Viewpoint | Social Security Provident Fund Issues and Key Points of Concern for Proposed IPO Enterprises

Article 72 of the the People's Republic of China Labor Code

The social insurance fund determines the source of funds according to the type of insurance, and gradually implements social pooling. Employers and workers must participate in social insurance and pay social insurance premiums in accordance with the law.

Article 84 of the Work Injury Insurance Ordinance

If the employer fails to register for social insurance, the social insurance administrative department shall order it to make corrections within a time limit; if it fails to make corrections within the time limit, the employer shall be fined not less than one time but not more than three times the amount of social insurance premiums payable, and the person in charge directly responsible and other persons directly responsible shall be fined not less than 500 yuan but not more than 3,000 yuan.

Article 13 of the Regulations on the Administration of Housing Provident Fund

The housing provident fund management center shall set up a special housing provident fund account in the entrusted bank.

The unit shall register the housing provident fund deposit with the housing provident fund management center, and handle the procedures for the establishment of housing provident fund accounts for the employees of the unit. Each employee can only have one housing fund account.

Article 37In violation of the provisions of these regulations, if a unit fails to go through the registration of housing provident fund payment or fails to go through the procedures for the establishment of housing provident fund accounts for its employees, the housing provident fund management center shall order it to go through within a time limit; if it fails to do so within the time limit, a fine of 10000 yuan to 50000 yuan shall be imposed.

The housing provident fund management center shall establish a detailed account of the employee's housing provident fund, which shall record the deposit and withdrawal of the employee's individual housing provident fund.

According to the Measures for the Administration of Initial Public Offering and Listing of Shares, an issuer shall not have the following circumstances:

Violation of industry and commerce, taxation, land, environmental protection, customs and other laws and administrative regulations in the past 36 months has been subject to administrative penalties, and the circumstances are serious.

According to the Measures for the Administration of Initial Public Offering and Listing on the Growth Enterprise Market, the issuer, its controlling shareholder and actual controller have not committed any major illegal acts that damage the legitimate rights and interests of investors and the public interest of the society in the past three years.

According to the China Securities Regulatory Commission's "Answers to Several Questions on Initial Business", how should issuers do a good job of disclosure on issues related to the implementation of the social security system, and how should intermediary agencies grasp when verifying relevant issues?

A: If the issuer has unpaid social insurance and housing provident fund during the reporting period, it shall disclose in the prospectus the specific circumstances of the unpaid social insurance and housing provident fund and the reasons for its formation, such as the possible impact of the supplementary payment on the issuer's continuing operation, reveal the relevant risks and disclose the response plan. The sponsor and the issuer's lawyer shall verify the aforementioned matters and issue a clear opinion on whether they are material violations.

Specific cases:

When Henan Kaiwang Electronics applied for listing on the GEM, the auditors required the issuer to disclose the basis for calculating the amount of social security and housing provident fund, the impact on the net profit of the issuer for each period of the reporting period and the net profit after deducting non-recurring gains and losses, and to measure whether the issuer met the listing conditions after the full payment.

In its reply, the issuer disclosed in detail the deposit ratio and base of the company's basic old-age insurance, basic medical insurance, unemployment insurance, work-related injury insurance and maternity insurance units, and the deposit ratio and base of the provident fund. Then, according to the number of unpaid people, calculate the amount of social security and provident fund paid during the reporting period, and finally calculate its proportion in the net profit of each period and the net profit after deduction.

Conclusion: The listing standard chosen by the company is "Shenzhen Stock Exchange GEM Stock Listing Rules" "The net profit of the (I) in the last two years is positive, and the cumulative net profit is not less than RMB 50 million". Assuming that the amount paid in full according to the above calculation method, the company's net profit in the last two years is not less than 50 million yuan. Therefore, the above-mentioned deduction of the amount of the company is still eligible for listing.

Mingyue Lens Co., Ltd. applied for listing on the Growth Enterprise Market. The reviewers asked whether the social insurance and housing provident fund that had not been paid before needed to be paid, measured the impact of full payment on business performance, whether it constituted a major violation of laws and regulations, and revealed relevant risks and disclosed Response plan.

The issuer's reply is as follows: First, make detailed statistics on the number of people who did not pay social security and provident fund during the reporting period and the reasons; Then explain that the number and proportion of unpaid people have decreased year by year (from 2017 to 2018 at the beginning of the reporting period, employees were not motivated to pay social insurance and housing provident fund; After the publicity and implementation of social insurance and housing provident fund by the company's personnel and other departments, employees' willingness to participate in insurance and pay housing provident fund gradually increased); the final table calculates the impact on net profit of the amount of social insurance and housing provident fund paid by the issuer during the reporting period.

In addition, the issuer obtained the actual controller's commitment to make up the social insurance and housing provident fund and the compliance with the social insurance and housing provident fund, and further demonstrated that it did not constitute a major violation of the law and the corresponding response plan.

