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Rules for Setting up of Foreign-shared Securities Companies

(In accordance with the Decision of the China Securities Regulatory Commission on Amending the Rules for the Establishment of Foreign-share Securities Companies on December 28, 2007,issued by Decree No.8 of the China Securities Regulatory Commission on June 1, 2002revised )

Article 1
The present Rules have been defined in accordance with the relevant provisions of the Company Law and the Securities Law to meet the demands of opening up the securities market, to strengthen and improve the supervision and administration of foreign-shared securities companies and to define the conditions and procedures for the establishment of foreign-shared securities companies.
Article 2
The "foreign-shared securities companies" as mentioned in the present Rules means:
1.
The securities companies that are jointly contributed and set up by the foreign and domestic shareholders; and
2.
The securities companies that are altered from domestic-funded securities companies through the acceptance or purchase of shares by foreign shareholders.
Article 3
The China Securities Regulatory Commission (hereinafter referred to as the CSRC) shall take charge of the examination and approval, supervision and administration of foreign-shared securities companies.
Article 4
The relevant provisions of the Company Law, the Securities Law and the CSRC shall be conformed to the name, form of organization, registered capital, establishment and responsibility of the departments of a foreign-shared securities company .
Article 5
The following businesses may be engaged in by a foreign-shared securities company:
1.
Underwriting and recommendation of stocks (covering RMB common stocks and foreign capital stocks) and bonds (covering government bonds and corporate bonds);
2.
Brokerage of foreign capital stocks;
3.
Brokerage and proprietary trading of bonds (covering government bonds and corporate bonds); and
4.
Other businesses approved by the CSRC.
Article 6
The following conditions shall be met by a foreign-shared securities company:
1.
The registered capital conforms to the provisions of the Securities Law;
2.
The shareholders have the qualifications as offered for by the present Rules, and the proportion and form of their capital contribution conform to the provisions of the present Rules;
3.
In accordance with the provisions of the CSRC, the numbers of persons who have acquired the qualification for securities dealing should be 30 or more, and there are necessary professionals for accounting, legal affairs, and computing;
4.
Having healthy internal management, risk control, as well as the separated management system of underwriting, brokerage and proprietary trading concerning institution, personnel, information and business execution, etc., and having an specific internal control technical system;
5.
Having the business premises that meet the requirements and the qualified business facilities; and
6.
Other prudential conditions as offered for by the CSRC.
Article 7
The following conditions shall be met of foreign shareholders of a foreign-shared securities company :
1.
Their home countries or regions have a healthy legal and regulatory system of securities, and the securities regulatory bodies have concluded the memorandum of understanding on securities regulation and maintain an effective cooperative relation with the CSRC or the institution accepted by the CSRC;
2.
They have been legally shaped in their home countries or regions, at least one of them is an institution that has the lawful financial business qualification; and within three years after the equity participation, they shall not transfer their equities in the foreign-shared securities company;
3.
They have embarked upon the financial business for five years or more, and haven't been given major punishment by the securities regulatory body, the administrative or judicial department of their respective home countries or regions in last three years;
4.
All of their financial indicators comply with the legal provisions of their respective home countries or regions and the requirements of their respective securities regulatory bodies in the last three years;
5.
They have a healthy internal control system;
6.
They have a good reputation and business performance; and
7.
Other prudential conditions as offered for by the CSRC.
Article 8
The domestic shareholders of a foreign-shared securities company shall have the qualification requirements for the shareholders of securities companies offered for by the CSRC., At least one shall be a domestic-funded securities company among the domestic shareholders of a foreign-shared securities company. But the foreign-shared securities company changed from a domestic-funded securities company shall be not included.
Article 9
The domestic shareholders may invest by cash or tangible goods which are indispensable for the business run. The foreign shareholders shall use freely exchangeable currencies to invest.
Article 10
The proportion of the shares held by foreign shareholders or the equities possessed by foreign shareholders accumulatively (both directly held and indirectly controlled) in a foreign-shared securities company shall not surpass one third of the total access.

At least one domestic-funded securities company shall hold one third or more of the shares or equities in the foreign-shared securities company among domestic shareholders.

At least one domestic shareholder shall hold one third or more of the shares in light of a foreign-shared securities company changed from a domestic-funded securities company.

