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China – CIRC Sets Out Rules For Breakthrough Of 20% Equity Interest In A Domestic Insurer.


25 April, 2013



In accordance with Article 4 of the Administrative Measures on Equity Interest in Insurance Companies (“Measures”), which came into force on 10 June 2010, the maximum shareholding of any one shareholder in a domestic insurance company cannot exceed 20% unless the shareholder meets the requirements under Article 15 (as set out below) and has obtained approval from the China Insurance Regulatory Commission (CIRC).


A domestic insurance company is defined under the Measures as an insurance company in which the aggregate shareholding of its foreign investor(s) is less than 25%.


On 9 April 2013, the CIRC promulgated the Notice on Relevant Issues regarding Article 4 of the Administrative Measures on Equity Interest in Insurance Companies (“Notice”), which supplements the requirements under Article 4 and further clarifies the position. In accordance with the Notice, a shareholder who meets the relevant criteria (as set out below) can hold up to 51% equity interest in a domestic insurance company.


A shareholder who wants to break through the 20% shareholding limit must meet all of the following requirements: –


Requirements under Article 15 of the Measures Additional requirements under the Notice
  • being capable of making continuous capital contribution, with each of the three most recent fiscal years being profit-making
  • having total assets of RMB10 billion or more at the end of the prior year
  • having strong financial capability, with net assets of RMB200 million or more
  • having a net asset value of not less than 30% of the value of total assets
  • being of a good creditworthiness and a leading company in its industry
  • the value of long-term equity investments (including the investment in insurance companies) being no higher than its net asset value
  • having invested in the domestic insurance company for three years or more


  • not having acted in violation of the laws and regulations regarding acts of insurance companies’ shareholders


In addition, there is a three-year lock-up period before a shareholder holding more than 20% equity interest in a domestic insurance company is able to transfer its equity to another investor, unless otherwise approved by the CIRC or transferred by way of court auction. The Notice also provides that for any domestic insurance company with less than three-year trading history, none of its shareholders is allowed to hold more than 20% of its equity.


According to the CIRC, it anticipates that the clarifications in the Notice will help attract more strategic investors to invest in the insurance industry so as to enhance the financial capacity of the insurance industry; it may also help strengthen the shareholders’ responsibility so as to improve the corporate governance efficiency.


For further information about this article, please contact:
Carrie Yang, Partner, Clyde & Co
Alina Zhu, Clyde & Co
Amanda Li, Clyde & Co



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