When Chengdu Qisheng Technology Co., Ltd. applied for the Growth Enterprise Market, the auditors pointed out in the issue of employees and social security accumulation fund: whether the supplementary disclosure of the issuer's entrustment of a third-party payment agency to pay social insurance and housing accumulation fund for the company's employees constitutes a major violation of laws and regulations, calculate the amount involved in the supplementary payment and punishment, and explain the impact on the issuer's financial data.

The issuer's reply is as follows: first of all, the situation of failing to pay housing provident fund for all employees of the company, implementing the system of not paying housing provident fund during the probation period, and entrusting a third-party payment agency to pay social insurance and housing provident fund for employees of the company is not in line with the provisions of the social insurance law, the Interim Measures for the administration of social insurance registration and the regulations on the administration of housing provident fund.

Secondly, the reasons for entrusting a third-party organization to pay on behalf of the company are as follows: the employees work in scattered places, and the issuer has not set up branches in the local area, so it is unable to pay social insurance and housing accumulation fund for local business personnel, and the purpose of protecting the legitimate rights and interests of employees through payment on behalf of the social insurance law and the regulations on the management of housing accumulation fund is in line with the purpose of protecting the legitimate rights and interests of the company's employees.

Finally, I got the commitment letter from the actual controller and the law-abiding certificate issued by the Social Insurance Administration, the Human Resources and Social Security Bureau, and the Provident Fund Management Center.

Feedback: The prospectus disclosed that before the end of 2017, the company and its subsidiaries' employees' social security and provident fund contributions were relatively low, of which the number of housing provident fund contributors during the reporting period accounted for 0%, 68.08, and 71.33, respectively. The main reason is that some employees of the company are not willing to pay social security, and some of the company's social insurance, provident fund did not open accounts.

Please indicate:

(1) At the end of 2017, the reason why the issuer's housing provident fund contributors accounted for 0%, whether to make a supplementary payment on the 2017 housing provident fund, and whether there is a dispute between the relevant employees and the issuer regarding the payment of housing provident fund matters;

(2) Whether the low proportion of social security and provident fund paid in 2017 complies with the relevant provisions of laws and regulations, whether there is a risk of being punished by the competent authority, and whether it constitutes a major violation of laws and regulations;

(3) Measure the amount of social security and provident fund payable by the issuer in 2017 and the measurement process, the impact on the performance during the reporting period, and whether it affects the conditions for issuance and listing.

According to the response of Xiangyu Medical Feedback, the Company's social security and provident fund contributions were relatively low in 2017, mainly due to the non-standard management of employees' social security and provident fund contributions at the beginning of the reporting period, and the low willingness of employees to make individual contributions. Since 2018, the Company has actively regulated and rectified the situation, with social insurance and housing provident fund contributions reaching approximately 88% and approximately 74%, respectively. In addition, the company has obtained a certificate issued by the competent human resources and social security bureau, proving that there are no major violations of laws and regulations in the payment of medical and social security in Xiangyu during the reporting period, and the department will not punish the enterprise for historical irregularities, and the company has no record of administrative punishment by the department.

The issuer estimates the amount of economic benefits that may flow out of the enterprise in the future due to the non-standard payment of social security and provident fund in 2017, and the impact on after-tax profit is 3.5014 million yuan, accounting for 5.43 of the current net profit. After taking this factor into account, the company's performance is still in line with the company's listing indicators.

In order to reduce the impact of the above contingencies on the interests of minority shareholders, the commitments made by the controlling shareholder and the actual controller of the issuer in respect of the relevant matters, even if the regulatory authorities require the issuer to pay or make up in accordance with the relevant laws and regulations, may also be made up by the actual controller to fulfill the commitments.

As can be seen from the above case, the issuance review committee mainly focuses on the issuer's social security provident fund payment from three aspects:

One is whether there is a reasonable reason for the coverage ratio of social security and provident fund paid by enterprises to employees if they do not fully pay. The second is to pay attention to whether the issuer's social security provident fund payment will be subject to administrative punishment and the circumstances are serious, or constitute a major illegal act; On the other hand, the question is whether the issuer's supplementary payment of the social security provident fund will cause the operating performance to decline, resulting in failure to meet the listing conditions.

The the People's Republic of China Social Insurance Law, the Interim Regulations on the Collection and Payment of Social Insurance Premiums, and the Regulations on the Administration of Housing Provident Fund stipulate the scope, payment time and payment ratio of social insurance and housing provident fund. The governments of all provinces, municipalities and autonomous regions have social insurance. And housing provident fund has formulated specific collection policies.

The CSRC has not given clear requirements on the specific number of contributors. According to the common practice of companies to be listed in recent years, at the end of the last reporting period, the company must pay social security and provident fund for employees who meet the requirements, basically covering all employees.

Through the recent enterprise cases, the proportion of enterprises paying social security provident fund has basically reached more than 95%, and the remaining 5% has not paid can also make a reasonable explanation. As the relevant system for paying social security provident fund is not perfect, it is difficult for enterprises to pay social security provident fund for all employees.

