China's stock market regulators are cracking down on the
appropriation of funds of listed companies by controlling
shareholders, saying those who fail to repay by the year end face
prosecution.
The China Securities Regulatory Commission (CSRC) made the
decision at a meeting in Changsha, capital of central China's Hunan Province, after Premier Wen Jiabao personally intervened in the matter,
CSRC sources told Xinhua News Agency yesterday.
CSRC Deputy Chairman Shang Fulin said at the meeting that local
regulators should preserve evidence gathered in investigations for
possible prosecutions.
The appropriation of large amount of funds of listed companies
by the controlling shareholder and the existence of a controlling
majority of non-tradable state-owned shares in most listed
companies have been two leading issues afflicting China's
burgeoning stock market.
As the shareholding reform that turns non-tradable shares into
tradable shares has almost come to its end, the other issue is
becoming even more imperative for the regulators to resolve.
"The solution of this chronic problem will go a long way to
protect the interests of public investors, improve the corporate
governance of listed companies and ensure the healthy development
of the stock market," said Teng Tai of China Galaxy Securities.
The initiative to solve the issue began in November 2005, when
the State Council approved a CSRC report on improving the quality
of the country's 1,300 listed companies.
The report set the end of this year as the deadline to solve the
issue.
In June, China's legislative body adopted an amendment to the
criminal code that makes appropriation of a listed company's funds
by controlling shareholders a crime.
CSRC figures show that by the end of September, 309 listed
companies had retrieved 20.4 billion yuan (US$2.58 billion) that
had been appropriated by their controlling shareholders.
However, 102 listed companies still had a total of 25.4 billion
yuan (US$3.21 billion) outstanding to their controlling
shareholders.
The Shanghai Securities News reported yesterday that at
least 15 executives had been probed, arrested or prosecuted for
appropriating funds.
To date no officials of state-owned parent companies had been
charged for appropriating funds of their listed branches.
(Xinhua News Agency October 14, 2006)