Auction Management Regulations
Ministry of Commerce
(No. 24 of 2004)
Auction Management Regulations
The “Auction Management Regulations" has been Reviewed and approved by the Ministry of Commerce at the 14th meeting on November 15th, 2004. I hereby announced the start date is on Jan 1st, 2005.
Minister Bo Xi Lai December 2nd, 2004
Chapter I General Provisions
Article 1. Our role is to regulate the auction, to maintain process orderly and to promote the auction industry. According to the "PRC Auction Law" (hereinafter referred as the "Auction Law") and the foreign investment laws, administrative regulations and rules, this regulation is enacted. Article 2. This regulation applies to the auction companies and any auction activities within PRC. Any type of operating auction shall be regulated by the auction enterprises (according to law). Article 3. The auction enterprises here referred as the registered legal companies or joint stock companies in China whom engaged in business activities of the auction.Article 4. The Ministry of Commerce is the direct department in charge of the auction industry, the national supervision and management of the implementation of the auction. Provinces, autonomous regions and municipalities (hereinafter referred to as provincial level) and the department of commerce of the Municipal People's Government (hereinafter referred to as municipal) have the rights to supervise and manage the implementation of the auction. Article 5. Auction enterprises engaged in auction activities shall comply with the "Auction Law" and other relevant laws, administrative regulations, rules; follow by the principles of fairness, justice and publicity.
Chapter II Establishment, alternation and termination of the auction business
Article 6. Investors who tend to set up auction business in China should have good credit, no violation of Chinese laws, administrative rules and regulations of the act. Article 7. To set up an auction enterprise, companies or individuals shall meet the following requirements: (A) No less than one million yuan for registered capital; (B) Has to have their own name, organizational structure and articles of association; (C) A set office premises; (D) Three or more qualified auction practitioners, including at least one auctioneer; and has close connection with the main business of the industry (full-time or part-time staff required); (E) Compliance with the relevant laws, administrative regulations and the auction business rules stated in this regulation; (F) Comply with the development plan of the commercial departments of the auction industry.
Article 8. To set up an auction enterprise, applicants shall submit the following: (A) The application; (B) The articles of association, the auction business rules; (C) "Notice of pre-approval of enterprise name" issued by the industrial and commercial administration; (D) The resume and valid proof of identity of the appointed legal representative; (E) The proposed auctioneer qualification certificates and proof of relevant qualifications of the employees; (F) Work place proof of ownership or lease contract;
Article 9. Auction enterprises engaged in auctioning historical relics shall follow the relevant laws and administrative regulations. The national administrative department in accordance with the confiscated articles, used to offset taxes and fined articles; the people's court in accordance with the confiscated articles, used to offset fines and fined articles, as well as items that cannot be returned and other special state-owned assets, the auction enterprises shall hold responsibility. specific qualifications shall be provided by the provincial commercial departments and other relevant departments for standard management regulations, and will be submitted to the ministry of commerce for record.
Article 10. The name of the auction enterprises shall follow the name rules when registrating. The word “auction” should be used in the company name.
Article 11. Auction companies intend to establish a branch company shall meet the following conditions: (A) Comply with the auction industry development plan; (B) Passed the annual examination; (C) No less than five million yuan of the registered capital (paid in full), each branch should receive no less than one million yuan of funds or in kind; (D) Two or more qualified auction practitioners, and has close connection with the main business of the industry (full-time or part-time staff required); (E) A set office premises; (F) More than three years engaged in the auction business, consecutive profit made in the past two years with the last auction turnover of more than fifty million yuan (last year) ; or auction turnover last year worth over two hundred million yuan.
Article 12. Auction company set up branch offices, applicants need to submit the following materials: (A) The application form of the proposed branch; (b) The copy of the enterprise legal business license; (C) The last two years annual financial accounting statements audited by the accounting firm; (D) Resume and valid proof of identity of the appointed branch head; (E) The proposed auctioneer qualification certificates and proof of relevant qualifications of employees; (F) proof of ownership of the office space or rental contract.
Article 13. Establishes an auction company and its branch offices shall meet the following:
When apply for the establishment of the auction business and branch offices, enterprises or branch offices shall be reviewed and approved by the municipal commerce department, then issued by the provincial commerce department. The applicant shall bring the approval to the local administrative department for registration. Provincial department in charge of the auction business shall exanimate the company or branch establishment by hearing.
