Chapter I General Provisions
Article 1 These Measures have been formulated in accordance with the "Company Law", "Securities Law" and the provisions of relevant laws and administrative regulations for the purpose of regulating the conducts of securities companies on the issuance and transfer of bonds, and protecting the legitimate rights and interests of the bondholders.
Article 2 "The bonds of a securities company" as used in the Measures refer to the negotiable instruments issued by a securities company according to law, with the principals and interests to be repaid within an agreed time limit.
These Measures shall be applicable to the issuance of bonds by securities companies, excluding the issuance of the convertible company bonds.
Article 3 The China Securities Regulatory Commission (hereinafter referred to as the "CSRC") shall be responsible for the supervision over the issuance and transfer of the bonds by securities companies according to law.
Article 4 The issuance of the bonds of a securities company shall be in accordance with the conditions as prescribed in the Measures, and shall be reported to the CSRC for approval. No bonds may be issued without authorization or in any disguised form without approval.
Article 5 The bonds of a securities company may be publicly issued, upon approval, to the general public or issued to targeted clients to the qualified investors. The bonds for directional issuance shall not be issued publicly whether directly or in any disguised form.
Article 6 The securities companies that issue bonds (hereinafter refer to as "issuer") shall make effective measures for the repayment of principals and interests due in order to protect the legitimate rights and interests of the bondholders.
Chapter II Issuance and Underwriting
Article 7 The public issuance of the bonds by the securities companies shall also be in line with the following requirements besides meeting the conditions as prescribed in the "Company Law":
1. The issuer is a conglomerate securities company;
2. The net capital has been audited at the end of the recent period shall be no less than RMB 1 billion ;
3. It was profit-making in the past year;
4. All the indexes of risk supervision and control are in conformity with the relevant provisions of the CSRC;
5. It has no record of serious violation of the laws and regulations during the past two years;
6. It has a sound operational mechanism for the shareholders' meeting and the board of directors as well as effective internal management rules, and has an appropriate technical system for business separation and internal control;
7. The capital is not taken up by the natural person, legal entity, or any other organization or any of the affiliates thereof in actual control; or
8. Other conditions as prescribed by the CSRC.
Article 8 Where a securities company issues directional bonds, the requirements as prescribed in items 4, 5, 6, 7, and 8 of the preceding Article shall also be met, besides the conditions as prescribed in the "Company Law", and the net capital audited at the end of the late period shall be no less than RMB 500 million.
Article 9 The directional bonds issued shall only be issued to the qualified investors, which refer to those investors that meet the following conditions, and can judge by themselves, with the ability of independently analyzing and bearing the risk of the invested bonds:
1. The legal entities or investment organizations established according to law;
2. Able to engage in bond investment according to the provisions and articles of incorporation; and
3. A registered capital of RMB10 million or more or the net capital audited being RMB20 million or more.
Article 10 The capital collected through the issuance of bonds shall be used for specified purposes and for which there shall be corresponding spending plan and the management rules. The collected capital shall be used in line with the relevant provisions of laws and regulations or those of the CSRC, and may not be used in the businesses and conducts prohibited.
Article 11 The issuer shall retain securities rating organizations to make credit rating for the current bonds and make arrangements for the follow-up rating.
The securities rating organizations shall be responsible for the impersonality, impartiality and punctuality of the rating result. The contents and the format of the credit rating report shall be in conformity with relevant provisions.
Article 12 The issuer shall provide guaranty for bonds issuance. Where the guaranty is provided for the issuance of bonds, the guarantor shall have the capability to pay off the debts for debtors, and the guaranty shall be that with joint and several liabilities; In case the mortgage or the pledge is provided for the issuance of bonds, the property under the mortgage or pledge shall be assessed by the qualified property assessment institutions.
The amount of money secured for the public issuance of the bonds shall be no less than the total amount of the principals and the interests of the bonds, and for the directional bonds issued, the amount shall be no less than 50% of the total amount of the principals and the interests of the bonds.
Article 13 An issuer shall retain credit agents for bondholders. The credit agency agreement shall be made when retaining the credit agent, and the rights and obligations, as well as the liabilities for breach of contract among the issuer, bondholder and the credit agent shall be specified.
An issuer shall stipulate expressly in the prospectus that the investors subscribing the current bonds shall be deemed as accepting the credit agency agreement.
