There are two categories of shares issued by companies limited by shares.the first category is ordinary shares, denominated and traded in RMB, that may be held only by Chinese indibiduals, legao entitied, or the State.These shares are referred as “A-Shares.”the second category is special shares, which are denominated in RMB but quoted and traded in foreign exchange and may be held only by foreigners.
1.       Domestic Share Regulations:A-Shares
Under the regulation regarding the issuing and trading of stock, the issuer must be a limited liability company that has beeen authorized to issue stock. In applying to issue stok and to establish a new entity as a limited liability company, the following requirments must be met:
(1)    producion and management plans must conform to the industrial policies of the state
(2)    only one type of common stock can be issued with equal rights for equal shares
(3)    the promoter’s stock shall constitute not less than 35 percent of the total stock capital planned to be issued by the company
(4)    of the total stock capital to be issued by the company, the promoter’s share shall not be less than RMB30million,except where otherwise provided for by the State
(5)    the portion of stock to be issued to the public shall not be less than 25 perent of the total stock capital to be issued, and the portion to be issued to the management personnel and staff of the company shall not exeed 10percent of the amount to be issued to the public
(6)    the prmoter has committed no major vialations of the law within the previous three years
(7)    other requiements provided by the CSRC
In addition to the requirements set forth above, an existiong enterprise that desires to issue stock and establish a limited liability company must meet the following requirements:
(1)    the net assets of the existiong enterprise may acount for no less than 30 percent of the total assets, and the intangible assets may acount for no more than 20 percent of the net assets at the end of the year prior to issuing stok wxcept where otherwise provideed by the CSR
(2)    the existiong enterprise has been profitable for three years prior to issuing the stock
An enterprise company that intends to incerase its equity, in addition to meeting the requirements noted above, is also required to demonstrate the following:
(1)     the proceeds from the previous stoch issue are used profitably in full compliance with the terms and condition of the enterprise’s prospectus
(2)      the inerval since the previous stock issue is no less than twelve months
If preliminary approval is granted by the SAIC or subordinate office, the application is forwarded to the CSRC for further review and evaluation. If the appliation is approved by the CSRC, the company is authorized to issue stok to the public. However, the issuer is requied to publish an approved prospectus within five business days before the stok sale commences. Prior to approval for the publi offering, the prospectus and its contents cannot be released to the public. The regulations provide that a prospeuctus is valid for a period of six months and is required to contain the foollowing information:
(1)    the name and address of the company
(2)    curriculum vitae of the promoter and the issuer
(3)    puipose of raising the funds
(4)    the total amount of the current capital stock,the category and amount of stock to be issued, face value and selling price o each share, the net capital value of ech stock before the issue and the net capital value of each stock after the issue, and expenses and commissions for the issuing o stock
(5)    the percentage of stock subscribed to by the promoter in the first issue,the structure of stock rights and certificates for capotal verification
(6)    name of the underwriter fo the public offering
(7)    time, location of the public offering, and the nethod of subscription and payment
(8)    puipose for the funds to be rased
(9)    anticipated losses and profits of the company, and risks of investment
(10)the shortterm development plans of the company
(11)important contrats of the company
(12)significant litigation and claims against the company
(13)biographies of the directors and superbisors fo the company
A company applying for listing of its stok is required to provide the listing committee of the stock exchange with its financial records, its latest prospectus, company registration documents, and a letter fo recommendation from a member of the stok exchange. The listing committee is required to make a determination within twenty working days. A company that is approved for listiong is required to publish a stock listing announcement that provides for the date of approval of listing, the conditions of the issue and structure of stok rights, information concerning the directors, supervisors, and key management personnel, and the financial performane of the company. To protect investors, the CSRC has adopted a number of regulations outlining the standards and procedures for the de-listing of financially distressed companies from trading on the Shanghai and Shenzhen stock enchanges.
2.   Foreign capital shares listed in china regulations:B-shares
The individuals and entities allowed to invest in B-shares are limited to the following:
(1)    foreign entities or organizations
(2)    entities and organizations from the HKSAR,MACAO,OR TAIWAN
(3)    overseas chinese citizens
An investor in B-shares is required to present proof of identity and subscriber qualificaitons when investing. Investors in Bshares have the same rights and obligations as investors in domesti capital shares. A company may speify in its artiles of association any speial matters concerning the rights and obligations as its shareholders of foreign capital shares. As required under the company law, the Bshare regulations also provide that the articles and association of a company are binding on the company, its shareholders, directors, supervisors, mangers and senior mangement personnel. The directors, supervisors, and mangeemnt personnel of the ompany havefiduciary duties to the company.
A company may obtain approval to issue B-shares if it hase been previously established by a publi offering. In order to obtain approval to issue Bshares, a company must first demonstrate that it is in compliance with state industrial policies relating to the relating to the use of raised funds, fixed asset investment, and foreign investment. FOR B-shares issued by a public offering,
(3)documents demonstrating the establishment of the company including business license or certificaiton
(4)letter of reommenddation to issue Bshares provided to the company by the local administration fo industry and commere or the state council
(5)the company’s draft artiles of association
(6)the ompany’s prospectus
(7)a feasibility study that addressrs the proposed use of the funds to be raised by the issuane of the Bshares
(8)approval document authorizing the use of the raised funds in a fixed asset investment project,if applicable
(9)financial statements of the company for the previous three years
(10)asset valuation report
(11)legal opinion concerning the company
(12)the underwriting agreement and description of the underwriting strategy
(13)other documents required by the CSRC
In addition to the above documents, acompany that applies to issue B-shares in an initial public offering is required to submit to the CSRC the following documents:
(1)      information concerning the promoters, including the shares to be subscribed to by the promoters, the capital contribution of the promoters, and capital verification certificate demonstrating the promoter’s source of puihase funds
(2)      approval notice concering the use of the name of the company by the administration of industry and commere
    The interval between the issue of Bshares listed in China and a prior issue of domestic capital shares may be less than twelve months. The period for underwriting Bshares cannont exceed ninety days. A company that issues Bshares is required to employ an underwriter who is approved by the PBOC and the CSRC. The principal underwriter of the Bshare issue is required to submit an underwriting report, including an analysis of the articles, when adopted by the company, are binding on the company, directors, shareholders, supervisors, managers, and other senior management personnel.


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