Certificate of approval will be printed by the Ministry of Commerce.
Article 14. Auction business plan to change its registration project when applying to the industrial and commercial administrative authority, should report to the provincial commerce department for approval first, then issued the certificate of approval.
Article 15. Starting from the day the auction businesses and branch offices received the certificate of approval, if unclaimed the business license within six months, the auction business approval certificate will lose its effectiveness automatically.
If the auction enterprises and branch offices are not opened after six months, or opened after six consecutive months without operating an auction event or without any business tax certificate, its business license shall be revoked by relevant department.
Article 16. Auction business dissolved under the articles of association, shareholder resolutions or other reasons; or closed due to violation of laws, administrative regulations and this regulations; or because they can not pay their debts and declared bankrupt by law, the relevant departments will takeover according to law.
Chapter III Establishment, modification and termination of auction enterprise with foreign investment
Article 17. An auction enterprise with foreign investment may be engaged in profit-making auction activity, except the law, administrative regulations otherwise stipulated.
Article 18. Encourage foreign investors with strong economic background, advanced technology and management experience, and extensive international auction marketing network to establish foreign-funded auction enterprises here.
Article 19. To establish a foreign-funded enterprise, other than article 7 listed in this regulation, investors shall also meet the following conditions:
(a) Comply with the foreign-funded enterprise's registered capital and total investment of relevant provisions;
(2) An auction enterprise with foreign investment operation period normally does not exceed thirty years, if setting up a foreign-invested auction enterprise in the Midwest normally does not exceed over forty years.
Article 20. The foreign-invested auction enterprises has got approved for setting up a branch office, needs to attend foreign-invested enterprises annual inspection check on top of article 11 of this regulation.
Article 21. To establish a foreign-funded enterprise, other than the procedures prescribed in article 8 of this regulation, applicants should submit the following material:
(a) Contracts and articles (foreign auction enterprises only needs to submit articles) and its attachments, etc;
(2) Bank reference, registration certificate (copy) of each investment parties;
(3) The most recent year audit reports of each investment parties by an accounting firm,
(4) State-owned assets evaluation report of Chinese investors invested in sino-foreign joint venture and cooperated auction enterprise.
(5) Appoint book of board members names and investment parties of the foreign investment.
Foreign investment auction enterprises setting up branches, should submit the enterprise capital verification report on top of the provisions of article 12 mentioned in this regulation.
Article 22. To establish a foreign-funded enterprise and branch, auction in accordance with the following procedures:
The applicant shall submit the application listed in article 20 to the ministry of commerce. The ministry of commerce shall make a decision of approval or disapproval within the given time period. Issue the approval certificate for the foreign-funded enterprise; if it doesn’t get approved, shall explain the reason.
The applicant shall receive the approval certificate of foreign-invested enterprises and auction business within a month, then go to the local administrative authority for industry and commerce for registration procedures.
The ministry of commerce may oversee the establishment process of the foreign-invested enterprise and branch by hearing.
Article 23. An auction enterprise with foreign investment wish to apply for alternation to the industry and commerce administration authorities, shall issue an auction business approval certificate and the approval certificate of foreign-invested enterprises prior to get the ministry of commerce approved.
Article 24. If the foreign invested auction enterprises and branch offices are not opened after six months, or opened after six consecutive months without operating an auction event or without any business tax certificate, its business license shall be revoked by relevant department.
Article 25. The foreign invested auction business dissolved under the articles of association, shareholder resolutions or other reasons; or closed due to violation of laws, administrative regulations and this regulations; or because they can not pay their debts and declared bankrupt by law, the relevant departments will takeover according to law.
Chapter IV Auction practitioners and auction activity
Article 26. Staff who obtained the auctioneer qualification needs to follow the professional and technical personnel of auction system, after being registered, him or her is allowed to host auction activities.
The auctioneer mentioned in this regulation are referring to those who has passed the national examination, qualified by the ministry of commerce and personnel, as well as received the auctioneer qualification certificate issued by the PRC auctioning industry association.
Article 27. The auctioneer should and only registered practicing in one auction enterprise. Part-time working at other auction enterprise is not allowed.
The auctioneer shall not lend the People's Republic of China auctioneer qualification to others or other units.
