Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies (2023 Revision)

Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies (2023 Revision)

Order of the China Securities Regulatory Commission
(No. 213)

The Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies, as deliberated and adopted at the 2nd executive meeting of the China Securities Regulatory Commission on February 17, 2023, are hereby issued, and shall come into force on the date of issuance.

Yi Huiman, Chairman of the China Securities Regulatory Commission
February 17, 2023

Annex 1: Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies
Annex 2: Legislative Explanation of the Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies
Measures for the Administration of the Material Asset Restructurings of Unlisted Public Companies
(Deliberated and adopted at the 41th chairman's executive meeting of the China Securities Regulatory Commission on May 5, 2014, amended in accordance with the Decision to Amend Certain Securities and Futures Rules issued by the China Securities Regulatory Commission on March 20, 2020, and revised at the 2nd executive meeting of the China Securities Regulatory Commission on February 17, 2023)

Chapter I General Provisions

Article 1 For the purposes of regulating the material asset restructurings of unlisted public companies (hereinafter referred to as “public companies”), protecting the lawful rights and interests of public companies and investors, driving public companies to constantly improve their quality, maintaining the order of the securities market, and protecting the public interest, these Measures are developed in accordance with the Securities Law of the People's Republic of China (hereinafter referred to as the “Securities Law”), the Company Law of the People's Republic of China, the Decision of the State Council on Issues concerning the National Equities Exchange and Quotations, the Opinions of the State Council on Further Optimizing the Market Environment for Mergers and Restructurings of Enterprises, and other relevant laws and administrative regulations.

Article 2 These Measures shall apply to the material asset restructurings of public companies with their stocks publicly transferred on the National Equities Exchange and Quotations (hereinafter referred to as the “NEEQ”).
For the purposes of these Measures, “material asset restructuring” means the asset transaction of a public company and companies controlled by it, outside their routine operations, by the purchase and sale of assets and other means, causing significant changes in the business or assets of the public company.
Where the purchase or sale of assets by a public company or a company controlled by it satisfies any of the following criteria, it constitutes a material asset restructuring:
(1) The total assets purchased or sold account for 50% or more of the ending total assets of the public company on its audited consolidated financial statements for the last accounting year.
(2) The net assets purchased or sold account for 50% or more of the ending net assets of the public company on its audited consolidated financial statements for the last accounting year, and the total assets purchased or sold account for 30% or more of the ending total assets of the public company on its audited consolidated financial statements for the last accounting year.
Where the purchase or sale of assets fails to satisfy the criteria specified in the preceding paragraph, but the China Securities Regulatory Commission (hereinafter referred to as the “CSRC”) discovers any major problem that is suspected of violating any industrial policy of the state, law, or administrative regulation, or the provisions of the CSRC, and may damage the lawful rights and interests of the public company or investors, among others, the CSRC may, under the principle of prudential regulation, order the public company to supplement the relevant information as required by these Measures, suspend the transaction, or retain an independent financial advisor or any other securities service institution to conduct further inspection and disclose its professional opinion.
Where the public company reaches any of the indicators as mentioned in this Article by offering shares to purchase assets, the relevant requirements of these Measures shall apply.

Article 3 For the purpose of Article 2 of these Measures, “asset transactions by other means” include:
(1) forming a new shareholding enterprise with others by subscription, payment, and other means, or increasing or decreasing the capital of the existing enterprises;
(2) being entrusted to operate or lease the assets of other enterprises, or entrusting operating assets to others for operation or lease;
(3) accepting conditional assets donations or donating assets to others; and
(4) other circumstances recognized by the CSRC under the principle of prudential regulation.
If the aforesaid transaction of assets substantially constitutes a purchase or sale of assets, and reaches the criteria for a material asset restructuring set out by paragraph 3 of Article 2 of these Measures, the company shall fulfill the relevant obligations and perform the relevant procedures in accordance with the provisions of these Measures.

Article 4 A public company undertaking a material asset restructuring shall make a sufficient explanation of this transaction's compliance with the following requirements, and disclose:
(1) The pricing of assets involved in the material asset restructuring shall be fair, and there is no damage to the lawful rights and interests of the public company and its shareholders.
(2) The ownership of assets involved in the material asset restructuring is clear, there is no legal obstacle to the transfer of title to the assets or the transfer of assets, the relevant claims and debts have been legally handled, and the purchased assets are productive assets with clear ownership.
(3) The material asset restructuring helps to improve the asset quality and the capability of sustained operation of the public company, and will not result in the circumstances that the major assets of the public company are cash or the public company has no specific business after the restructuring.
(4) The restructuring helps the public company form or maintain a sound and efficient corporate governance structure.

Article 5 In a material asset restructuring of a public company, all relevant parties shall, in a timely and fair manner, disclose or provide information, and ensure that the information disclosed or provided is true, accurate, and complete and contains no false record, misleading statement, or material omission.

Article 6 In a material asset restructuring of a public company, its directors, supervisors, and officers shall act in good faith, diligently perform duties, maintain the safety of the assets of the public company, and protect the lawful rights and interests of the public company and all shareholders.