In the following cases, the issuer does not have to contribute to the social security provident fund:

According to the "Social Insurance Law" and the "Opinions of the Ministry of Labor and Social Security on Several Issues Concerning Part-time Employment", only industrial injury insurance in social insurance must be paid by enterprises for part-time employees. Take Shanghai as an example, part-time employees do not pay maternity insurance and unemployment insurance, while endowment insurance and medical insurance require enterprises to go through relevant procedures for part-time employees but do not undertake the obligation to pay.

according to the 'measures for foreigners enjoying relevant treatment for permanent residence in china, 'issued by 25 departments, including the organization department of the cpc central committee, the ministry of human resources and social security, and the ministry of public security,Foreigners holding China's Permanent Residence Permit for Foreigners may, in accordance with the Regulations on the Administration of Housing Provident Fund, deposit and use the housing provident fund at the place of work; those who are employed in China may participate in various social insurances in accordance with the relevant provisions of the Social Insurance Law.According to the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, the People's Bank of China, the Hong Kong and Macao Affairs Office of the State Council, and the Taiwan Affairs Office of the State Council."Opinions on Issues Concerning the Housing Provident Fund Treatment of Hong Kong, Macao and Taiwan Compatriots Employed in the Mainland (Mainland)", Hong Kong, Macao and Taiwan compatriots employed in the Mainland (Mainland) can pay housing provident funds in accordance with the "Housing Provident Fund Management Regulations" and related policies.However, according to the Social Insurance Law, foreigners who are employed in China shall participate in social insurance with reference to the provisions of the Social Insurance Law. In October 2018, the Ministry of Human Resources and Social Security issued the interim measures for Hong Kong, Macao and Taiwan residents to participate in Social Insurance in the mainland (mainland) (draft for soliciting opinions), which stipulates that people employed by Hong Kong, Macao and Taiwan in the mainland shall participate in social insurance in accordance with the law. SimultaneouslyIn order to avoid double insurance, Hong Kong, Macao and Taiwan residents who have participated in local social insurance in Hong Kong, Macao and Taiwan and continue to retain social insurance relations may not participate in endowment insurance and unemployment insurance in the mainland (mainland) with a certificate issued by relevant authorized institutions.Therefore, foreign and Hong Kong, Macao and Taiwan employees of enterprises should participate in social insurance and can choose to deposit provident funds, but the social insurance that Hong Kong, Macao and Taiwan employees have participated in in Hong Kong, Macao and Taiwan can no longer pay repeatedly.

Labor relations exist between the labor dispatch unit and the dispatched workers, and the social security provident fund of the dispatched workers is paid by the labor dispatch unit, so the enterprises receiving labor dispatch do not have to pay the social security provident fund for the dispatched workers.

According to the "Labor Contract Law" and the "Interpretation (III) of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Labor Dispute Cases", if the rehired employees enjoy basic pension insurance benefits or receive pensions, the company will treat them as labor relations and do not need to pay for them. Social security provident fund. Retired personnel who have not reached the legal retirement age do not belong to this category, and the enterprise is required to pay the social security provident fund according to the labor relationship.

According to the "Opinions on Several Issues Concerning the Implementation of the" the People's Republic of China Labor Law "", school students use their spare time to work and study, which is not regarded as employment. If a labor relationship is not established, they may not sign a labor contract. That is, there is no labor relationship between the enterprise and the intern, and there is no need to pay the social security provident fund for it.

There is no labor relationship between the labor outsourcing workers and the enterprise, nor is it included in the number of employees of the enterprise, and the enterprise does not have to pay the social security provident fund for it.

In many cases in the past, migrant workers who have paid old-age insurance for urban and rural residents (NCMS) and medical insurance for urban and rural residents (NCMS) are unwilling to pay other social insurance, and the issuer will usually reimburse them for the costs of NCMS and NCMS. Some migrant workers are highly mobile and have homesteads in their hometowns. They are not willing to buy houses in cities and voluntarily do not pay provident funds. Issuers usually provide them with free dormitories or housing subsidies.

How to deal with the problem of irregular payment of social security provident fund in enterprises to be listed:

1. Understand the relevant local policies and regulations on the payment of social security provident fund, verify the facts of the enterprise, and disclose in detail the number and proportion of unpaid personnel, as well as the reasons for non-payment;

2. Necessary measures shall be taken to make up the social insurance and housing accumulation fund that have not been paid, such as making up the payment or paying it to employees in the form of wages and subsidies, and then calculating the social insurance and accumulation fund data that need to be paid back in the reporting period according to the unpaid personnel, and then comparing it with the net profit or net profit after deduction to demonstrate that it does not affect the listing conditions;

3. Control and explain the possible risks, and the supporting documents of the corresponding competent departments on the lack of illegal records of social security and provident fund, confirming that the company does not have the risk of administrative punishment for failing to pay in accordance with the law;

4. Finally, the controlling shareholder and actual controller issue a commitment. If the subsequent issuer and subsidiary are required by the relevant government departments to make up the social insurance and housing provident fund for their employees, the promising party will fully bear all the social insurance and housing provident fund expenses that need to be paid by the issuer and the issuer's holding subsidiary as determined by the relevant government departments, As well as the related losses caused to the issuer due to the above matters.