Article 28. The auctioneer is allowed to switch from the originally registered units. The auctioneer wishes to change registered entities, shall provide the auctioning industry association with register alteration formalities.
The Chinese auctioning industry association shall keep monthly record of any auctioneer changes in file for the ministry of commerce.
Article 29. The following articles or property rights are prohibited for auction:
(a) prohibited by laws and regulations of buying and selling,
(2) the ownership or disposition controversial, with no confirmation of judicial, administrative counterpoising,
(3) Goods have not been completed by the customs formalities and still under customs supervision.
Article 30. An auction enterprise shall operate auction activities by law, must not have the following actions:
(a) lease or transfer auction franchise,
(2) false conduct propaganda, causes pecuniary loss to vendees.
(3) hired unregistered auctioneer or other uncertified personnel for auction.
(4) Maliciously reduce commission ratio or lower the auction activity cost commissions( except charity auction) or any kind of unfair underground competition.
(5) other behaviors in violation of laws and regulations.
Article 31 If an auction company found an investigation object or stolen goods in auction shall immediately report to the local public security department.
Article 32 the bidders entrust others for bidding shall provide a proof of identity copy of the bidders and agents.
Accredit a power of attorney shall contain the agent's name, acting matters, agency authority and time period.
Article 33 Before the implementation of any auction activities, the auction enterprise and the client shall propose a written agreement prevent any kind of unperformed, suspend or terminated losses.
Article 34 regarding the auction items, an auction enterprise is responsible for it and should establish the line of duty, and adopt necessary safety countermeasures.
Article 35 an auction enterprise held auction activity, according to the auction subject matter attribute and auction in accordance with the nature of the merger and acquisition of China and other relevant laws, administrative regulations date announcements. Notice shall be posted targeted location and released on notable newspapers or media that are appointed by the commerce departments.
Article 36 an auction enterprise shall display auction targets in the auction pre-conference for bidders, also provide relevant materials to the bidders.
Show time should be at least two days, fresh goods, or other items that are hard to preserve should not ne included.
Article 37 an auction enterprise shall have the right to find out or require the client to write and explain the source of the auction items and if there’s any defects.
An auction enterprise shall let the bidder know that they are aware of the defections of auction targets.
Article 38 laws, administrative regulations and rules have special provisions for the transferees, the auction enterprises shall give mark auction to bidders who met the requirements by laws, administrative regulations and rules.
An auction target is transferrable in accordance with the laws, administrative regulations and rules and approved by the administrative licensing law. Clients need to get approved by the administrative licensing authority.
Article 39 an auction enterprise may set up a bidding stage at the auction venue and explain to bidders before the auction.
Article 40 If any of the following situation occurs, auction shall be discontinued:
(a) no bidders attending,
(2) the third party has controversial over the auction target ownership or disposition and provided effective proof on the spot.
(3) client representatives with justified reasons and provided written notice before an auction activity, the auction shall be discontinued.
(4) accidents occurred during an auction activity.
(5) any circumstances are not suitable according to law, shall be discontinued.
Suspending an auction shall be announced by the auction enterprise. If all sorted out, the auction should be continued.
Article 41 If any of the following situation occurs, auction shall be terminated:
(a) the people's court, arbitration institution or the relevant administrative authorities cognizance client for auction targets and notify the auction enterprise in written materials.
(2) an auction target is recognized for stolen goods,
(3) Accidents causing auction activity discontinued;
(4) an auction target is damaged or lost before an auction,
(5) client representatives delivered written notice of termination to an auction enterprise before the auction,
(6) any circumstances are not suitable according to law, shall be terminated.
Terminating an auction shall be announced by the auction enterprise. If the client requests to continue the auction after it ended, he or she shall redo the auction procedures.
Article 42 auction enterprises with foreign investment and domestic auction enterprise held auction activities within PRC, the auction target shall follow the law, administrative regulations and relevant provisions.
Chapter V Supervision and Management
Article 43 the ministry of commerce formulates relevant auction industry regulations, policy, development planning, in accordance with law, set up supervision and verification, industrial statistics and credit management system, Responsible for utilizing foreign investment promotion and management of the auction industry, Give business guidance to those self-regulatory organization.
Article 44 Provincial commercial departments is responsible for stipulation and implementation of this region’s auctioning industry development planning.