An issuer may retain trust and investment corporations, fund management corporations, securities companies, law firms, and securities investment consultation institutions as credit agents.
Article 14 The issuer shall retain law firms to provide the legal advisory papers and the lawyer's working report by consulting the relevant provisions of the CSRC on securities issuance.
Lawyers shall air their legal opinions expressly, the focus of which is on the issuance conditions of bonds, plans of issuance, terms of issuance, guaranty, credit rating, the special repayment accounts, and the credit agent, as well as the bondholder's meetings, etc, according to the characteristics of the bonds.
Article 15 An issuer shall retain a securities company that has the main underwriter's qualifications to organize the underwriting of bonds. For the directional bonds issued, the selling of which may also be organized by the issuer itself with the approval of the CSRC.
Article 16 The board of directors of a securities company shall formulate the schedule for bond issuance, and the shareholders' meeting shall make special decisions on the following matters concerned:
1. The scale of issuance, the time limit and the interest rate;
3. The use of the funds collected;
4. Ways of issuance;
5. The valid term of the decisions made; and
6. Other important items in relation to the current bonds.
Article 17 The following documents shall be filed to the CSRC by a securities company when applying for bond issuance:
1. The application report of the issuer;
2. The resolutions of the board of directors and the shareholders' meeting;
3. The recommendations of the main underwriters (with the attachment of the investigation report on the fulfillment of duties);
4. The prospectus (with the attachment of the plan of issuance);
5. The legal advisory papers (with the attachment of the lawyer's working report);
6. The financial statements over the past three years and in the current term, which have been audited;
7. The credit rating report and the follow-up statements on the arrangement of the rating;
8. The special report on the repayment plan and the safeguards;
9. The report on the analysis of the cash flow concerning the payment of the principals and the interests of the current bonds;
10. The security agreement and the related documents;
11. The credit agency agreement;
12. The photocopies of the articles of incorporation and the business license of the issuer;
13. Other important contracts in relation to the issuance of the bonds; and
14. Other documents ought to be reported to the CSRC as required.
Article 18 For the issuance of directional bonds, if the potential subscriber promises in written form to subscribe all the bonds and not transfer them in the bond transfer markets, the issuer may be exempt from credit rating, providing guaranty or retaining the credit agency, after obtaining the written consent of the potential subscriber.
The bonds as cited in the preceding paragraph can be transferred only by agreement. The two parties making the transfer shall make definite written indications and recognition on the limitations of the transfer and the risk of the bonds.
Article 19 Bonds shall be underwritten on a sole agency basis or on a commission basis.
The maximum period for underwriting bonds or the self-organized sale shall be 90 days.
Article 20 For the bonds publicly issued, if the total amount of the par value of the bonds which are sold out within the sales term accounts for less than 50% of the total amount of the bonds to be issued, or the requirements for listing of the bonds are not met with, the issuance shall be deemed as a failure. And the issuer shall return the subscribers the amount of money according to the issuance price together with the interests of the bank deposit at the corresponding period of time.
The issuer cannot put to use the capital collected before the end of the issuance of the bonds, and the main underwriter and the credit agent shall have the responsibility to supervise them.
Article 21 The bonds publicly issued shall be issued openly to the general public, with RMB100 par value for each share. The directional bonds issued shall be issued to the qualified investors by way of keeping accounts, with RMB 500 thousand par value for each share, and the bonds subscribed by each qualified investor shall be no less than RMB one million par value.
Bonds may be issued according to the par value, or by other means, of which the specific way of issuance shall be determined through negotiation between the issuer and the main underwriter.
Article 22 The interest rate of the bonds shall be determined through negotiation between the issuer and the main underwriter in light of such factors as the credit grade, degree of risk, the demands and supply of the markets, etc, but must be in line with the relevant provisions on the management of the interest rate of the bonds.
Article 23 The minimum period of the bonds shall be one year, and the maximum period shall be five years.
Chapter III Trust and Transfer
Article 24 The bonds of the securities companies shall be subject to the registration, trust and settlement of the China Securities Registration and Settlement Limited Company.
The Central National Debts Registration and Settlement Limited Company may also be responsible for the registration, trust and settlement of the company bonds after approval.
