CHAPTER FIVE CORPORATE BONDS

　　Article 159 A joint stock company limited or a limited liability company established with investment by a solely State owned company or by two or more State owned enterprises or by more than two State owned investment institutions may issue corporate bonds in order to raise funds for production or operations according to this law.

　　Article 160 The term "corporate bond" used in this law refers to the valuable securities issued by a company according to legally prescribed procedures and pursuant to which the company convenants to repay principal and interest within a certain period of time.

　　Article 161 In issuing corporate bonds, a company shall meet the following requirements:

　　1. The net assets of the company shall be no less than RMB30 million in case of a joint stock company and no less than RMB60 million in case of a limited liability company.

　　2. The aggregate amount of bonds issued does not exceed 40 percent of the total net assets of the company.

　　3. The average distributable profits over the last three years are sufficient to defray one year's interest payment on the company bonds.

　　4. The use of funds raised conforms to the industrial policy of the State.

　　5. The interest rate payable on the corporate bonds shall not exceed the levels set by the State Council.

　　6. Other requirements prescribed by the State Council.

　　The funds raised by issuing corporate bonds must be used for the purposes approved by the authorized authorities and shall not be used to cover losses or for non-production expenditure.

　　Article 162 A company may not reissue corporate bonds under the following circumstances:

　　1. The corporate bonds issued at the previous time have not been fully subscribed;

　　2. The company has defaulted on previously issued corporate bonds or other indebetedness, or is late in the payment of principal or interest, and such situation is still continuing.

　　Article 163 When a joint stock company limited or a limited liability company proposes to issue corporate bonds, its board of directors shall draft a plan for approval by meeting of shareholders.

　　When a solely State owned company proposes to issue corporate bonds, the decision is subject to the investment organization or department authorized by the State.

　　After the resolution or decision is made according to the preceding paragraphs, the company shall apply for approval with the securities administration department of the State Council.

　　Article 164 The scale of an issue of corporate bonds shall be determined by the State Council. In granting an approval by the securities administration department of the State Council to issue corporate bonds, it must ensure that scale of issue is not exceed that set by the State Council.

　　The securities administration department of the State Council shall grant approval if an application for issuing bonds conforms to provisions of this law and deny the approval if the provisions are not met.

　　If an approval previously been granted for an application has been found not to conform to the requirements of this law, the approval shall be revoked. If the corporate bonds have not been issued, the issuing shall not be carried out. If the corporate bonds have been in the process of issuing, the company in question shall return the payment to subscribers plus the interests calculated on bank deposits rates for the same term.

　　Article 165 In applying for issuing bonds with the securities administration department of the State Council, a company shall submit the following documents:

　　1. Certificate of registration of the company;

　　2. Articles of association of the company;

　　3. Corporate bonds offer procedures;

　　4. Asset appraisal report and capital verification report.

　　Article 166 After the bond issue applciation has been approved, a company shall make public the procedures for bond offer.

　　The procedures shall have the following matters set out:

　　1. Name of the company;

　　2. Total amount of bonds and face value of the bonds;

　　3. Bond's interest rate;

　　4. Period and method for payment of principal and interests;

　　5. Starting and closing date of the issue;

　　6. Net assets of the company;

　　7. Total amount of corporate bonds having been issued but not yet due; and

　　8. Underwriters of the bonds.

　　Article 167 In issuing bonds, the bond shall bear the name, face value, interest rate, and time of repayment, the signature of the chairman of the board of directors and seal of the company.

　　Article 168 Corporate bonds may be divided into registered bonds and bearer bonds.

　　Article 169 The issuing company shall keep a corporate bonds registered.

　　For issuing registered bonds, the bond register shall have the following items set out:

　　1. Names or both names and addresses of the bondholders;

　　2. Date of issue and serial numbers of bonds acquired by bondholders;

　　3. Total amount of bonds issued, the face value of the bonds, interest rate of the bonds, payment dates of principal and interests, and method of payment; and

　　4. Date of issue of the bonds.

　　In issuing bearer bonds, the bond register shall set out the total amount of bonds, interest rate, payment time and method, date of issue and serial numbers.

　　Article 170 Corporate bonds can be transferred. Transfer of corporate bonds shall be made at legally established securities exchanges.

　　When transfer, prices of corporate bonds shall be agreed upon between transferers and transferees.

　　Article 171 Registered bonds shall be transferred by the bondholders through endoresement or other ways provided for by law and administrative decrees.

　　After registered bonds are transferred, the company shall register the names or both the names and addresses of the transferes in the bond register.

　　The transfer of bearer bonds shall become effective after delivery of the bonds to the transferees by the bondholders at the legally establishment securities exchanges.

　　Article 172 Subject to resolutions a meeting of shareholders, of a listed company may issue corporate bonds convertible into shares and specify the conversion procedures in the corporate bond offer procedures.

　　The issuing of convertible bonds is subject to the approval of the securities administration department of the State Council. For issuing convertible corporate bonds, a listed company shall meet the requirements for issuing stocks apart from the conditions for issuing common corporate bonds.

　　Corporate bonds convertible into shares shall be marked "convertible bonds" and the amount of such bonds issued shall be recorded in the bond register.

　　Article 173 In issuing convertible bonds, a listed company shall issue share certificates to bondholders in accordance with its conversion procedures, but the bondholders have the option whether or not to convert.