Article 11
The directors, supervisors and senior managers of a foreign-shared securities company shall have the qualification requirements which are offered by the CSRC.
Article 12
The representatives appointed by all the shareholders or the agents entrusted by them shall submit the following documents to the CSRC in order to apply for setting up a foreign-shared securities company:
1.
Application form jointly concluded by the legal representatives or the authorized representatives of the domestic and foreign shareholders;
2.
Contract for setting up the foreign-shared securities company and the draft of the company's bylaw;
3.
Explanatory documents on the competence of main senior managers to be appointed by the foreign-shared securities company;
4.
Copies of business licenses, registration certificates, or securities business qualification certificates of the shareholders;
5.
Audited financial statements of the foreign and domestic shareholders for the three years before the application;
6.
Explanatory letters promulgated by the securities regulatory bodies of the home countries or regions of the foreign shareholders or the foreign institutions accepted by the CSRC on whether these shareholders have met the conditions which are provided for in Items (2) up to (4) of Article 7 of the present Rules;
7.
Legal opinions promulgated by the law firms within the territory of China; and
8.
Other documents required by the CSRC.
Article 13
In accordance with the relevant laws, administrative regulations and the present Rules, the CSRC shall, , examine the application documents as provided for in the preceding article, make the decision on whether to approve the application within the stipulated time limit, and notify the applicant in written form. For those not approved, explanation of written form shall be shown.
Article 14
Within six months since the day on which the CSRC promulgated the document of approval, the shareholders shall contribute the capital in full amount or offer the cooperative conditions agreed upon, elect directors and supervisors, appoint senior officers, and apply to the administration for industry and commerce for registration of establishment and obtain the business licensel.
Article 15
Within 15 workdays from the day on which the business license is granted, the board chairman or the authorized representative of a foreign-shared securities company shall submit the following documents to the CSRC to apply for the License for Securities Business:
1.
Copy of the business license;
2.
The company's bylaw;
3.
Capital verification report produced by the accounting firm that is qualified for securities-related business within the territory of China;
4.
Name list of the directors, supervisors, senior officers and main business operators, and the copies of their post holding qualification certificates and their securities business qualification certificates;
5.
Documents about the internal control system;
6.
Explanatory documents about the business premises and business facilities; and
7.
Other documents required by the CSRC.
Article 16
In accordance with the relevant laws, administrative regulations and the present Rules, the CSRC shall , examine the application documents which are offered for in the preceding article, and shall make its decision within 15 workdays from the day on which the application documents meeting the requirements are received. For those meeting the conditions, the License for Securities Business shall be granted; for those not meeting the conditions, the license shall not be granted and explanation of written form shall be shown..
Article 17
A foreign-shared securities company that hasn't acquired the License for Securities Business as granted by the CSRC may not begin business or embark upon the securities business.
Article 18
The conditions as provided for in Article 6 of the present Rules shall be met if a domestic-funded securities company applies for changing into a foreign-shared securities company,..

The foreign shareholders purchasing or holding shares of domestic-funded securities companies shall meet the conditions as provided for in Article 7 of the present Rules, and the proportion of the purchased shares or the capital contribution thereof shall meet the provisions of Article 10 of the present Rules.

