Viewpoint | Interpretation of the Notice on Regulating the Transfer of Assets of State-owned Financial Institutions

Published:

2021-12-25

On December 7, the Ministry of Finance issued the "Notice on Regulating Matters Related to the Transfer of Assets of State-owned Financial Institutions" (referred to as "Caijin [2021] No. 102") to improve the transparency of the transfer of assets of state-owned financial institutions and regulate related assets Transaction behavior to safeguard the rights and interests of state-owned financial capital investors. This Notice is one of the supporting documents to implement the role of state-owned financial capital investors of the Ministry of Finance. 1. file overall architecture Caijin [2021] No. 102 "Notice" is mainly divided into three parts in terms of content structure. The first part is the guiding ideology and general tone throughout the full text of this document, that is, "in accordance with laws and regulations, adhere to the principles of equal compensation, openness, fairness and justice, and strictly prevent the loss of state-owned assets". The second part is the specific practical control of each link of the asset transfer of state-owned financial institutions, that is, "refine the application of the law, standardize the transfer method, reasonably determine the price, clarify the transaction process, etc". It reiterated the relevant provisions on all aspects of the procedures for the transfer of state-owned financial assets previously formulated by the Ministry of Finance. The third part is "information disclosure and regulatory improvement, the implementation of the main responsibility". It is emphasized that financial departments at all levels should strengthen the supervision and management of the transfer of assets of state-owned financial institutions at the same level and territorial central state-owned financial institutions. If it is found that the transferor has not implemented or violated relevant regulations or infringed on state-owned rights and interests, the transferor shall be required to immediately suspend or terminate the transfer of assets and report to the higher-level financial department. The three parts include the transfer principle, transfer method, transfer procedure, transfer price determination and transfer responsibility of financial state-owned assets, and put forward clear policy boundaries. Interpretation of 2. key content (I) Scope and Principles Caijin [2021] No. 102 "Notice" clearly summarizes the basic concept of the main body of state-owned financial institutions as wholly state-owned, wholly state-owned, state-controlled and actually controlled financial institutions (including their branches and subsidiaries at all levels with actual control). The transfer of assets of state-owned financial institutions should strictly abide by national laws, regulations and policies, give full play to the role of the market in allocating resources, and follow the principles of equal compensation, openness, fairness and justice. Where matters of government public administration are involved, the relevant examination and approval procedures shall be carried out in accordance with the provisions of the State. Ensure transparency in the transfer of assets, put an end to black-box operations, and strictly prevent the loss of state-owned assets. This is also the guiding ideology and general tone that runs through the full text. (II) Refine the application of the law according to the classification of assets. 1. The transfer of asset types to which the Measures for the Administration of the Transfer of State-owned Assets of Financial Enterprises (Order No. 54 of the Ministry of Finance) apply: first, the transfer of equity assets by state-owned financial institutions. The second is the transfer of financial assets, such as trust plans, asset management products and fund shares, where all the underlying assets are equity assets and enjoy floating income, unless otherwise stipulated by the state. At present, the supervision and management mode of state-owned assets in China is a two-line management mode in which the SASAC and the Ministry of Finance respectively supervise the enterprises and asset types they are responsible. The transfer of state-owned assets of financial enterprises shall be governed by the relevant provisions promulgated by the Ministry of Finance. This provision strengthens the supervision of equity assets, expands the scope of supervision involving the underlying assets, which are all equity assets, and provides a traceable reference scheme for their transfer. For the disposal, acquisition and management procedures of equity asset transfer, higher requirements are put forward for the professionalism and risk awareness of practitioners. 2. The transfer of asset types applicable to the Notice No. 102 of Caijin [2021]: First, the transfer of non-equity assets such as real estate, machinery and equipment, intellectual property rights, and related financial assets shall be subject to the provisions of the industry regulatory authorities. Second, the transfer of the underlying assets outside the country. Third, the normal conduct of business involves the transfer of assets, disposal of scrapped assets, judicial auctions, government expropriation of assets and so on. In addition, the transfer of financial institutions supported by state power and credit, which are included in the management of state-owned financial capital, shall be subject to the provisions of Circular No. 102. (III) implementation of the main responsibility Article 2 of the "Notice" of Caijin [2021] No. 102 proposes that the transfer of major assets should strictly implement the "three important and one large" decision-making system and follow the principle of "unified policies and hierarchical management", aiming to eliminate black-box operations and prevent state-owned assets Loss. The issue of clearly implementing the main responsibilities of all parties has long been found in China's state-owned financial capital supervision system. In the 2018 "Guiding Opinions of the Central Committee of the Communist Party of China and the State Council on Improving the Management of State-owned Financial Capital" (hereinafter referred to as the "Guiding Opinions"), it is clearly pointed out that "the current state-owned financial capital management still has scattered responsibilities, unclear powers and responsibilities, unclear authorization, The layout is not good, and the allocation efficiency needs to be improved, and the construction of the rule of law is not in place, clear the legal status of