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Securities

Interim Measures on Administration of Initial Public Offering and Listing

(2010-11-4)

Chapter I General Provisions
 
Article 1 The Measures are formulated in accordance with the "Securities Law" and the "Company  Law" in order to regulate initial public offerings and listing on the growth enterprise board, promote the development of the enterprises of independent innovation and other growth venture companies, protect investors’ legitimate rights and interests and safeguard public interest s .
 
Article 2 The Measures apply to initial public offerings and listing on the second board within the jurisdiction of the People ’s Republic of China.
 
Article 3 The issuer shall satisfy the issuance conditions stipulated in the "Securities Law" , the "Corporation Law" and the Measures before applying for initial public offerings and listing on the second board .
 
Article  4 Information disclosed by the issuer required by law must be authentic , accurate and complete, and shall not include any false record s , misleading statements or material omission .
 
Article  5 Sponsors and their representatives shall perform their duties with due diligence, keep good faith, earnestly fulfill the obligations of prudent examination and guidance, and be responsible for the authenticity, accuracy and integrity of documents issued by them.
 
Article 6 Securities service institutions and staff issuing documents for security issuance  shall, in  line  with the business standards and moral standards generally accepted by this industry, seriously perform their statutory duties and be responsible for the authenticity, accuracy and integrity of the documents issued by them.
 
Article 7 An admittance system that adaptable to the investors ’ risk bearing capacity shall be established  on the second board to fully inform investors of risks in investment.
 
Article 8 The China Securities  Regulatory  Commission ( hereinafter referred to as “the CSRC” ) shall, according to law, examine and approve the issuer ’ s application for  initial public offering , and   supervise the issuer ’ s stock issuance.
 
Stock exchanges shall formulate business rules according to law,  create  an open, fair and just market environment and ensure normal operation of the  growth enterprise board .
 
Article 9  The approval granted by  the  CSRC to an  issuer ’s initial public offering of stock based on the application document submitted by the  issuer  is not a substantial judgment or guarantee of the investment value of the stock or the yield of investors there from. After the stock is issued  according to law, investors shall bear on their own the investment risks caused by changes in the  issuer ’s business operation and income .
 
Chapter II  Issuance Conditions
 
Article  10 The issuer shall satisfy the following conditions before applying for  initial public offering :
 
(1) The issuer shall be a company limited by shares established according to law, with continuous operation for more than three years.
 
For a company limited by shares which is totally changed from a limited liability company by converting its net assets value as shown in its account book into shares,  the time of continuous operation may be calculated from the day when the limited liability company is established;
 
(2) Making profit in the recent two consecutive years, with accumulative net profit of not less than RMB10 million in the recent two years and with a continuous growth; or, making profit in the most recent year, with the net profit of not less than RMB5 million, the business income of not less than RMB50 million in the most recent year and the growth rate of  business  income of not lower than 30% in the recent two years. Net profit  shall be calculated on the basis of the amount before or after deducting the excluding extraordinary profit and loss, whichever is smaller;
 
(3) The net assets at the end of the most recent  period  shall not be less than RMB20 million, and without uncovered loss; and
 
(4)  The total amount of capital stock after issuance shall not be less than RMB30 million.
 
Article 11 The issuer shall have paid the registered capital in full amount and have  completed  the formalities for the transfer of property rights over the assets contributed by the  issue r or shareholders as investment. There is no major ownership dispute over the major assets of the  issuer .
 
Article  12 The issuer shall mainly operate one business, with the production and operation activities complying with  regulations in the laws ,  administrative rules  and  the  Articles of  Association , as well as  the national industrial  and environmental protection policies.
 
Article  13  There is no  significant  change in the  major  business, directors and senior management  of the  issue r in the  recent  two years, and there is no change in the actual controller of the  issuer  either.
 
Article 1 4  The  issuer  shall have a sustained profitability and do not fall under any of the following circumstances:
 
( 1 )   Its business mode or product or service structure has changed or is about to change to a large extent, which exerts great adverse influence upon its sustained profitability;
 
( 2 )   Its position in the industry or the business environment of its industry has changed or is about to change to a large extent, which exerts great adverse influence upon its sustained profitability;
 
( 3 )   There exist risks that great adverse changes would occur in its acquirement or use of such important assets or technologies as trademark, patent, proprietary technology and franchise rights, etc.;
 
( 4 )   Its business income or net profit in the  most recent  year  is  greatly dependent on any affiliated party or client with many uncertainties;
 
( 5 )  Its net profit in the latest year  is  mainly from investment yield beyond the consolidated financial statements; and
 
( 6 )   Other circumstances which would exert great adverse influence upon its sustained profitability.
 
