PUBLICIDAD – PLAN DE MEDIOS

Under the Company Law (2005), a ‘promoter of a company’776 refers to either an individual or legal entity that prepares and arranges the setting- up procedures of a joint stock limited company, who turns into a shareholder of the company after the company has been established.777 Promoters must subscribe all or part of the shares that should be issued by the company, depend ing on whether there are remaining shares to be offered to the general public or specified persons.778 This concept could also be applied to limited liability companies. For a common joint stock company, the law does not set special conditions for the promoter’s eligibility. The rules are set out in two of the CBRC regulations.

In Interim Provision (2007), rules on the qualifications of promoters of VTBs are quite brief. The required promoter or capital investor of VTBs shall contain at least one banking institution, either domestic or foreign.779 No further restrictions are given in this rule, which means private capital could also join in in the promotion process, together with a commercial bank. However, the main promoter of the setting- up procedure and the then controlling shareholder after the company has been established is restricted to only banking institutions.780 What is implied in this requirement is that only banking institutions can lead the setting-up procedures of a VTB and be its controlling shareholder, while private investors without a financial licence can only ‘follow’ the steps of banks and will not have a controlling stake.781 If several private investors wish to set up a VTB, what they need to do first is to invite a bank as the ‘leader’.

21878283.html> accessed 1 March 2015.While the total assets of all banking institutions in China as at the end of 2013 reached 151.4 trillion. CBRC, Annual Report of 2013.

776 _{In China’s Co mpany La w, a co mpany is an independent legal person that bears liabilities for its}

debts with all its property. Shareholders of the co mpany are only liable for the number of shares for which they have paid. Diffe rences between a ‘limited liability co mpany (here inafter ‘LLC’)’ and a ‘joint stock limited co mpany (hereinafter ‘JSLC’)’ lie in many aspects, for examp le, (i) shareholder a mount. A LLC could have 2-50 shareholders, while a JSLC only has minimu m 5 shareholder require ment; (ii) minimu m share cap ital, (iii) whether shares could be free ly sold to the public. In general, an LLC in China is similar to a private limited co mpany under UK Companies Act, while a JSLC in China is similar to UK’s plc.

777

China Company Law (2005 amendment), arts 77-80.

778

Ibid art 78.

779

Interim Provisions on the Administration of Village and Town Banks, art 8 (2).

780

Ibid art 25

This restrictive requirement was detailed further in a Notice of the CBRC in 2011,782 in which the standard for main promoter was raised. Promoters of a VTB shall still contain at least one banking institution. However, the main promoter (and the controlling shareholder, after the firm has been established) must be a banking institution with a last annual supervisory ratings scores of 2, 2+ or 1, using the ‘CAMELS+’ rating system.783 The main promoter shall also employ sufficiently qualified staff and meet other prudential regulatory standards required by the CBRC.784 These rule changes de facto raise the threshold for banks as eligible promoters of VTBs. The strict requirement remains in Measures (2014).785

The real effect of this restrictive standard on the VTB industry lies in several aspects. It sets up an entrance threshold for banks who wish to set up and control a VTB. Only those banks scoring 2 or 1 are eligible to assume the role of main promoter under the current rule. The purpose of the CBRC is to keep the rural financial market stable by preventing unqualified banks from controlling a VTB. A bank that scores 2 or above in the CAMELS+ system is well operated in respect of supervision, so it can take the responsibility of setting up a VTB and, more importantly, of following up on management of its subsidiary. Although a VTB is an independent legal entity and is legally separate from its controlling shareholder, in the current bank management model, the holding bank usually takes the duty of managing its subsidiary VTBs by setting up a separate management department inside the bank.786 Banks with a higher score in the rating system are therefore assumed to be more capable of managing a separate VTB in respect of, for example, the qualifications and ability of directors and senior managers sent from the holding company to the subsidiary.

782

CBRC, 关于调整村镇银行组建核准有关事项的通知 [Notice of the CBRC on Adjusting Matters Relating to the Approval of the Formation of Village and Township Banks] (2011 No. 81).

783

China’s CAMELS+ system is based on the commonly used international CAMELS rating system with Chinese characteristics, using six components , including capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. There are six levels of scoring in total, 1 is the best and 6 is the worst. More details about China’s rating system are set up in CBRC, 商业银行监管评级内部指引 [Internal Guidelines on Supervisory Ratings for

Commercial Banks] (2005 No. 88). An English news report available at

<http://www.cbrc.gov.cn/EngdocView.do?docID=2210 > accessed 1 March 2015.

784

Notice of the China Banking Regulatory Commission on Adjusting Mat ters Relating to the Approval of the Formation of Village and Township banks (2011 No. 81).

785 _{Measures of CBRC for the Implementation of Administrative Licensing Matters Concerning}

Rural Medium and Small Financial Institutions (2014 No. 4), art 28.

786 _{CBRC, 关于加快发展新型农村金融机构有关事宜的通知 [Notice of Issues about}

This standard, however, is also too restrictive, as the majority of city commercial banks cannot score 2 in the rating system. For example, as at the end of 2010, the Bank of Luoyang was the only city commercial bank in Henan Province that reached a score of 2,787 yet the Henan Province has at least 13 city commercial banks in operation. Besides, none of the city commercial banks in China has ever reached the score of 1. A newspaper article mentions the fact that only large commercial banks (ie, the ‘big four’) and joint-stock commercial banks (who are, in fact, less interested in getting involved in setting up VTBs, as discussed in Chapter 2), could score 2 or above.788

Therefore, the ‘2 or above’ threshold becomes a new restriction for the VTB industry. It is the city commercial banks who show the biggest interest in setting up VTBs.789 Large and medium banks have less incentive to re-enter the county and rural markets from which they once withdrew, since they could earn huge benefits in their mature urban market throughout the country. A reason for major banks setting up VTBs is suggested as merely ‘responding to the CBRC’.790 In contrast, city and rural commercial banks usually have fewer branches and wish to expand their market access and get more RMB licences by setting up VTBs. It is a new strategy for expanding the market for the small banks, while at the same time, local residents would benefit from available banking facilities and affordable credit. Ideally, here lies a ‘win–win’ situation. The current threshold on main promoters for setting up a VTB, however, is inviting those uninterested banks into the industry, while keeping those with more incentives outside the realm.