the funder, the realization of the right by the law, the power and responsibility of the statutory. Institutions that perform the duties of state-owned financial capital investors exercise relevant rights in accordance with the law, and assume management responsibilities in accordance with the principle of matching rights and responsibilities and equal rights and responsibilities." Then, in November 2019, the General Office of the State Council issued the Interim Provisions on the Responsibilities of State-owned Financial Capital Investors. On the basis of the Guiding Opinions, this provision further emphasizes the provisions of the Ministry of Finance at all levels to perform the responsibilities of investors. The structure paves the way for this asset transfer, and it also means that the distribution of powers and responsibilities will be implemented. It can be seen that to prevent the loss of state-owned assets, the implementation of the main responsibility, to put an end to black-box operations need to be down-to-earth, according to the map and a long way to go. (IV) transfer method Caijin [2021] No. 102 "Notice" stipulates that unless otherwise stipulated by the state, state-owned financial institutions shall not transfer assets to non-state-owned transferees by direct agreement without public bidding procedures. After the state-owned financial institutions have deliberated and decided in accordance with the authorization mechanism, they can transfer by direct agreement. With regard to the transfer of on-market agreements, article 22 of Decree No. 54 of the Ministry of Finance states that "when only one qualified intended transferee is produced through public solicitation by the property rights trading institution, the transfer of property rights may be carried out by means of on-market agreement transfer, but the transfer price shall not be lower than the listed price. In the case of an on-market agreement transfer, the transferor shall conduct full consultation with the transferee and sign an agreement on the transfer of property rights (contract, the same below) after properly handling the relevant matters involved in the transfer in accordance with the law." In the past, the transfer of state-owned assets will be restricted, and it will no longer be easy to trade directly through the transfer of state-owned assets. in addition, article 35 of decree no. 54 of the ministry of finance specifies three situations in which, with the approval of the state council or the financial department, the transferor may transfer state-owned property rights of unlisted enterprises and state-owned shares of listed companies by direct agreement, this "Notice" adds "the transfer of assets within the group, the withdrawal of performance in accordance with the investment agreement or the terms of the contract, the third party in accordance with the contract to exercise the preemptive right, the transfer of assets in specific industries to state-owned and state-controlled enterprises, and the financial department at the same level For other circumstances approved, after the state-owned financial institution deliberates and decides in accordance with the authorization mechanism, it can be traded by direct agreement. The above-mentioned special assets can be transferred by agreement in accordance with the law and the approval procedures, which is conducive to improving the efficiency of asset disposal, reducing costs, and ensuring the orderly transfer of state-owned financial assets. (V) recognition of the transfer consideration According to the Interim Measures for the Supervision and Administration of State-owned Assets Evaluation of Financial Enterprises (Order No. 47 of the Ministry of Finance), financial enterprises need to entrust asset evaluation institutions to conduct asset evaluation when transferring assets. Caijin [2021] No. 102 "Notice" stipulates the circumstances under which pre-evaluation can be exempted, including asset transactions with clear fair market value, asset transactions with low transfer target value (single asset value is less than 1 million yuan), asset transactions between wholly state-owned and wholly-owned financial institutions, and asset transactions between state-owned financial institutions and wholly-owned subsidiaries, as well as asset transactions between the holding subsidiaries of state-owned financial institutions that will not cause changes in the state-owned rights and interests owned by state-owned financial institutions, and that will not cause the loss of state-owned assets after being demonstrated by state-owned financial institutions or third-party intermediaries, it may not be evaluated after fulfilling the decision-making procedures in accordance with the law. Asset transactions with a clear market fair value may determine the transfer floor price by reference to the fair market value, and other asset transactions may determine the transfer floor price by reference to the fair market value, audited book value, etc. The regulation improves the efficiency of the disposal of state-owned assets, reduces costs and optimizes the allocation of capital. (VI) clarify the transaction process and price payment 1. Transaction Process Notice No. 102 provides for different methods of public trading, including entry trading, public auctions, online auctions and competitive negotiations. Among them, the "Notice" does not make a clear definition of competitive negotiation. The "Administrative Measures for Non-Bidding Procurement Methods of Government Procurement" (No. 74) promulgated by the Ministry of Finance has detailed management regulations on competitive negotiation: Competitive negotiation refers to "negotiation team negotiates with qualified suppliers on procurement of goods, projects and services, and suppliers submit response documents and final quotations according to the requirements of negotiation documents, the purchaser determines the procurement method of the closing supplier from among the closing candidates proposed by the negotiating team". The "Government Procurement Law" stipulates that competitive negotiations require the establishment of a negotiation team. The negotiation team is composed of an odd number of more than three representatives of the purchaser and relevant experts. The number of experts shall not be less than 2/3 of the total number of members. Correspondingly, Notice No. 102 stipulates that if competitive negotiation is adopted, more than three people should participate in the bidding; if other methods are adopted, the state has relevant regulations to implement them in accordance with