Article 25 The bonds publicly issued shall be applied for centralized competitive transaction by listing in the stock exchange, and may also be transferred by other means upon approval of the SCRC.
The securities company that applies for listing of the bonds shall, makes listing agreement with the stock exchange, observes the listing regulations of the stock exchange and accepts the supervision of the stock exchange as well.
Article 26 The following conditions ought to be met in the application for the listing of bonds:
1. The application for the issuance of bonds has been approved and the bonds issuance has been completed;
2. The total amount of the par value of the bonds actually issued is no less than RMB 200 million
3. The requirements for the public issuance are still met with when applying for listing of the bonds; and
4. Other conditions as prescribed by the CSRC.
Article 27 In case the termination of the bonds listed for transaction is one month before the expiration of the listed bonds, the cashing of the bonds shall be handled by the issuer.
In case the securities company whose bonds are listed for transaction is in any of the situations as prescribed in Articles 55 and 56 of the "Securities Law", the stock exchange shall make decisions on the suspension of the transaction or termination of the listing.
Article 28 The directional bonds issued shall be transferred by agreement, or by other means with the approval of the SCRC, of which the minimum transfer unit shall be no less than RMB 500 thousand par value. The bonds transfer shall be made between the qualified investors, and shall be made in line with the business rules of the place of transfer.
The issuer, the main underwriter, the securities company providing the transfer service and the transferor shall all make examination and confirmation on the identity of the qualified investors, those investors who are not qualified shall not participate in the activities of subscription and assignment of the directional bonds issued.
Article 29 The issuer, the main underwriter, and the securities company providing the transfer service shall make declaration to the registration and settlement company on the relevant data of the qualified investor who has been examined and confirmed, and handle the formalities for the opening and registration of the securities account. The qualified investors shall only carry out such investment activities as the application and purchase and the assignment of the bonds by using the securities account that has been registered in the registration and settlement company, and shall fill in the subscription list or the assignment list of the bonds.
Chapter IV Information Disclosure
Article 30 The securities company shall make prospectus and other information disclosure documents in light of the relevant provisions of the CSRC when issuing bonds, and make sure that all the information that have the material influences on the investors shall be disclosed in authenticity, accuracy, integrity, and in time. But the prospectus for the issuance of directional bonds and the relevant data are refrained from being published in the media whether directly or in any disguised form.
The issuer and the relevant parties shall not mislead the investors by any means to buy the bonds.
Article 31 The issuers shall indicate the investors in the obvious place of the prospectus: "The investors shall, when purchasing the current bonds, carefully read the prospectus and the relevant information disclosure documents, and make independent investment judgment. The approval of the CSRC on the issuance of the current bonds does not mean that the CSRC has made any evaluation on the investment value of the current bonds, nor does it mean the CSRC has made any judgment on the investment risk of the current bonds."
Article 32 The prospectus, the listing announcement, the periodical report and the announcement on the major events, shall be made in accordance with the relevant provisions of the CSRC and the operational rules of the stock exchange.
Article 33 The issuance terms disclosed in the prospectus shall be specific and definite, stipulating in detail the terms in relation to the rights and obligations of the parties of the bonds.
At least the following contents shall be included in the prospectus:
1. The scale of the bonds, time limit and the interest rate;
2. The start and termination time of the issuance;
3. The time, the procedures and the ways of the repayment of the principals and the interests;
4. The special repayment account and other repayment measures;
5. The relevant arrangements for the bondholder's meeting;
6. The credit agent and the credit agency agreement;
7. The guaranty issues;
8. The rating report and the arrangements for the follow-up rating;
9. The liabilities of the issuer in breach of the contract; and
10. The underwriting institutions and their liabilities.
Article 34 The issuers shall, within the existing period of the bonds, disclose to the bondholders the annual financial report that has been audited by the accountant firm which has the qualification of practicing securities business.
Article 35 The issuer that issues bonds publicly shall make public announcements for three times on the relevant matters concerned in the designated press of the CSRC within 10 days before the date of paying the principals and interests.
Article 36 During the listing of bonds, the issuer shall submit an annual report to the SCRC and the stock exchange within four months after the end of each financial year, and submit a mid-term report to the SCRC and the stock exchange within two months after the end of the first half year of each financial year, as well as make disclosure on the designated press and the internet website of the CSRC.