Article 19
The following documents shall be submitted to the CSRC when a domestic-funded securities company applying for changing itself into a foreign-shared securities company :
1.
Application form concluded by the legal representative;
2.
Decision of the shareholders' meeting on changing itself into a foreign-shared securities company;
3.
Draft of company's bylaw;
4.
Share transfer or capital contribution agreements (share purchasing agreement);
5.
Name list and resumes of the persons appointed by the foreign investors to take position in that securities company, and their corresponding business qualification certificates and position qualification certificates;
6.
Copies of business licenses or registration certificates and securities business qualification certificates of the foreign shareholders;
7.
Audited financial statements of the foreign shareholders for the three years before the application;
8.
Explanatory letters promulgated by the securities regulatory bodies of the home countries or regions of the foreign shareholders or the foreign institutions accepted by the CSRC on whether the present shareholders have met the conditions as provided for in Items (2) up to (4) of Article 7 of the present Rules;
9.
In accordance with law, plans for the business settlements that cannot be conducted by foreign-shared securities companies;
10.
Legal opinions promulgated by the law firms within the territory of China; and
11.
Other documents required by the CSRC.
Article 20
In accordance with the relevant law, administrative regulations and the present Rules, the CSRC shall examine the application documents proscribed by the preceding article, make the decision to approve or disapprove the application within the stipulated time limit, and notify the applicant in written form. For those not approved, explanation of written form shall be shown..
Article 21
Within six months from the day when the CSRC issued the document of approval, the securities companies that receive approvals for changes shallhandle the matters of shares transfer or capital increase, clean up the business that cannot be operated by foreign-shared securities companies, and shall apply to the Administration for Industry and Commerce for the registration of business alteration and acquire the new business license by turning in the original one.
Article 22
Within 15 workdays from the day of the registration of change, a securities company that receives approvals for change shall submit the following documents to the CSRC and apply for a new License for Securities Business:
1.
Duplicate copies of the business license;
2.
The bylaw of the foreign-shared securities company;
3.
The original license for securities business and its duplicate copies;
4.
Capital verification report promulgated by the accounting firm resided within the territory of China and qualified for securities-related business;
5.
In accordance with law, report on the business settlements that can't be operated by foreign-shared securities companies;
6.
Legal opinions and verification report on the aforesaid business settlements promulgated by the law firm resided in the territory of China and the accounting firm qualified for securities-related businesses; and
7.
Other documents required by the CSRC.
Article 23
In accordance with the relevant law, administrative regulations and the present Rules, the CSRC shall, aexamine the application documents stipulated in the preceding article, and shall make the decision on whether to approve it within 15 workdays from the day when the application documents meeting the requirements are received. For those meeting the conditions, the new License for Securities Business shall be granted to them; and for those not meeting the conditions, no new license may be granted, and explanation of written form shall be shown..
Article 24
A securities company newly set up or going on to exist after the merger of foreign-shared securities companies or the merger of foreign-shared securities companies and domestic-funded securities companies shall meet the conditions for establishment of foreign-shared securities company prescribed in the present Rules; its business scope, the proportion of the shares or equities held by foreign shareholders shall be in accordance with the provisions of the present Rules.

Its business scope and the proportion of the shares or equities held by the foreign shareholders shall comply with the provisions of the present Rules if there are foreign shareholders in a securities company set up upon the split-up of a foreign-shared securities company,.

Article 25
Foreign investors may hold the shares of a listed domestic-funded securities company through buying securities from the stock exchanges or through setting up a strategically cooperative relation with the listed domestic-funded securities company upon acquiring an approval of the CSRC; the approved business scope of that listed domestic-funded securities company shall not be changed. The listed domestic-funded securities company shall not be restricted by the proportion that at least one domestic shareholder holds one third or more of the total shares with the base of the premise which the controlling shareholder is a domestic one.

The investor shall be compliance with the conditions provided for in Article 7 of the present Rules, and abide by Article 129 of the Securities Law if a foreign investor holds 5% or more of the shares of a listed domestic-funded securities company through purchasing securities from the stock exchanges or holding shares jointly with others by entering agreements or any other arrangements,.

The proportion of the shares of a listed domestic-funded securities company held (including both directly held and indirectly controlled) by a single foreign investor shall not be more than 20%; and the proportion of the shares of a listed domestic-funded securities company held (including both directly held and indirectly controlled) by all the foreign investors shall not be more than 25%.

Article 26
In accordance with the present Rules, the application documents submitted to the CSRC and the materials reported to the CSRC shall be in Chinese. The Chinese versions that are in line with the original documents shall be attached if the documents and materials of the foreign shareholders and those issued by the securities regulatory bodies of their home countries or regions or the foreign institutions accepted by the CSRC are in foreign languages.

The CSRC may ask the applicant to make supplementary explanations if the documents and materials submitted by the applicant cannot sufficiently explain the situation of the applicant.

Article 27
The present Rules shall be applied accordingly if investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Area hold shares of securities companies.
Article 28
Other relevant provisions of the CSRC shall govern the establishment, alteration, termination, business activities, supervision and management of foreign-shared securities companies if there is no such provisions in there Rules.
Article 29
The present Rules shall enter into force July 1, 2002.