents
provided by any professional institutions for the company to be
taken over.
Article55 If a purchaser, inconsistent with the provisions specified
in these Measures, fails to perform the obligation of making report
or announcement, the purchaser shall initiatively correct it; if the
purchaser fails to correct it, the stock exchange shall handle the
matter in accordance with the professional provisions; if the
purchaser refuses to correct it, the CSRC shall order the purchaser
to correct it, and shall terminate the activities concerning the
takeover. Prior to the correctness, the purchaser shall not appoint
directors, supervisors, senior management persons for the company to
be taken over; during the time period for the correctness, the CSRC
shall refuse to accept any documents provided by any professional
institutions for the company to be taken over. If the matter
constitutes a securities act that breaks the law, legal liability
shall be pursued according to law.
Article 56 If there is a falsehood, misleading statement or major
omission in the report or announcement made by a purchaser, the
matter shall be initiatively correct; if the purchaser fails to
correct it, the stock exchange shall handle the matter in accordance
with the professional provisions; if the purchaser refuses to
correct it, the CSRC shall order the purchaser to correct it, and
shall terminate the activities concerning the takeover. Prior to the
correctness, the purchaser shall not appoint directors, supervisors,
senior management persons for the company to be taken over; during
the time period for the correctness, the CSRC shall refuse to accept
any documents provided by any professional institutions for the
company to be taken over. If the matter constitutes a securities act
that breaks the law, legal liability shall be pursued according to
law.
Article 57 Where, if a holding shareholder or other practical
controller of a listed company transfers the practical control right
of a listed company, he fails to repay the debts owed to the
company, or fails to rescind the guarantee ensured for him by the
company, or fails to correct other matters that damage the interests
of the company, he shall initiatively correct it; if he fails to
correct it, the board of directors, the independent director of the
company under takeover shall adopt completely effective legal
measures to promote the correctness, and the stock exchange shall
handle the matter in accordance with the professional provisions; if
he refuses to correct it, the CSRC shall refuse to accept any
documents provided by any professional institutions for the company
to be taken over.
If the matter constitutes a securities act that breaks the law,
legal liability shall be pursued according to law. If the board of
directors, or the independent director fails to adopt the measures
specified in the proceeding paragraph, the stock exchange shall
handle the matter in accordance with the professional provisions; if
they refuse to take measures, the CSRC shall order them to correct
the matter. If the matter constitutes a securities act that breaks
the law, legal liability shall be pursued according to law.
Article 58 If in the documents such as audit reports, asset
appraisal reports, legal opinions, and financial opinions produced
by a professional institution and its staff members for the listed
company, there is a falsehood, misleading statement, or major
omission, initiative correctness shall be made; if correctness
fails, the stock exchange shall handle the matter in accordance with
the professional provisions; if the institution and its staffs
refuse to correct it, the CSRC shall refuse to accept any documents
provided by any professional institutions for the company to be
taken over. If the matter constitutes a securities act that breaks
the law, legal liability shall be pursued according to law.
Article 59 Anyone with knowledge of the information of the takeover
of the listed company, prior to the lawful publicity of the relevant
information on the takeover, discloses the information, buys or
sells the securities issued by the listed company, or advices other
persons to buy or sell the securities of the listed company, or
distributes false information or undertakes fraudulent activities by
taking advantage of the takeover of the listed company, legal
liability shall be pursued according to law.
If, by taking advantage of the takeover of the listed company, a
party commits other inappropriate activities, the party shall make
initiative correctness; if correctness fails, the stock exchange
shall handle the matter in accordance with the professional
provisions; if the party refuses to correct it, the CSRC shall order
him to correct it. If the matter constitutes a securities act that
breaks the law, legal liability shall be pursued according to law.
Chapter VI Supplementary Provisions
Article 60 In the takeover of a listed company, shares of the
company to be taken over held or practically controlled by
shareholders, by share controllers, or by persons who cooperate with
each other shall be calculated together.
Article 61 Under any of the following circumstances, a purchaser
shall hold the practical control of shares of a listed company:
1. if, among all the shareholders of a listed company, a purchaser
holds the most of shares issued by the listed company, except that
there is reverse evidence;
2. the voting rights available for a purchaser to exert or control
surpass the voting rights represented by the shares of the
shareholder on the roster of the shareholders who holds the largest
number of the shares issued by the company;
3. if the proportion of shares or voting rights held or controlled
by a purchaser reaches or exceeds 30 percent of the shares issued by a listed company, except that there is reverse evidence;
4. if the exertion of a purchaser''s voting rights may vote more than half of the directors of the company;
5. other provisions stipulated by the CSRC.

Article 62 Terms mentioned in these Measures refer to the following:
1. "Takeover offer" refers to a proposal sent by the purchaser to the shareholders of the company under takeover which indicates that the purchaser is voluntary to buy the shares held by the shareholders of the company to be taken over according to the terms of the offer;
2. "preliminary acceptance" refers to a statement made by the offeree indicating preliminary assent to an offer; prior to the expiration of the offer the preliminary acceptance does not constitute an acceptance;
3. "shareholder", "share controller", and "persons cooperating with each other" refer to the same as do the "shareholder", "share controller", and "persons cooperating with each other" mentioned in Regulations on the Information Disclose of the Alter of Shares Held by the Shareholders of A Listed Company.

Article 63 The formats and contents of the report on the takeover of the listed company, the report on the takeover offer, the statement of the board of directors of the company under takeover, and documents of the application for exemption from takeover offer shall be made by the CSRC.

Article 64 These Measures shall enter into force as of December 1, 2002.

Bright Jon    Attorney-at-law   Fax: +86-512-53516040  email@colaw.cn
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