Article 37 The important matters in relation to the interests of the bondholders within the time limit of the report shall be disclosed in detail in the periodical report, and at least the following contents shall be included in the report:
1. The payment of principals and interests of the bonds;
2. The relevant conditions of the special repayment accounts;
3. The material alteration of the guarantor and the guarantee;
4. The alteration of the liabilities of the issuer;
5. The summarization of the status of cash flow;
6. The conditions of follow-up ratings;
7. The main contents of the report on the agency matters of the credit agent;
8. The main conditions of the public announcements of the major events;
9. The convening of the bondholder's meetings; and
10. Other information that has great influences on the bondholders.
Article 38 In case an issuer is in any of the following circumstances, it shall be publicized in time or informed to the bondholders in an effective way:
1. Anticipation of being unable to repay the interests or the principals;
2. Abnormity in the special repayment account;
3. Making such contracts as the security contract and other important contracts that may have great influence on the repayment of the principals and the interests;
4. Occurring serious loss or suffering such serious loss that exceeds 10% of the net capital;
5. Occurring major arbitration or litigation;
6. Reducing the capital, merger, split, dissolution and application for going bankrupt;
7. Great re-composition of liabilities to be carried out;
8. Failure to implement the stipulations of the prospectus;
9. The major alteration of the guarantor or guarantee;
10. The suspension of the transaction of the bonds and the termination of the listing of the bonds by the stock exchange; and
11. Other circumstances as prescribed by the CSRC.
Article 39 Where the bonds are issued to targeted clients, the contents and ways of continuous disclosure of the information shall be stipulated in the prospectus, but shall be in conformity with the relevant provisions of the CSRC on the information disclosure of the directional bonds issued.
Chapter V Repayment Measures
Article 40 A bondholder shall implement its rights according to the provisions of the laws and regulations, and the stipulations of the prospectus, and supervise the relevant conducts of the issuer and the credit agent.
Article 41 A issuer shall open a special repayment account for the payment of the principals and the interests of the bonds, and make clear the sources of the capital in the account, the way of withdrawal and other relevant matters concerning the supervision and management of accounts. The capital in the account may be used for the investment of such products as treasury bonds that are of low risk and high fluidity, or repay the bonds ahead of schedule as agreed.
Article 42 The issuers shall make resolutions through the shareholder's meeting, and improve the proportion of the optional surplus accumulation fund and that of the ordinary risk reserve within the existing period of the bonds, so as to reduce repayment risks.
Article 43 The issuers shall make resolutions through the shareholder's meeting to take the following measures within the period when the capital in the special repayment account could not be withdrawn as stipulated or repay the principals and interests of the bonds:
1. Not distributing profits to the shareholders;
2. Deferring the implementation of such items of capital outlay as the major foreign investment, purchase, and merger or incorporation;
3. Adjusting to reduce or ceasing to pay the salary and bonus to the directors or the executives; and
4. The person directly liable is forbidden to shift from his position.
Article 44 Where an issuer agrees to repurchase the bonds before the expiration date of the bonds or repay the debts ahead of the schedule as stipulated, he shall not impair the interests of the bondholders, and shall treat all the bondholders fairly.
Article 45 Issuers are forbidden to alter the stipulations of the prospectus unilaterally within the existing period of the bonds. Where it is necessary to make any alteration under special circumstances, the issuer shall notify the credit agent in time and win the consent of the bondholder.
Article 46 A bondholder may implement his rights alone, or through the bondholder's meeting. The rights, procedures of convening, and the effective conditions of the bondholder's meeting shall be stipulated in the prospectus.
Article 47 In case any of the following circumstances arises, the bondholder's meeting shall be convened:
1. The issuer suggests that the stipulations of the prospectus be altered;
2. The issuer is unable to pay the principals and the interests on schedule;
3. The issuer reduces the capital, merges or incorporates, dissolves and applies for bankruptcy;
4. The material alteration of the guarantor or guarantee; or
5. The bondholders owning over 10% of the par value of the bonds suggest changing the credit agent.
Article 48 The issuer, the guarantor, the shareholders who hold the current bonds and over 10% stock rights of the issuer, and other important affiliates, may take part in the bondholder's meeting and bring forward proposals, but may not take a vote.