Article 7 A public company undertaking a material asset restructuring shall retain an independent financial advisor, a law firm, an accounting firm, and other securities service institutions in compliance with the provisions of the Securities Law to issue relevant opinions. The public company may also concurrently retain other institutions to provide advisory services for its material asset restructuring.
Securities service institutions and personnel that provide services for a material asset restructuring of a public company shall abide by laws, administrative regulations, and relevant rules of the CSRC, observe the business standards and ethical norms generally recognized in the industry, rigorously perform duties, refrain from seeking illicit interests, and undertake responsibilities for the veracity, accuracy, and completeness of the documents prepared or issued by them.

Article 8 Entities and individuals that have access to any information on a material asset restructuring of a public company shall, before the information is disclosed in accordance with the law, be obligated to keep it confidential, and be prohibited from using it for insider trading, securities market manipulation, or other illegal activities.

Chapter II Management of Material Asset Restructuring Information

Article 9 When initially negotiating with the other party to the transaction in a material asset restructuring, a public company shall take effective confidentiality measures, limit the scope of persons having access to relevant sensitive information, and enter into confidentiality agreements with the parties involved in the material asset restructuring or having access to information on the material asset restructuring.

Article 10 In principle, a public company, its controlling shareholder or actual controller, and other relevant parties shall research, plan, and decide on material asset restructuring matters after the relevant stock is suspended from transfer or in non-transfer hours, and do their best to simplify the decision-making process, improve the decision-making efficiency, shorten the decision-making time, and narrow the scope of persons having access to insider information. If it is necessary to consult the relevant authorities on policies or conduct plan justification, it shall be conducted after the relevant stock is suspended from transfer.

Article 11 A public company shall, when planning material asset restructuring matters, record in detail the progress of each specific stage of the planning process, including the specific time when and location where the relevant plans are discussed, the relevant intentions are formed, and the relevant agreements or letters of intent are signed, the participating institutions and persons, and the content of discussions and resolutions, among others, prepare a written memorandum of the transaction process, and properly keep it. All persons involved in each specific stage shall sign the memorandum for confirmation on the spot.
A public company shall, in an effective and timely manner, conduct the registration of persons having access to insider information in accordance with the rules of the NEEQ.

Article 12 Where, in the stage of planning on a material asset restructuring of a public company, all parties to the transaction preliminarily reach a substantive intention or though no substantive intention is reached, the relevant information has been disseminated on the media, the parties consider it difficult to keep such information confidential, or there is any abnormal fluctuation in the transfer of the stock of the company, the public company shall promptly apply to the NEEQ for the suspension of the transfer of its stock.

Article 13 When planning and implementing a material asset restructuring of a public company, the relevant parties with information disclosure obligations shall fairly disclose relevant information that may considerably affect the stock transfer price of the public company to all investors, and may not disclose such information to selected investors beforehand, except as otherwise prescribed by any law or administrative regulation.
The shareholders and actual controller of a public company and other relevant institutions and persons that participate in the planning, justification, decision-making, and other stages of the material asset restructuring shall, in a timely and accurate manner, provide relevant information to the public company, and assist the public company in disclosing information in a timely, accurate, and complete manner.

Chapter III Procedures for a Material Asset Restructuring

Article 14 Where a public company undertakes a material asset restructuring, a resolution shall be made by the board of directors in accordance with the law, and be submitted to the shareholders' meeting for deliberation.

Article 15 Where a public company holds a meeting of the board of directors to resolve material asset restructuring matters, it shall disclose a material asset restructuring report, a report issued by the independent financial advisor, a written legal opinion, and the audit report and asset appraisal report (or asset valuation report) involved in the restructuring while disclosing the resolution of the board of directors. The board of directors shall also make arrangements on and disclose matters that require the holding of a shareholders' meeting.
Where, before the public company holds the first meeting of the board of directors regarding the material asset restructuring, the audit and other work on the relevant assets have not been completed, a preliminary proposal on the material asset restructuring and the review opinion issued by the independent financial advisor regarding the preliminary proposal shall be disclosed while the resolution of the first meeting of the board of directors is disclosed. The public company shall complete audit and other work and hold another meeting of the board of directors within six months after the preliminary proposal on the material asset restructuring is disclosed, and disclose the material asset restructuring report, the report issued by the independent financial advisor, the written legal opinion, and the audit report and asset appraisal report (or asset valuation report) involved in the restructuring, among others, along with the resolution of the board of directors. The board of directors shall also make arrangements on and disclose matters that require the holding of a shareholders' meeting.

Article 16 A resolution made at a shareholders' meeting regarding material asset restructuring matters must be adopted with two thirds or more of the voting rights held by shareholders attending the meeting. If the number of shareholders of the public company exceeds 200, the votes casted by shareholders attending the meeting that each hold less than 10% of the shares of the company shall be counted separately. The public company shall disclose the voting results in a timely manner after a resolution is made.
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