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Circular Regulates Assets Sales
The China Securities Regulatory Commission, China's securities watchdog, issued a circular on Sunday to regulate the sale and purchase of assets in listed companies.
The circular, which laid down new procedures for listed companies seeking to restructure their assets, aims to promote quality restructuring and protect investors' rights.
It said listed companies no longer need to apply to the regulatory commission before major assets restructuring. This allows companies to decide for themselves what assets they wish to buy or sell.
Analysts said the move will give companies more freedom and more responsibility.
The term "major assets restructuring'' refers to the buying and selling of assets that account for more than 50 per cent of the total assets of a listed company. The net volume of any sold assets and the profits they bring also need to exceed 50 per cent of the base figure.
In the past, the securities authorities have only allowed companies with major financial problems to make such major moves, and only with the commission's permission.
Most of China's restructurings were done using administrative levers.
Analysts said now that enterprises are free to play with their assets as they wish they will become more market-oriented and self-reliant.
They also said, however, that information on trading needed to be freely available, especially that which involves the purchase of stakes by listed companies and the assignment of board members.
As such, while lifting administrative restraints, the circular also required related companies to be transparent in their actions, and it also said the whole operation must strictly abide by the law.
The circular pointed to the importance of law firms, accounting firms and other intermediaries in the assets restructuring process.
To ensure the quality of assets transfers, the regulation also required that companies should continue operating after restructuring and that listed companies and their major share holders should have separate personnel, assets and financial systems.
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