关于进一步促进境外上市公司规范运作和深化改革的意见 Further Standardizing Operations and Intensifying Reform of Companies List

(Issued by the State Economic and Trade Commission and the China Securities Regulatory Commission on 29 March 1999.)
颁布日期：19990329 　实施日期：19990329 　颁布单位：国家经济贸易委员会、 中国证券监督管理委员会

　　A "company listed outside China" ("Company") is a company which raises capital outside the country and is one of the types of organizational structure under the modern enterprise system. This structure imposes comparatively high requirements on such areas as corporate management structure and information disclosure. At present the majority of Companies have shown progress in innovating their systems of organization and transforming their operating mechanisms; however, there are also some Companies which have not yet fully completed the transformation of their operating mechanisms, and which demonstrate problems in such areas as operational standardization and internal management. The following opinions concerning operational standardization and intensification of corporate reform are put forward in order to further promote Companies' strict compliance with the relevant domestic and foreign laws and regulations, their conscientious performance of their continuing obligations toward investors and their establishment of a good corporate image on domestic and foreign capital markets:

　　1. The operational organizations of Companies must be separated from those of their controlling entities

　　Companies must rationalize their corporate management systems in keeping with the requirements of the modern enterprise system.

　　Companies and their controlling entities (hereafter "controlling entities" refers to companies, enterprises and institutions with legal person status that have a controlling interest in a Company) must keep independent accounts and independently bear liabilities and risks. A controlling entity shall principally exercise its shareholder rights in a Company through the shareholders' meeting in accordance with legal procedures. The organizations within a Company, particularly the board of directors, management, the financial and marketing organizations, must be independent from those of the controlling entity. All those which are not yet independent must be separated before the end of 1999. There shall be no superior/subordinate relationship between the internal organizations of the controlling entity and the corresponding departments of the Company, and the former may not issue directives to or otherwise interfere with the independence of the Company's organizations.

　　When the controlling entity appoints a shareholder representative to the Company, such person shall join the board of directors in a lawful manner. No more than two senior management personnel from the controlling entity (i.e. the chairman of the board, vice-chairmen of the board and executive directors) may concurrently hold the position of chairman of the board, vice-chairman of the board or executive director in the Company and they must clearly separate the duties of their respective offices, bear the legal liabilities and exercise the legal rights of their concurrent positions, and ensure that they have sufficient time and the necessary knowledge and abilities to handle the work of the Company. No member of the management personnel of the controlling entity may concurrently hold the position of general manager, assistant general manager, chief financial officer, chief marketing officer or secretary of the board of directors of the Company.

　　2. Further intensify the restructuring of controlling entities and Companies

　　The functions of a State-owned controlling entity whose principal business and assets have been folded into a Company shall progressively be allocated to, or merged into, other State-owned legal person entities. If the controlling entity has assets and business aside from the business of the Company, it shall reduce its affiliated transactions with the Company and avoid competin

g with it in the same industry.

　　Controlling entities shall progressively shed their social welfare functions and non-operational assets by shifting the same to society through such methods as auctions, mergers and acquisitions, transfer to local governments and integration into the local social welfare system. For those which are at present still difficult to shed, strict management methods must be formulated to ensure that they are separate from the Company financially and personnel-wise.

　　When a Company sheds its social welfare functions and non-operational assets, the agreement executed between the controlling entity and the Company at the time of listing and restructuring shall be strictly performed. For those which have not been completely shed, the shedding process must be continued and completed within a limited period of time. A newly listed Company shall formulate a concrete plan to shed its social welfare functions and non-operational assets and specify the methods and responsibilities for resolving the remaining issues prior to listing; otherwise, it shall not be permitted to list. Governments at all levels and the relevant authorities shall adopt proactive measures to support the restructuring of Companies and controlling entities.

　　3. Specify Companies' decision-making process and strengthen director responsibility

　　A Company must make its decision-making procedure explicit in its articles of association and it may not permit decisions which should be made by the shareholders' general meeting to be made in any other way. A Company also may not permit decisions which should be made by the board of directors to be made in any other way (such as by a joint meeting). For any important matter subject to decision by the board of directors, all of the executive directors and external directors (hereafter "external directors" refers to directors who do not hold a position in the Company) must be given advance notice by the statutory time and provided with sufficient information, and the meeting must be conducted in strict compliance with the prescribed procedures. The directors may demand that supplementary materials be provided. If one-quarter or more of the directors or two or more of the external directors believe that there is insufficient information or that the arguments are inconclusive, they may jointly propose that the board meeting be postponed or that some of the matters to be discussed at the board meeting be discussed at a later time. In such circumstances the board of directors shall accept the proposal.

　　The directors of a Company have a fiduciary obligation and a duty of due diligence. A director shall adopt a conscientious and responsible attitude when attending board meetings and express unequivocal opinions on the matters being discussed. If a director is unable to attend he may not transfer his voting rights, but he may empower, in writing, another director to attend the meeting as his proxy; however, in such circumstances the director shall independently bear legal liability. Even if each director has in whatever manner expressed an opinion, any written resolution of the board of directors which was not reached in accordance with legal procedures and signed by the directors shall not have the legal effect of a board resolution. Directors who have voted for a board resolution which violates a law, administrative regulation and/or the Company's articles of association shall be directly liable. A director who can prove that he expressed a dissenting opinion during the vote and whose negative vote is recorded in the minutes of the board meeting may be exempted from liability. A director who abstained or who was absent and failed to appoint a proxy may not be exempted from liability. A director who explicitly raised objections in the discussion but did not explicitly vote against such a resolution may also not be exempted from liability. The board of directors

shall keep complete minutes of the matters discussed and the resolutions made at board meetings. The secretary of the board of directors shall conscientiously organize the minutes and set out in an orderly manner the matters discussed at the board meeting. The secretary of the board of directors shall sign the resolutions and be liable for the accuracy of the minutes.

　　4. Strengthen the strategic policy making function of the board of directors, and make active and proper use of outside consultancy organizations

　　The board of directors shall concentrate its energies to draw up and study the Company's long term development strategy and in so doing may, on the basis of need, establish strategic policy making, auditing and other such professional committees. Before making decisions on market development, mergers and acquisitions or investment in a new field, a Company shall engage an outside consultancy organization to provide a professional opinion to be used as an important basis for the board of directors' decision, if the investment or the merger/acquisition assets amount to 10% or more of its total assets.

　　5. Maintain the stability of Companies' senior management and raise the quality of Companies' senior management

　　The election, appointment or hiring of the senior management personnel (hereafter "senior management personnel" refers to directors, supervisors, managers, assistant managers, the chief financial officer and the secretary of the board of directors) of a Company shall be strictly conducted in accordance with the relevant provisions of the PRC, Company Law ("the Company Law") and the Articles of Association of Companies Seeking a Listing Outside the PRC Prerequisite Clauses ("Prerequisite Clauses"). In the absence of any special reasons, the relevant senior management personnel may not be arbitrarily chan

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