Article 15 The issuer shall pay the tax legitimately, and enjoy tax preferences conforming to relevant laws and regulations.  The business performance of the issuer shall not be greatly dependent on tax preferences.
 
Article 16 The issuer shall not have major risks of debt  repayment and major contingent issues including  guarantee , litigation   or  arbitration  that influence its  sustained  operation. 
 
Article 17 The issuer ’ s equity is clear,  and there is no  major  dispute over the ownership of  the shares of the issuer held by its  controlling shareholder and shareholders under the control of the controlling shareholder or actual controller .
 
Article 18  The assets of the  issuer   shall be  complete, its business, personnel, finance and institution s  are independent from each other, and it has a complete business system and the capability of market-oriented independent business operation. It  shall have  no horizontal competition with its controlling shareholder, actual controller or other enterprise controlled by the actual controller, nor does it have any  connected  transaction that  is  obviously unfair  or may  severely  affect the company ’ s independence.
 
Article  19  The  issuer  has a perfect corporate governance structure, and has established such systems as the  shareholders"  meeting ,  board of  directorate ,  board of supervisors  and independent directors , secretaries to  directorate  and  audit committee  according to law.  The relevant institutions and  personnel  can perform their duties according to law.
 
Article 20 The basic accounting work of the issuer is standardized. Its financial statement is prepared in accordance with the accounting standards for enterprises and other relevant accounting systems and can fairly reflect the financial status, business achievements and cash flow of the issuer in all important aspects. A certified public accountant has issued an auditing report with unqualified opinions for such statement.
 
Article  21 The issuer ’ s internal control system shall be sound and be effectively  implemented , and properly ensure the  reliability  of financial reports of the company,  legitimacy of  production and  business  operation , efficiency and effect of operation.  A certified public accountant has issued an internal control verification report with unqualified opinion.
 
Article  22  The  issuer shall have  a strict capital management system, and no funds  shall be  possessed by the controlling shareholder, the actual controller or other enterprises under the control of the controlling shareholder or actual controller by way of loan, repayment of debts for the  issuer , advance money for the  issuer  or other.
 
Article  23 The Articles of  Association  of the issuer shall have already defined  the limits of examination and approval authority and deliberation procedure s of outward guarantees, and there shall be no illegal guarantees for its controlling shareholder, actual controller and other enterprises under their control.
 
Article  24 The directors, supervisors and senior management of the issuer shall understand relevant laws and regulations concerning issuance and listing, learn about the  legal obligation s and responsibilities of listed companies and their directors, supervisors and senior management.
 
Article 2 5  The directors, supervisors and senior management of the issuer shall obtain the professional qualifications regulated by law s , administrative regulations and rules , and  do not fall under any of the following circumstances:
 
(1) Be  prohibited by the CSRC from accessing into the securities market and is still within the prohibited period;
 
( 2 )   Be  imposed on an administrative penalty by the CSRC in the  recent  three years, or has been publicly decried by a securities exchange in the  most recent year ; or
 
( 3 ) .  Be suspected of being involved in a crime and a case has been placed on file by the judicial organ for investigation and prosecution for that purpose, or  be  suspected of being involved in a violation and a case has been placed on file by the CSRC for investigation for that purpose, and there is no express conclusion or opinion yet.
 
Article 2 6  The issuer and  its  shareholders  have not issued  securities publicly or in other ways without approval of legal authorities in the  latest  three years, or  the   lawbreaking still  last s  although they  occurred  three years ago.
 
The  issuer or any of its shareholders has not publicly  issued  securities either directly or in any disguised form without approval in the  recent  three years. Or, if it did publicly issue securities either directly or in any disguised form without approval three years ago, it is not doing it at present.
 
Article 27 Funds raised by the issuer  shall be mainly used for its major business  and  have specific purposes. The amount of funds raised by it and the investment projects shall be suitable for its current production and operation scale, financial status, technical level and management capability, etc.
 
Article 28  The issuer shall establish a system for deposit of raised funds for special purposes , and the funds shall be  deposited into the special account determined by the board of directors.
 
Chapter III Issuance Procedure s
 
Article 2 9  The board of directors of the issuer shall make  resolutions on  the  specific  plan of the shares issuance, the feasibility of the raised funds’ use and other  issues  that  must  be  confirmed  according to law and submit  them  to the  Shareholders ’   Meeting for approval.
 