Provincial commercial departments shall set up supervision, verification, industrial statistics and credit management system for the auction enterprises in the region, Responsible for setting up audit permission for an auction enterprise and its ranch, Manage and guide the self-regulatory organizations in the region.
Provincial commercial departments shall set up network connections between the auction enterprises and other relevant administrative authorities for auction business activities, the supervision and inspection of the situation and the processing results shall be recorded. The auction enterprises shall give feedbacks of the supervision annually.
Unqualified auction enterprises, shall apply rectification within a prescribed time period, and will notify relevant departments.
Article 45 the auctioning industry association according to law, shall oversee the auction enterprises and auctioneers. The auction industry association shall formulate the industry standard, strengthen self-discipline management, coordinate the relationship between the government departments and the enterprises, provide services and safeguarding enterprises’ rights and interests.
Under the guidance of the ministry of commerce, the Chinese auction industry will concrete credit management system; organize auctioneer test, evaluation and qualification.
Chapter VI Legal Responsibility
Article 46 with no permission engage in business enterprise, the auction activity shall be banned in accordance with the relevant provisions.
Article 47 the auctioneer violates rules 26, 27, stipulated or have regulators conceal, provides false materials and other irregularities, the provincial commercial departments will notice the auctioning industry association with illegal facts and disposal suggestion. Giving written results in10 working days and will forward provincial commercial departments and industry association.
Article 48 an auction enterprise violates article 29 of this regulation, cause buyer losses, the auction enterprise shall pay compensation, if it’s the trustee’s responsibility, the auction enterprise has the right to demand compensation from the trustee.
Article 49 an auction enterprise violates article 30 (1), the provincial commercial departments will give orders and impose fines under 30,000 yuan.
Article 50 an auction enterprise violates article 30 of item (3) of the regulation, shall be warned by the provincial commercial department, and impose fines twice as much of the illegal income, but no higher than 3 million yuan; No illegal gains will impose a thousand yuan fine. Cause losses for the buyers, the auction enterprises shall compensate.
Article 51 an auction enterprise violates article 30 (2), (4), the relevant administrative authorities shall give them penalty.
Article 52 an auction enterprise violates article 35, 36, violates compasses undertakes announcement or display before an auction, the provincial commercial departments shall take charge in making corrections, extensions or impose one million yuan.
Article 53 an auction enterprise and a trustee violates article 37, did not state the defection of an auction target, the buyer shall have the right to request a compensation from the auction enterprise, If it is a trustee’s responsibility, the auction enterprise has the right to demand compensation from the trustee.
An auction enterprise/client release announcement before the auction regarding the unclarified authenticity or quality of the auction target, it is not responsible for warranty (hereinafter referred to as "disclaimer). If an auction enterprise clearly knows or should know that an auction target has flaws, disclaimer is invalid.
Article 54 after an auction is completed, the trustee is not helping buyer in accordance with legally prescribed license alteration, property transfer procedures, causing the buyer or an auction enterprise losses, the trustee shall be compensated.
The trustee proposed to suspend or terminate the auction, causing enterprises or bidder losses, shall be compensated.
Article 55 If one of following occurs, provincial commercial departments or the ministry of commerce may cancel the relevant auction enterprise and its branch licensing permissions:
(a) staff who abuses his power, neglects his duty to make decision granting establishment decisions,
(2) violates the provisions of the law and the rules for the establishment;
(3) beyond their statutory functions and powers granting establishment decisions.
Article 56 commercial departments and industrial association staff who malpractices for personal gain, abuse their powers, neglect their duties, the responsible competent personnel and the personnel directly responsible shall be given administrative sanction; Constitutes a crime, shall be investigated for criminal responsibility.
Article 57 commercial departments staff overheard the confidential information of the auction enterprises, trustees, bidders or buyers, causing information leaking, shall be compensated according to the regulation. If an auction enterprise think the materials have confidential content, should write the word "secret" and seal it before sending out to the to management authorities.
Chapter VII Supplementary Notes
Article 58 wholesale market for agricultural products, automotive market and other commodity trading markets select the auctioning method and use Internet platform for auction business management, shall follow the articles stated in this regulation, specific measures will be formulated separately.
Article 59 a wholly state-owned auction enterprise shall comply with the relevant provisions of the state for restructuring.
Article 60 the ministry of commerce is responsible for the interpretation of these rules.
Article 61 This regulation will affect on January 1st, 2005.