On May 1, 2009, the Administrative Measures for the Transfer of Financial Enterprises’ State- Owned Assets, promulgated by China’s Ministry of Finance (MOF) on March 17, 2009, came into effect. The Measures aim to regulate the transfer of financial enterprises’ state-owned assets, enhance the supervision and administration of transactions involving state-owned assets, and prevent the loss of stateowned assets.
According to the Measures, the term “state-owned assets of financial enterprises” refers to rights and interests created through various forms of investment in financial enterprises by governments at all levels and their authorized investors, including the state-owned property rights of unlisted financial enterprises and state-owned shares of listed financial enterprises. The transferor of such assets may be the finance department of governments at or above the county level or their authorized investors, or state-owned or state-controlled financial companies (collectively, the Transferor). The transferee of these assets may be domestic or overseas legal persons, natural persons or other entities (collectively, the Transferee).
The Measures outline three possible transfer methods. In general, transfers are conducted through property right exchange institutions and stock exchange systems. The state-owned assets of unlisted financial enterprises, for example, should be transferred in legally established property right exchange institutions at or above the provincial level. Likewise, stateowned shares of listed financial enterprises should be transferred through legally established stock exchange systems. Under certain circumstances, though, a Transferor may enter into agreements with a Transferee directly to transfer state-owned assets. For example, an ultimate holding company that wants to transfer state-owned assets among its controlled companies as part of an internal asset reorganization may conduct this transfer through a direct agreement to avoid the expenses associated with the other possible transfer methods. In this case, the transfer plan may be subject to examination and approval by MOF under certain circumstances.
The Measures list the procedures and application materials necessary for the three possible transfer methods. Normally, transfers must first obtain approval from competent governmental authorities.
In the course of the systematic evolution of the financial sector and the reorganization of stateowned financial enterprises, the volume and amount of asset transfers have swelled. Since 2006, MOF has issued a series of regulations to facilitate the administration of these new and bigger transactions. First it promulgated the Administrative Measures on the Registration of Financial Enterprises’ State-Owned Property Rights, then it issued the Provisional Administrative Measures for the Appraisal and Supervision of Financial Enterprises’ State-Owned Assets, and now, with the Measures, MOF has tackled the issues involved in transferring financial enterprises’ state-owned assets. Together, these three regulations safeguard the legal rights and interests of the contributors of state-owned assets and help prevent corruption in the transfer process.