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- Guidelines on the Examination and Approval Requirements for Increase of Capital and Change in Shareholders Holding 5% or More Equity Interests and Actual Controllers of 5% or More Equity Interests in Securities Companies (证券公司增资扩股和变更持有5%以上股权的股东、实际控制人的审核要求, the “Approval Guidelines”)
- Guidelines on the Filing Procedures for Change in Shareholders Holding Less than 5% Equity Interests in Securities Companies (证券公司变更持有5%以下股权股东报备工作指引, the “Filing Guidelines”)
Issuing authority: the China Securities Regulatory Commission (the “CSRC”)
Effective date: 9 May 2008
Subject: securities company, change of shareholding Under PRC law, CSRC approval is required in the case of a change in shareholders holding 5% or more equity interests or actual controllers of 5% or more equity interests in a securities company. In contrast, only reporting to the local CSRC branch is required in the case of a change in shareholders holding less than 5% equity interests of the securities company. The two sets of Guidelines are aimed at providing clarity on the relevant approval and filing procedures for and strengthening the supervision of shareholding changes in securities companies. Notably, the Filing Guidelines also expand the scope of shareholding changes subject to CSRC approval to include a change in the holders of less than 5% equity interests in a securities company in certain cases as detailed below. In addition, in line with the existing policy in respect of fund management companies and futures brokerage companies, the two sets of Guidelines prescribe that no person may hold an interest in more than two securities companies (or control more than one).
Highlights
1. General
- In the case of a subscription for newly issued capital by an existing shareholder or an acquisition of existing shares by a new investor (“Investing Shareholder”), certain new prudential supervisory requirements are required to be complied with, for example: (i) after completion of the investment, ownership of the subject equity interests should be free from any dispute as to ownership and the Investing Shareholder should not hold such equity interests on behalf of others or manage such equity interests for others; (ii) the Investing Shareholder must be capable of making full payment for the proposed investment in a timely manner and the balance of its long-term equity investments will not exceed its net assets; and (iii) the Investing Shareholder must be an operating entity.
- An entity is only permitted to have control over one securities company and may not have equity participation in more than two securities companies.
- The equity interests held by Investing Shareholders are generally subject to lock-up periods ranging from 3 years to 5 years. For instance, the Approval Guidelines require an Investing Shareholder who is the controlling shareholder or actual controller of the relevant securities company to undertake that all of its equity interests will be subject to a 60-month lock-up period. Other Investing Shareholders need to undertake to observe a 36-month lock-up. It is unclear whether the Approval Guidelines would have any retroactive effect in respect of the lock-up restrictions.
- Acquisitions by a person of less than 5% shares in a listed securities company are exempt from lock-up requirement where the acquisitions are made through participating in a capital increase of the securities company by way of IPO or public issuance of new shares, converting publicly issued convertible bonds into shares, exercising rights under publicly issued warrants or on-exchange acquisitions.
- A securities company may not provide financial assistance (including by way of guarantee) to an Investing Shareholder in respect of the investments in the company.
2. Change of a 5% or more shareholder
- CSRC approval is required for any change of a holder or controller of 5% or more interest in a securities company (notwithstanding that the transaction giving rise to such change may involve less than 5% of the equity interests of the company).
- An entity who holds or controls 5% or more interest in a securities company should also satisfy the qualification requirements set out under the PRC Securities Law and other relevant rules, including meeting the applicable capital adequacy requirements, being capable of being continuously profitable and having a good compliance record.
- A securities company is required to conduct due diligence on an Investing Shareholder who will become a 5% or more shareholder or controller through subscription for new equity interests to be issued by the company and satisfy itself that the Investing Shareholder meets the applicable prudential supervisory requirements and qualification requirements.
3. Change of a less than 5% shareholder
- Although stated as being subject only to filing requirements, the acquisition of less than 5% interest in a securities company may only be completed upon receipt of a no-objection letter for the local CSRC. The CSRC should issue the no-objection letter or raise its objection within 5 working days after the CSRC receives a full set of filing documents.
- Change of a less than 5% shareholder of listed securities company is not subject to the above filing requirements if such change results from trading on a stock exchange.
- In the case of a change in shareholders of less than 5% equity interests in a securities company, the Filing Guidelines set out the specific documentary requirements, such as (i) the background information on the party acquiring equity interests (including its ultimate interest holder); and (ii) a legal opinion in respect of the acquisition.
- The Filing Guidelines for the first time expressly require that any change which results in a foreign investor directly or indirectly holding an interest in a securities company be approved by the CSRC. This means that a PRC entity with direct or indirect foreign participation would need to obtain CSRC approval before it can make any investment in a securities company.
Please contact Zili Shao ( zili.shao@linklaters.com tel: +86 21 2891 1868) or Fang Jian ( jian.fang@linklaters.com tel: +86 21 2891 1858) if you would like further details.
