The Implementing Opinions on Further Regulating Restructure of SOEs issued by the SASAC, which came into effect on 19 December 2005, provide that:
(a) Formulation of restructure plan
1. if a restructuring plan affects bank creditor's rights, the restructure plan must obtain consent from any financial institutions to which it owes money;
2. the transfer must go through an equity exchange centre (like CBEX in Beijing);
3. a legal opinion approving the restructure plan must be presented; and
4. the restructure plan is subject to approval of relevant SASAC, and in some cases is also subject to approval of finance or labour authorities. If an enterprise with state-owned assets is to become a non-SOE, the restructuring plan must be approved by the people's government at the relevant level.
(b) Accounting, assessment and auditing
The loss of state-owned assets is as usual a focus for legislation on restructuring of SOEs. For example:
1. if land use rights are involved in the restructuring, the land use rights must be registered, the disposal must be clear, and the valuation of the land use rights must be conducted by a qualified third party agent;
2. where exploration rights and exploitation rights are involved, the disposal of these rights must be determined by land and resource authority. Such rights cannot be transferred separately and the disposal is subject to approval, and assessment for the mining rights must be conducted by a qualified intermediary agent; and
3. regarding patent rights, trademark rights, land use rights, exploration rights, exploitation rights and franchising rights which are not included in the asset scope of the restructure, such assets may not be used by the enterprise which is established after the restructuring. If such assets are included, they must be valued by a third party agent recognized by the parties.
(c) Management buy-out
1. Holding of shares by management is subject to the approval of SASAC;
2. Management may not take a controlling shareholding; and
3. Management shareholders may not participate in formulation of the restructuring plan, determination of the share price, and may not receive loans or other financial support from the enterprise.
(d) Protection of employees
1. A worker replacement plan must be formulated, and only when such plan is passed by the workers' representative meeting or workers' meeting can the enterprise be restructured, and the replacement plan must be announced to the workers in timely manner (This requirement is less daunting than it appears because the workers' representatives are usually nominated by the management);
2. During the restructuring, the enterprise must pay all the due fees to workers leaving the SOE at once; and handle relevant social insurance relation and pay all kinds of social insurance for workers in the new enterprise after the restructuring.
