On January 15, 2015, the China Securities Regulatory Commission (hereinafter, the "CSRC") adopted the Administrative Measures for Issuing and Trading Corporate Bonds (hereinafter, the "Measures"), which came into effect on the day of their promulgation.
The Measures expand the scope of bond issuing entities to all corporate juristic persons and specifically stipulate that publicly issued corporate bonds shall be listed and traded in a stock exchange set up pursuant to law or transferred in the National Equities Exchange and Quotations or any other stock exchange premises approved by the State Council. Applications may be filed to transfer non-publicly issued corporate bonds in stock exchanges, the National Equities Exchange and Quotations, quotation and service systems among institutions for privately placed products, or over the counters of securities firms.
The Measures also specifically provide that the report materials cited in the prospectuses and other information disclosure documents issued for the placement of bonds in the course of corporate bond issuance and continued information disclosure shall be issued by an accounting firm or evaluation agency qualified to engage in securities service business. The legal opinions cited in a bond placement prospectus should be provided by a law firm and signed by two practicing lawyers and by the responsible person of the law firm with which the lawyers are affiliated.
The Measures provide that if an issuer has not been subject to any fact of bond default or delayed payment of principals or interests in the last three years with an average annual realized distributable profit not less than 1.5 times the one-year bond interest in the last three years, possesses a bond credit rating of AAA, and has met other conditions imposed by the CSRC for investor protection, the issuer may either publicly issue its corporate bonds to public investors or choose to make public offering to qualified investors only. Other bonds shall be issued to qualified investors.
In addition, the Measures cancel the sponsorship and issuance examination committee systems for the public issuance of corporate bonds. Under Article 21 of the Measures, an issuer shall prepare and submit application documents in accordance with the provisions of the CSRC concerning the contents and formats of information disclosure. After the application is accepted by the CSRC, whether the application is approved will be decided within three months upon acceptance of the application documents by issuing relevant documentation. Thus, the review procedure is streamlined.
Finally, the Measures enhance the oversight of the bond market, enhance information disclosure and specifically require that issuers who publicly issue corporate bonds and other persons obligated to disclose information disclose information via the Internet website of the premises where the bonds are traded and publish an abstract of the disclosed information or messages in at least one newspaper or journal designated by the CSRC for public review.