Administrative Measures for Auto Finance Companies (2023)

Administrative Measures for Auto Finance Companies (2023)

Order of the National Financial Regulatory Administration
(No. 1 [2023])

The Administrative Measures for Auto Finance Companies, as deliberated and adopted at the executive meeting of the National Financial Regulatory Administration, are hereby issued and shall come into force on August 11, 2023.

Director Li Yunze

July 10, 2023

Administrative Measures for Auto Finance Companies (2023)

Chapter I General Provisions

Article 1 For the purpose of strengthening the supervision and administration of auto finance companies and promoting the healthy development of the auto financing industry of China, these Measures are formulated in accordance with the Law of the People's Republic of China on Regulating the Banking Industry, the Company Law of the People's Republic of China and other relevant laws and regulations.

Article 2 The term “auto finance company” as mentioned in these Measures refers to a non-banking financial institution that is established with the approval of the National Financial Regulatory Administration (NAFR) and exclusively provides auto financing services.

Article 3 The name of an auto finance company shall contain the words “auto finance.” Without the approval of the NAFR, no entity or individual may use such words as “auto finance,” “auto credit,” or “auto loan” in the name of an institution.

Article 4 The NAFR and its regional offices shall exercise supervision and administration over auto finance companies according to law.

Chapter II Establishment, Change, and Termination

Article 5 To establish an auto finance company, the following requirements must be met:

(1) Having the articles of association required by the Company Law of the People's Republic of China and the NAFR.

(2) Having investors required by these Measures.

(3) Having the registered capital required by these Measures.

(4) Having directors and senior managers competent for their posts as well as competent employees that are familiar with the auto finance business.

(5) Having established an effective corporate governance, internal control, and risk management system.

(6) Having established an information technology structure that meets business operations and regulatory requirements, having a secure, and compliant information system required for supporting business operations, and having technology and measures that guarantee continuous business operations.

(7) Having the business place, safety measures and other facilities required by its business operation.

(8) Other prudential conditions prescribed by the NAFR.

Article 6 Investors of an auto finance company shall be non-banking legal-person enterprises established inside or outside China according to law, in particular, the principal investor must be an auto manufacturing enterprise or non-banking financial institution.

The term “principal investor” as mentioned in the preceding paragraph refers to the investor who contributes the largest amount of investment and whose amount of investment is not less than 30% of the total equity of the auto finance company to be established.

At least one of the investors of the auto finance company shall have not less than five years of rich experience in auto consumer credit business management and risk control, or bring in a qualified professional management team for the auto finance company, including at least an officer with rich experience in the auto finance profession and a risk management professional.

Article 7 To be an investor of an auto finance company, a non-financial institution shall satisfy the following requirements:

(1) Its revenue for the last fiscal year is not less than 50 billion yuan or its equivalent in a freely convertible currency; in the case of a principal investor, its auto output and sales shall be sufficient to support the development of its auto finance business.

(2) Its net assets at the end of the last fiscal year shall not be less than 30% of its total assets or shall not be less than 40% of its total assets, in the case of a controlling shareholder of the auto finance company.

(3) It is in good financial condition and has been continuously profitable for the last two fiscal years or for the last three fiscal years, in the case of a controlling shareholder of the auto finance company.

(4) Its funds to be invested are its proprietary funds, and it is prohibited to buy shares of the auto finance company with loan funds or funds of others.

(5) In principle, the balance of its equity investments (including the current investment) shall not exceed 50% of the non-financial institution's net assets or 40% of the non-financial institution's net assets, in the case of a controlling shareholder of an auto finance company, unless the non-financial institution is an investment company or holding company specified by the State Council.

(6) It complies with the laws of the place of registration and did not commit a material violation of laws and regulations in the last two years.

(7) In the case of a principal shareholder, it shall not transfer the auto finance company's equities it holds within five years of acquisition and shall give an undertaking not to pledge or form a trust for the equities, which undertaking shall be stated in the bylaw of the auto finance company.

