Rules on Foreign Access to Securities Firms to Take Effect

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Last updated at: (Beijing Time) Tuesday, June 04, 2002

Rules on Foreign Access to Securities Firms to Take Effect

As issued and clearly defined by China Securities Regulatory Commission (CSRC), the rules and procedures on establishing foreign-shared stock companies and capital managing companies will take effect on July 1.

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Organizational structure

As China Security News reported, the foreign-shared companies and the capital managing companies, in accordance with the rules, include those that are transferred or purchased by foreign shareholders and those that are co-founded by foreign and domestic shareholders. The organizational structure of the aforesaid companies is limited company.

Business scope

Their business covers the dealing of stocks (including RMB average stocks and foreign stocks) and bonds (including bonds issued by the government and companies); managing of foreign stocks; managing and selling of bonds (including bonds issued by the government and companies) and other businesses approved by the CSRC. The rules indicate the companies that are dealing with stock business must be granted with business license first.

Share restriction

The rules noted the registered capital of the companies must be compatible with the related regulations. While domestic shareholders invest by cash or objects dealing in the business, foreign shareholders are required to invest by currency.

The rules say the shares that are held by foreign shareholders mustn't exceed one third of an accumulative total; and among domestic shareholders, at least one should hold one third of the shares. As for the companies that are transferred from the domestic to the foreign-shared, at least one domestic shareholder should hold one third of the shares.

The rules also make it clear that the shares that are held by foreign shareholders in the capital managing companies mustn't exceed 33 percent of an accumulative total. The ratio mustn't be above 49 percent within the three years after China's entry into the WTO. The capital managing companies that are co-invested by domestic and foreign investors should take two steps---preparation and getting into operations.

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