Circular on Printing and Distributing the Guiding Opinions on Promoting State-owned Shareholders and Their Controlled Listed Companies to Settle Horizontal Competition and Standardize Related-party Transactions

Guo Zi Fa Chan Quan [2013] No.202

August 23, 2013

In order to further standardize the relationship between the State-owned Shareholders and their controlled listed companies, promote the settlement of horizontal competition and the standardization of related-party transactions, and facilitate the sound development of state-owned economy and securities market, the Circular on Printing and Distributing the Guiding Opinions on Promoting State-owned Shareholders and Their Controlled Listed Companies to Settle Horizontal Competition and Standardize Related-party Transactions (hereafter referred to as "the Circular") has been formulated in accordance with relevant national laws and administrative regulations. The Circular is hereby printed and distributed to you for your strict compliance and implementation in light of respective actual circumstances. Relevant issues and matters occurred in actual practice shall be subject to timely reports.

Guiding Opinions on Promoting State-owned Shareholders and Their Controlled Listed Companies to Settle Horizontal Competition and Standardize Related-party Transactions

In order to further regulate the acts of the State-owned Shareholders and actual controllers (hereinafter referred to as "the State-owned Shareholders") of listed companies, promote sustainable development of state-owned holding listed companies and protect the legitimate interests of various investors, the guiding opinions are hereby issued as follows in accordance with the laws and regulations on supervision of state-owned assets and securities.
　
Article 1 The State-owned Shareholders and their controlled listed companies shall determine the strategic positioning based on the development programs. Moreover, they shall sort out their respective business and divide the business scope and boundary in a reasonable way, so as to settle horizontal competition and standardize related-party transactions.
　
Article 2 The State-owned Shareholders and their controlled listed companies shall work out after research a general idea to settle the horizontal competition on the principle of "one strategy for one enterprise; to promote another enterprise after one enterprise has gained the success" and in light of actual conditions of the enterprises and the characteristics and development situation of their respective industries. The businesses involved in horizontal competition shall be incorporated the same platform step by step by such means as asset restructuring, equity replacement and business adjustment to increase the industrial concentration and the professional level.
　
Article 3 The State-owned Shareholders and their controlled listed companies shall strictly establish a sound internal control system in accordance with relevant laws and regulations to standardize related-party transactions. With respect to the inevitable related-party transactions within the normal business scope, the parties shall determine the transaction price on the principle of openness, fairness and justice and enter into relevant agreements or contracts in accordance with laws so as to ensure the fairness of the related-party transactions. The listed companies shall strictly perform deliberation procedures for related-party transactions and the obligation of information disclosure according to regulations. During the deliberation, any director or shareholder who has connected relation with the transactions shall abstain from voting and may not exercise the voting right as a proxy.
　
Article 4 The State-owned Shareholders and their controlled listed companies shall make public commitments to the market with respect to solutions about and duration for settlement of horizontal competition and standardization of related-party transactions on the basis of compliance and sufficient negotiation. The State-owned Shareholders and their controlled listed companies shall faithfully perform the commitments and announce the performance progress to the market on a regularly basis. Where it is impossible to perform, or necessary to adjust the commitments due to policy adjustments, market changes and other objective causes, the parties shall make public explanation in advance, fully disclose the causes for adjustments or non-performance and put forward corresponding solutions.
　
Article 5 The State-owned Shareholders shall, for the purpose of promoting the settlement of horizontal competition and standardization of the related-party transactions, negotiate with relevant listed companies on the basis of equality and in accordance with the law. If appropriate, the qualified State-owned Shareholders may, through sufficient negotiation with its controlled listed companies and according to the market principle, develop on behalf the businesses or assets, which are necessary for the development of the listed companies but not appropriate to be implemented by the companies at present by leveraging its own advantages in brand, resources, finance, etc.. Matters with respect to such business development to be agreed by the listed companies and the State-owned Shareholders shall be subject to the authorization from the general meeting of the listed companies. When the State-owned Shareholders assign the developed business, the listed companies shall have the priority in acquiring the business under the identical conditions. The decision made by the listed companies to grant relevant authorization or waive the right of preemption shall be considered and approved by the shareholders without any relationship with the transaction at the general meeting.
　
Article 6 The State-owned Shareholders shall exercise and perform the rights and obligations of shareholder in accordance with law, and cooperate with its controlled listed company in strict disclosure of relevant information in a timely and fair way and in accordance with laws, regulations and the rules on security supervision. Prior to public disclosure of relevant information, the State-owned Shareholders shall manage to record the insiders according to relevant regulations for the purpose of strict prevention of insider transactions.

Article 7 The state-owned assets regulatory institution and the securities regulatory institution shall, with serving the real economy as the starting point, fully respect the rules of enterprise development and the securities market, constantly improve working mode and perfect supervisory measures to form policy resultant force for the purpose of promotion of the sound development of state-owned economy and securities market.