Article  30  The issuer’s Shareholders’ Meeting shall make resolutions on the shares issuance, containing at least the following issues:
 
(1) Varieties and quantities of shares;
(2) Issuance object;
(3) Price range or pricing methods;
(4) Use of the raised funds;
(5) The distribution scheme of the profit carried over before the issuance;
(6) The validity  period  of the resolution;
(7) The authorization obtained by the board of directors to handle specific issues for the issuance; and
(8) Other issues that must be clearly specified.
 
Article 3 1 The issuer shall make application documents according to relevant regulations of the CSRC, which shall be sponsored by the sponsor and be submitted to the CSRC.
 
Article 3 2  The sponsor who sponsors the issuer’s shares issuance and listing on the  growth enterprise board  shall make due diligence and prudential judgment on the issuer’s growth and give special opinions. The sponsor shall also state the issuer’s innovation ability in the  special opinions if the issuer is an independent innovative enterprise.
 
Article 33 The CSRC shall decide whether to accept the application documents or not within five working days upon receiving them.
 
Article 34 After the CSRC accepts the application documents, the issuer’s application documents shall be preliminary examined by the related authorities and be examined by the  public  offering  review  committee of the  growth enterprise board .
 
Article 35 The CSRC shall make a decision of approval or disapproval on the issuer’s issuance application and submit relevant documents.
 
The issuer shall issue shares within six months since the day when it is approved by the CSRC; the approval documents shall be invalid if the issuer fails to issue the shares within six months, and the shares can be issued after the re-approval by the CSRC.
 
The issuer shall issue shares within six months since the day when it is approved by the CSRC; the approval documents shall be invalid if the issuer fails to issue the shares within six months, and the shares can be issued after the re-approval by the CSRC.
 
Article 36  If  an  important  issue  occurs  after  approval of the issuance application  and before  the  end  of shares issuance, the issuer shall postpone or suspend the issuance, report timely to the CSRC as well as fulfill the obligation of information disclosure. If some issues do not conform to the issuance conditions, the CSRC shall cancel the approval.
 
Article 37 If the application of shares issuance is not approved, the issuer can apply again after six months since the day when the CSRC makes the decision of disapproval.
 
Chapter IV Information Disclosure
 
Article 38 The issuer shall compile and disclose the prospectus according to relevant regulations of the CSRC.
 
Article 39 The content and format of the prospectus of growth enterprise board stipulated by the CSRC is the lowest requirement of the information disclosure. Whether the rules clearly stipulate it or not, any information with great influence on investors’ decisions shall be disclosed.
 
Article 40 The issuer shall offer the investors the following instructions at an outstanding position in the prospectus: “After the issuance, the shares will be listed on the second board which has high investment risk. The companies on the second board are characterized by unsteady performance and high operation risk, considerable delisting risk, etc. , so the investors will confront tremendous market risk s . The investors shall fully understand the investment risk on the second board and the risk factors disclosed by the company before they make prudential investment decisions.”
 
Article 41 The issuer and all their directors, supervisors and senior management shall sign or seal on the prospectus to ensure authenticity, accuracy and integrity of the prospectus’ content. The sponsor and its representatives of sponsor shall examine the authenticity, accuracy and integrity of the prospectus’ content, and sign and seal on the examination opinions.
 
The issuer’s controlling shareholder shall give confirmation opinions on the prospectus, and sign and seal on it.
 
Article 42  The financial statement cited in the prospectus shall be valid for 6 months after the expiry day of the most recent period. Under special circumstances, the issuer may apply for reasonable postponement of its validity, but not more than one month at most. The financial statement shall take the last day of a year, half a year and a quarter as the expiry day.
 
Article 4 3 The prospectus shall be valid for 6 months, which shall begin from the day when it is signed for the last time before the CSRC approves it.
 
Article 44 After the application documents are accepted and before the  public  offering  review  committee examines, the issuer shall disclose the prospectus (application edition) in advance on the websites designated by the CSRC. The issuer can also publish the prospectus (application edition) on the company’s website with the same disclosed content, but not earlier than the disclosure time on the websites designated by the CSRC.
 
Article 45 The prospectus (application edition) disclosed in advance shall not contain the information of issuance price.
 
The issuer shall offer the following instructions at an outstanding position of the prospectus (application edition) disclosed in advance: “The issuance application of the company has not been approved by the CSRC. The prospectus (application edition) ha s no legal effect of issuing shares, but just for the disclosure in advance. The investors shall make decisions according to the formally announced prospectus.”
 