Article 49 A credit agent shall fulfill his duty, implement his obligation of management with honesty, credit, caution and efficiency, and observe the stipulations of the agency agreement strictly, as well as implement the following obligations:
1. In case such circumstances as failure to repay the principals and interests in time or any other circumstance that may affect the material interests of the bondholders arise, the credit agent shall urge and remind the issuer, and notify the bondholders as well;
2. Supervising the use of the special repayment account and the money collected, as well as the guaranty matters concerned in light of the stipulations;
3. Acting as the agent of the bondholder and the issuer for the negotiation and litigation affairs between them, in light of the stipulations of the prospectus; and
4. Other matters concerned as authorized by the bondholder's meeting.
Article 50 The credit agents shall make operational rules for the agency business, and take effective measures to protect the legitimate rights and interests of the bondholders, and make reports on the credit agency matters periodically.
Article 51 Issuers shall assign persons specially handling the bond affairs, and make up the repayment working party to take charge of such matters as the repayment of the interests and the principals and other relative matters.
Chapter VI Legal Liabilities
Article 52 The issuance, underwriting, transfer and the information disclosure of a securities company shall be made in accordance with the relevant provisions of the Company Law and the Securities Law. Those acts in violation of the provisions shall be subject to administrative punishment by the CSRC according to law.
Article 53 In the case of bonds issued to targeted clients, if the issuer publishes, directly or in any disguised form, the prospectus, or releases relevant information in any mass media, which is in violation of the provisions, he shall be ordered by the SCRC for correction, and be meted out with one or more of the following penalties as warning, confiscation of the illegal proceeds; in case the circumstance is serious, the approval for the issuance of directional bonds shall be revoked by the SCRC, and the bonds having been issued shall be returned by the issuer according to the issuing price plus the bank deposit interest at the corresponding period, as well as being barred for three years for application for the qualifications on bond issuance. The executives directly responsible and other personnel directly liable shall be meted out with one or more of the following penalties: warning, confiscation of illegal proceeds, suspension from or complete revocation of the practicing qualifications of the securities business.
Article 54 The issuer or underwriter of directional bonds issued, who, in violation of the provisions, sells the bonds to unqualified investors shall initiatively make corrections; those who refuse to make corrections shall be ordered by the CSRC to make corrections, and be meted out with one or more penalties such as warning and confiscation of illegal proceeds. The approval for the issuance of directional bonds may be revoked by the issuer, and the bonds having been issued shall be returned by the issuer according to the issuing price plus bank deposit interests for the corresponding period, and the issuer shall be barred for three years from applying for the qualifications for bond issuance, and the underwriter shall be suspended from or disqualified in bond underwriting. The executives directly responsible and other personnel directly liable shall be meted out with one or more penalties, including warning, confiscation of illegal proceeds, suspension from or disqualification from practicing the securities business.
Article 55 The intermediary institutions that provide services in the issuance of directional bonds, shall correct the false records, misrepresentations or major omissions that may exist in the advice it proposed; those institutions who refuse to make corrections, shall be ordered by the SCRC to make corrections, and may also be meted out with one or more penalties according to the particular circumstances including warning, confiscation of illegal proceeds, suspension from or being disqualified from practicing the securities business. The executives directly responsible and other personnel directly liable shall be meted out with one or more penalties including warning, confiscation of illegal proceeds, suspension from or being disqualified from practicing the securities business.
Article 56 In case a credit agent fails to perform his duty as stipulated, the relevant personnel liable shall be imposed an administrative punishment by the SCRC according to law; and shall take civil liabilities according to law for the losses caused to the bondholders.
Article 57 If an issuer fails to repay the principals and the interests due, the bondholders can lodge a complaint to him. For those who have the ability to repay but refuse to implement the repayment duty, and have other violation acts, the SCRC may take the following measures according to the particular circumstances:
1. Ordering the implementation of relevant obligations;
2. Imposing one or more penalties on the entity including a warning, confiscation of illegal proceeds, suspension of part of the securities business; or
3. Imposing one or more penalties on the executives directly responsible and other personnel directly liable, including warning, confiscation of illegal proceeds, suspension from or being disqualified from practicing the securities business.
Chapter VII Supplementary Provisions
Article 58 The regulatory measures on the issuance of lower bonds by securities companies shall be formulated separately.
Article 59 The Measures shall enter into force as of October 8, 2003.