关于建立风险投资机制的若干意见 Establishing a Venture Investment Mechanism Several Opinions

ents.

　　Venture investment funds shall be established as closed-end funds, that is, the total amount of units issued and the life of the fund shall be determined in advance and the fund units may not be redeemed during the life of the fund.

　　(10) The paid-in money capital of venture investment companies and venture investment funds must be adequate. The amount invested by venture investment companies and venture investment funds in high and new technology enterprises shall account for a relatively large proportion of their paid-in capital. Their investment ratio in a specific enterprise or any single project should not be exceedingly high, in order to limit their exposure.

　　(11) The main management personnel in a venture investment organization shall meet such conditions as understanding technology, being capable at management, not having a record of improper activity, truthfully declaring their personal finances, being willing to bear corresponding liability for business losses.

　　(12) Venture investment organizations shall establish sound internal incentive mechanisms and restraint mechanisms. They may motivate their business management personnel by means of stock options, in accordance with the principle of permitting and encouraging the participation of such factors of production such as capital and technology in the distribution of returns. Matters such as the type and number of stock options, the conditions for granting them, restrictive conditions, the method of exercising the options shall be based on business performance and provided for in contracts between the contributors of capital and the business management personnel. Such contracts shall also specify the liability to be borne by senior management personnel for such acts as dereliction of duty and gross negligence.

　　The establishment, examination and approval of venture investment companies and venture investment funds must be carried out in accordance with the procedures and processes formulated by the relevant State Council authorities.

　　4. Establishment

of a mechanism for the withdrawal of venture investments

　　(13) Channels for the withdrawal of venture investments should be established and developed, in order to promote the development of venture investment. "Withdrawal" is a business act in which the return from a venture investment is obtained through an equity transfer. The objective laws of capital use shall be adhered to and smooth channels of withdrawal created in order to effectively attract funds in society into the sphere of venture investment, ensure a benign venture investment cycle and resolve such venture capital problems as equity flow, risk dispersal, value appraisal.

　　The main methods of withdrawing venture investments include enterprise acquisitions and mergers, equity buy-backs, stock market listings.

　　(14) The phrase "enterprise acquisitions and mergers" means the act whereby unlisted high and new technology enterprises transfer part or all of their equity to other enterprises or individuals. Non-bank financial institutions, listed companies, industrial investment funds and other companies and individuals shall be permitted and encouraged to participate in acquisitions of, and mergers with, high and new technology enterprises.

　　(15) The term "equity buy-back" means the act whereby an enterprise buys back the equity held in it by a venture investment organization. Financial institutions, small and medium-sized credit security funds and all other types of security organizations shall actively support the equity buy back activities of high and new technology enterprises.

　　(16) When the conditions are ripe, high and new technology enterprise boards should be established at the existing Shanghai and Shenzhen stock exchanges to provide listing and trading services for high and new technology enterprises and in particular for small and medium-sized science and technology enterprises. This will not only permit full usage of existing facilities and regulatory resources and be conducive to centralized and unified regulation of the securities market, but will also make it possible to relatively quickly develop and improve the channels for the withdrawal of venture investments. The specific procedures for issuance, listing and trading of their stocks will be formulated by the China Securities Regulatory Commission.

　　(17) Foreign venture board stock markets, like the US's NASDAQ and the Growth Enterprise Market established by the Stock Exchange of Hong Kong can also be used as a channel for withdrawing venture investments. In policy terms, favouring the listing abroad of high and new technology enterprises is beneficial in permitting the use of international capital to develop China's high and new technology industries, attracting foreign venture capital into China's venture investment market and enabling high and new technology enterprises to take their place in the international market. The specific procedures for listing and trading will be formulated by the China Securities Regulatory Commission.

　　5. Improving the system of intermediary service organizations

　　(18) The important functions of intermediary organizations in such areas as consultancy, supervision and appraisal should be maximized. Venture investment requires existing intermediary service organizations to provide services in that respect and also requires the establishment of specialized intermediary service organizations including industry associations, science and technology project appraisal organizations, technology brokerages, venture investment consultancy and advisory organizations which target the special character and specialized needs of such investment.

　　(19) When establishing intermediary service organizations the principle of separating government and enterprise shall be strictly adhered to, enabling them to become legal person entities which earn their own reputations, are responsible for their own profits and

losses and bear their own economic and legal liabilities. They shall legally engage in business activities in accordance with the principles of acting in good faith and operating in a fair and scientific manner.

　　(20) Venture investment industry associations established after examination and approval, being the industry's self-regulatory organizations for venture investment entities, high and new technology enterprises, relevant intermediary service organizations and others should formulate industry standards and service standards and evaluate the business practice of their members so as to form a self-regulating mechanism. The said associations should engage in such areas as the training of venture investment personnel and the development of non-governmental international exchange activities.

　　6. Establishing a sound system of policies, laws and regulations to encourage and guide venture investment

　　(21) The relevant authorities of the State Council will formulate specific implementing procedures for the application for, and examination, approval and administration of, the establishment of venture investment companies and venture investment funds pursuant to these Opinions in order to promote the establishment of a standardized venture investment mechanism. They will study and formulate fiscal and financial support policies and policies encouraging the access of foreign venture capital to the venture investment market which are beneficial to the development of venture investments; study and formulate an implementing plan for the establishment of "high and new technology enterprise boards" at the Shanghai and Shenzhen stock markets and study and formulate policies, laws and regulations relevant to the issuance, listing and trading of stocks of small and medium-sized science and technology enterprises; study and formulate policies relevant to the issuance of securities and listing of small and medium-sized science and technology enterprises on foreign growth enterprise board markets; and study and formulate procedures for the examination, approval and administration of the establishment of venture investment industry associations.

　　(22) The relevant authorities of the State Council will regularly formulate and issue venture investment project (sector) guidelines to target the investment of venture capital in accordance with State industrial policy, technology policy and the strategic objective of adjusting industry and product structures.

　　Venture investment is a special, highly competitive method of capital use which has a long payback period and a high degree of risk. When promoting the establishment of a venture investment mechanism, each region shall pay attention to minimizing risk, developing the system in a lawful and orderly manner, preventing a frenzy and avoiding the phenomenon of solely or chiefly relying on the government to contribute capital to establish venture investment organizations. The industry should be encouraged to primarily rely on non-governmental capital, while the basic principles for the government's role should be guidance, support and limited participation. The people's government of each province, autonomous region and municipality directly under the central government shall steadfastly integrate short and long-term objectives, adopt realistic and practicable measures, and concentrate their efforts in such areas as creating the environment, improving the market mechanism and attracting foreign and domestic venture capital, so as to actively and steadily promote the development of venture investment.nture capital, so as to actively and steadily promote the development of venture investment.nture capital, so as to actively and steadily promote the de

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