(8) Other prudential conditions prescribed by the NAFR.

The financial indicator requirements in subparagraphs (1), (2), (3), and (5) of the preceding paragraph shall be all on the basis of consolidated financial statements.

Article 8 To be an investor of an auto finance company, a non-banking financial institution shall meet the following conditions in addition to those in Article 7 (4), (6), and (7):

(1) Its registered capital shall not be less than 300 million yuan or its equivalent in a freely convertible currency.

(2) It has a good corporate governance structure, internal control mechanism, and sound risk management system; in the case of a principal investor, it shall also have not less than five years of experience in auto consumer credit business management and risk control.

(3) It is in good financial condition and has been continuously profitable for the last two fiscal years.

(4) In principle, the balance of its equity investments (including the current investment) shall not exceed 50% of the non-banking financial institution's net assets.

(5) It satisfies the prudential regulatory requirements of the regulatory authority of the country or region where it is located.

The financial indicator requirements in subparagraphs (3) and (4) of the preceding paragraph shall be all on the basis of consolidated financial statements.

Article 9 The minimum registered capital of an auto finance company shall be 1 billion yuan or its equivalent in a freely convertible currency. The registered capital is paid-in capital received in cash in a lump sum.

The NAFR may, in light of the development situation of auto finance business and the needs for prudent supervision and administration, raise the floor amount of registered capital.

Article 10 An auto finance company may conduct business nationwide. Without the approval of the NAFR, an auto finance company may not establish a branch.

Article 11 With the approval of the NAFR, an auto finance company may establish an overseas subsidiary. The NAFR will separately formulate the specific establishment conditions, procedures, and regulatory requirements for such subsidiary.

Article 12 The NAFR applies the post-holding qualification examination and approval system to directors and senior managers of auto finance companies.

Article 13 If an auto finance company makes any of the following changes, it shall seek approval from the NAFR or its regional office in accordance with the provisions on administrative licensure:

(1) Change of company name.

(2) Change of the company's registered capital.

(3) Change of domicile or business place.

(4) Adjustment of business scope.

(5) Change of stock rights or adjustment of stock right structure.

(6) Amending the bylaw.

(7) Change of the company's directors or officers.

(8) Merger or division.

(9) Other changes as prescribed by the NAFR.

Article 14 If an auto finance company falls under any of the following circumstances, it may be dissolved, subject to the approval of the NAFR:

(1) The business term prescribed in its articles of association expires, or any other cause for dissolution as prescribed in its articles of association occurs.

(2) The shareholders' meeting decides to dissolve the auto finance company.

(3) The dissolution is required due to the merger or division of the company.

(4) Any other statutory cause.

Article 15 If an auto finance company falls under any of the following circumstances, it may apply to the people's court for bankruptcy upon the approval of the NAFR:

(1) It applies for bankruptcy either voluntarily or upon the request of its creditors when it cannot pay off its due debts and its assets are not enough to cover the debts or it becomes obviously insolvent.

(2) If it has been dissolved, but it has not been liquidated or the liquidation has not been completed, a person legally responsible for liquidation that finds out that the assets of the auto finance company fall short of what is needed to cover its debts shall apply for its bankruptcy.

Article 16 Where an auto finance company is terminated due to dissolution, winding-up or declared bankruptcy, its issues shall be governed by the relevant laws and regulations.

Article 17 The administrative licensing procedures for the establishment, change and termination of an auto finance company as well as the post-holding qualification examination and approval of its directors and senior managers must be governed by the relevant provisions prescribed by the NAFR.

Chapter III Business Scope and Operating Rules

Article 18 An auto finance company may conduct all or part of the following Chinese and foreign currency business:

(1) Accepting time deposits or call deposits from a shareholder and the parent and controlled subsidiaries of the group of which the shareholder is a member.

(2) Accepting the guarantee funds of au......