relevant regulations, and there should be at least two people. The above participates in the bidding. When there is only one person bidding, an announcement must be made in accordance with the announcement procedure, and the announcement will be made 7 working days later, if it is determined that there is no new bidder to participate in the bidding to close the deal. Article 19 of the Notice of the Ministry of Finance on Issuing the Measures for the Administration of Asset Disposal of Financial Asset Management Companies (Revision) (2008) "In principle, asset companies shall transfer assets through public bidding, including but not limited to bidding, auction, invitation to offer, public bidding, public inquiry, etc. ...... At least two or more persons shall participate in the bidding when disposing in the form of invitation to offer, public inquiry, etc", from the above, the two documents have different provisions on the number of participants in the bidding, because this notice is a normative document, it is recommended to take No. 74 as the standard. 2. Payment of the transfer price Caijin [2021] No. 102 "Notice" further refines the installment payment regulations, which is conducive to improving the risk prevention and control capabilities of state-owned financial institutions and improving the investment environment of the current non-performing asset market. According to Article 52 of the "Measures for the Supervision and Administration of State-owned Assets Transactions of Enterprises" (hereinafter referred to as Order 32): "In principle, the asset transfer price is paid in one lump sum." Previously, in the process of disposal of state-owned financial assets, there was the phenomenon of installment payment, but when the two parties reached an agreement on the post-installment payment was unclear, and there was no normative document to clearly refine the constraints, the proportion of installment payment was not fixed, a few transfers would agree on liquidated damages for special circumstances, and no limited guarantee was provided. The notice not only stipulates the amount of installment transfer and the first proportion of installment, but also requires that installment payment needs to provide legal and effective guarantee and defines the delivery terms, which makes the business negotiations involving assets of state-owned financial institutions have laws to follow. This is conducive to strengthening the risk control and compliance management of the disposal market of state-owned financial assets, and further reducing the risk of differentiation. The disadvantage of this move is that it increases the burden on buyers, and the state-owned financial asset disposal environment where the fittest survives stimulates the polarization of small and medium-sized enterprises and powerful enterprises. (VII) improve information disclosure and supervision and inspection 1. Information disclosure Caijin [2021] No. 102 "Notice" continues the limit of Article 50 of Decree No. 32 on the information announcement period for asset transfer. Notice No. 102 stipulates that the information announcement period for asset transfer projects with a reserve price of 1 million yuan -10 million yuan shall not be less than 10 working days, and that for asset transfer projects higher than 10 million yuan shall not be less than 20 working days. However, it is different from the provisions of Article 9 of the Administrative Measures for the Administration of Asset Disposal Announcements of Financial Asset Management Companies (Revision) (2008) (hereinafter referred to as "Notice No. 87") on the period of announcement. There is competition and cooperation between the two regulations on the announcement period. Considering that both of them are normative documents formulated by the Ministry of Finance, and the principles of new and old laws and regulations, the "Notice" No. 102 shall prevail. Compared with the original "Notice" No. 87, the new regulations extend the announcement period, which fully guarantees information disclosure and supervision, and is conducive to the stability of the asset transfer market of state-owned financial institutions. However, this also extends the disposal time of asset transfer, which has a certain impact on the efficiency of asset disposal. 2. Strengthen supervision and inspection Article 7 of the "Notice" No. 102 emphasizes the supervision system. "If the relevant personnel of financial departments and state-owned financial institutions at all levels violate laws, administrative regulations and the provisions of this notice, make decisions beyond their powers, neglect their duties, or use power for personal gain, resulting in the loss of state-owned assets, they shall be liable for compensation in accordance with laws and regulations, and shall be punished by the relevant departments in accordance with the management authority of personnel and cadres; if a crime, Transfer to judicial organs." This provision continues the spirit of the provisions in Article 59 of Decree No. 32 on the situation that the relevant responsible personnel should bear the responsibility. In this provision, the Ministry of Finance emphasizes that the loss of financial state-owned assets should be linked to the personal interests of the responsible person. The responsibility of the financial enterprise and the regulatory agency of financial state-owned assets, that is, the financial department itself, is also summarized in it, so as to realize the responsibility to the person and the responsibility in place. On this basis, state-owned financial institutions need to conduct regular internal audits on the asset transfer of their branches and sub-enterprises at all levels, and report the asset transfer of the previous year to the financial department at the same level before May 20 each year. If there is any violation of laws and regulations, it shall be transferred to the judicial organ for handling according to law. Improve the efficiency of the protection of state-owned assets, can effectively prevent the loss of state-owned assets. Caijin [2021] No. 102 "Notice" is one of the supporting documents to implement the role of state-owned financial capital investors of the Ministry of Finance. It further clarifies the practical details of the implementation of the asset transfer policy of state-owned financial institutions in the early stage, which is important for ensuring the orderly circulation of state-owned assets. Strictly preventing the loss of state-owned assets has far-reaching guiding significance.

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