Article 46 The issuer and all its directors, supervisors and senior management shall ensure authenticity, accuracy and integrity of the content of the disclosed prospectus (application edition) in advance.
 
Article 47  The issuer shall publish the full text of the prospectus on the website designated by the CSRC before the shares issuance, publish an notice  in  the newspaper designated by the CSRC, and inform the investors of the websites on which the prospectus is published and the access to the documents.
 
The issuer shall disclose the prospectus on the company’s website no earlier than the publishing date stipulated in the preceding paragraph.
 
Article 4 8  The sponsor letter for the issuance provided by the sponsor, the documents provided by the securities service institutions and other important documents relevant to the issuance shall be disclosed on the websites designated by the CSRC and the company’s website as reference documents.
 
Article 49 The issuer shall put the prospectus and reference documents in the domiciles of the issuer, the securities exchange on which its shares will be listed, the sponsor, the leading underwriter and other underwriters for public reference.
 
Article 50  From the day when the application materials are accepted to the day when the prospectus is published by the issuer according to law after approving the issuance application by the CSRC, the issuer and the parties concerned in the issuance shall not propagandize the public offering by means of advertisement and introduction conference, and etc.
 
Chapter V   Regulation and Legal Liabilities
 
Article 51 The stock exchange shall set up system s including the listing, trading and delisting system  which  are  suitable for characteristics of the  growth enterprise board , supervise sponsors’ fulfillment of continuous supervisory obligations, and take corresponding measures on acts that violates relevant laws, regulations and business rules of the stock exchange.
 
Article 52  The stock exchange shall set up a system of market risk alert and continuous investors education which is suitable for characteristics of the  growth enterprise board , supervise  the  issuer’ s  establishment of a sound system of protecting investors’ rights and benefits as well as an internal control system of preventing and correcting lawbreaking actions.
 
Article  53   The CSRC shall take supervision measures of terminating examination and not accepting the issuer’s shares issuance application within 36 months  and  punish according to relevant regulations of the “Securities Law”   under the following circumstances: the issuance application documents submitted by the issuer to the CSRC have false records, misleading statements or major omissions; the ineligible issuer gets the issuance approval by fraudulent means; the issuer disturbs the examination work of the CSRC and the  public  offering  review  committee with improper means; the signatures or  seal s of the issuer and its directors, supervisors, senior management ,  controlling shareholder  and actual controller  are fabricated or altered; the issuer and the parties concerned in the issuance  publicizes  the public offering  but  break the Measures.
 
Article 54  The sponsor shall be punished according to relevant regulations of the “Securities Law” and the sponsor system under the following circumstances: the sponsor issues the sponsoring letter for the issuance with false records, misleading statements or major omissions; the sponsor disturbs the examination work of the CSRC and the  public  offering  review  committee with improper means; the signatures or stamps of the sponsor and the signature-related personnel are fabricated or altered; the sponsor does not perform other legal duties.  
 
Article 55  If the securities service institutions do not act with due diligence and the documents compiled and issued by them have false records, misleading statements or major omissions, the CSRC shall take supervision measures of not accepting special documents of securities issuance issued by relevant institutions within 12 months and special documents of securities issuance issued by signature-related personnel within 36 months and punish according to the stipulations in the “Securities Law”, other related law s , administrative regulations and rules.
 
Article 56  If the issuer, the sponsor or securities service institutions make or issue unqualified documents, alter the submitted documents without authorization or refuse to answer relevant questions raised by the CSRC, the CSRC shall, depending on the seriousness of the above circumstances,   take supervision measures such as supervisory conversation and ordering to rectify on relevant institutions and responsible personnel; this shall be filed into credit record and be published; in case of extremely serious offense, a warning shall be imposed on them.
 
Article 57 Under the circumstance that the realized profit in the profit prediction disclosed by the issuer fails to reach 80% of the predicted profit, unless force majeure, its legal representative, certified public accountant issuing the audit report on profit prediction shall publicly explain and make apology at the shareholders’ meeting , and   on the websites also  in the newspapers designated by the CSRC; the CSRC can warn the legal representative.
 
If the realized profit fails to reach 50% of the predicted profit, unless force majeure, the CSRC shall not accept the Company’s application for public securities issuance within 36 months.
 
Chapter 6 Supplementary Provisions
 
Article 5 8 The Measures will take effect as of May 1, 2009.
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