Memorandum of Understanding on the Joint Punishment of Subjects who Breach Trust in the Field of Real Estate

Notice of the National Development and Reform Commission Issuing the

Memorandum of Understanding on the Joint Punishment of Subjects who Breach Trust in the Field of Real Estate

Development and Reform Commission Document no. 1206 (2017)

To all provinces, autonomous regions, municipalities directly controlled by the central government, and related departments and institutions of the Xinjiang Production and Construction Corps:

In order to implement the spirit of the 18th Party Congress, and of the 3rd, 4th, 5th, 6th Plenums, to implement the requirements of the ‘State Council Notice Issuing the Planning Outline on the Construction of a Social Credit System (2014-2020), the ‘State Council Guiding Opinion on Establishing a system of joint rewards for those who keep trust and a system of joint punishment for those who breach trust and accelerating the construction of a social integrity system’, and the ‘State Council Opinions on accelerating nurturing and development of the housing market’ (Guofa [2016] no. 39), focus on cultivating and carrying forward socialist core values, accelerate the construction of a social credit system, establish and perfect a joint punishment mechanism for those who breach trust, establish a sound inter-departmental joint punishment mechanism, promote a business conduct of lawfulness and integrity among relevant subjects on in the field of real estate, the National Development and Reform Commission, the People’s Bank of China, The Ministry for Housing and Urban and Rural Construction, the Central Organization Department, the Central Propaganda Department, the Public Sector Reform Commission, the Central Spiritual Civilization Office, the Cyberspace Administration, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Human Resources and Social Security, the Ministry of Land Resources, the Ministry of Environmental Protection, the Ministry of Transportation, the Ministry of Water Resources, the Ministry of Commerce, SASAC, the General Administration of Customs, the General Administration of Taxation, AQSIQ, GSS, CBRC, CSRC, CIRC, the Civil Service Bureau, the Civil Aviation Bureau, the National Federation of Trade Unions, the Central Committee of the Communist Youth League, the National Women’s Federation and the Railway Corporation have signed the Memorandum of Understanding on the Joint Punishment of Subjects who Breach Trust in the Field of Real Estate.The Memorandum of Understanding is hereby issued to you, please diligently implement it.

Annex: Memorandum of Understanding on the Joint Punishment of Subjects who Breach Trust in the Field of Real Estate

Memorandum of Understanding on the Joint Punishment of Subjects who Breach Trust in the Field of Real Estate

To all provinces, autonomous regions, municipalities directly controlled by the central government, and related departments and institutions of the Xinjiang Production and Construction Corps:

In order to implement the spirit of the 18th Party Congress, and of the 3rd, 4th, 5th, 6th Plenums, to implement the requirements of the ‘State Council Notice Issuing the Planning Outline on the Construction of a Social Credit System (2014-2020) (State Council Notice no. 21 [2014]), the ‘State Council Guiding Opinion on Establishing a system of joint rewards for those who keep trust and a system of joint punishment for those who breach trust and accelerating the construction of a social integrity system’ (State Counci Notice no. 33 [2016]), and the ‘State Council Opinions on accelerating nurturing and development of the housing market’ (State Council Notice no. 39 [2016]), focus on cultivating and carrying forward socialist core values, accelerate the construction of a social credit system, establish and perfect a joint punishment mechanism for those who breach trust, establish a sound inter-departmental joint punishment mechanism, promote a business conduct of lawfulness and integrity among relevant subjects on in the field of real estate, the National Development and Reform Commission, the People’s Bank of China, The Ministry for Housing and Urban and Rural Construction, the Central Organization Department, the Central Propaganda Department, the Public Sector Reform Commission, the Central Spiritual Civilization Office, the Cyberspace Administration, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Human Resources and Social Security, the Ministry of Land Resources, the Ministry of Environmental Protection, the Ministry of Transportation, the Ministry of Water Resources, the Ministry of Commerce, SASAC, the General Administration of Customs, the General Administration of Taxation, AQSIQ, GSS, CBRC, CSRC, CIRC, the Civil Service Bureau, the Civil Aviation Bureau, the National Federation of Trade Unions, the Central Committee of the Communist Youth League, the National Women’s Federation and the Railway Corporation have reached the following unanimous opinion on the joint punishment of subjects who breach trust in the field of real estate.

I. Subjects of Joint Punishment

Subjects of joint punishment mainly refers to relevant institutions and personnel responsible for breaches of trust in real estate development and operations (hereinafter referred to as subjects of joint punishment), including:

(1) real estate development enterprises, real estate intermediary institutions, property management enterprises (hereinafter collectively referred to as the real estate enterprises breaching trust);

(2) the statutory legal representative of real estate enterprises breaching trust, their main responsible persons, and staff directly responsible for the breach of trust (hereinafter collectively referred to as personnel breaching trust).

II. Content and Method of Information Queries on Subjects who Breach Trust

(1) Content of Queries

1. The name of the real estate enterprise breaching trust, its unified social credit number (or organization code), the name, gender and identity card number of the person breaching trust;

2. The specific circumstances of the breach of trust; the units that made a ruling on the joint punishment and their documents, the basis of the ruling, its time, and other items that shall be recorded and disclosed without prejudice to state secret, commercial secret and individual personal privacy.

(2) Methods of Delivery and Query

The Ministry of Housing, Urban and Rural Construction shall transmit information about the punishment of the subject breaking trust to the National Credit Information Sharing Platform, and the said information shall, in accordance with the law, be published on the ‘Credit China’ website (www.creditchina.gov.cn) or on the website of the Ministry of Housing, Urban and Rural Construction, and it shall promptly be updated.

Relevant departments for administrative supervision and management may conduct queries related to subjects breaching trust through the National Credit Information Sharing Platform, the ‘Credit China’ website, provincial credit information sharing platforms or the website Ministry of Housing, Urban and Rural Construction, and the may adopt methods necessary to perform the work of querying records on the conduct of subjects breaking trust, and preserving evidence. The public may conduct queries for information on the conduct of subjects breaching trust through the “Credit China” website, or the websites of departments for housing, urban and rural construction.

The National Public Resource Exchange Platform, provincial credit information sharing platforms and the provincial public resource exchange platforms gradually automate the transmission, receipt, query, and use of information about subjects breaching trust in the field of real estate through the National Credit Information Sharing Platform.

III. Joint Punishment Measures

(a) Lawful restrictions or prohibitions of access to the market, to administrative licenses, to financing for subjects of punishment.

1. Restriction of access to government allocated land.

2. Restriction of access to safety production licences.

3. Restriction of access to production licences.

4. Restriction of access to real estate project development planning licenses, environmental impact evaluation certifications, the “Three Simultaneous” certifications, land and water conservation plan certifications, facility inspection certifications, construction licenses, commercial housing pre (sales) licenses, commercial housing sales contract registration, etc.

5. Restriction to the approval of applications for new major projects, reduction or interruption of government subsidies, or withdrawal of government subsidies and earmarked funds.

6. Restriction to the approval of applications for science and technology projects.

7. Strict audit of the issuance of corporate bonds, strict audits of corporate bonds issued. The breach of trust by the subject of punishment shall be taken into account during the audit of the issuance of share certificates, and the national audit of share transfer by small and medium-sized enterprises.

8. Prohibition of the participation as a supplier in government procurement activities.

9. Restriction on establishing or participating in financial institutions and microfinance companies, financial guarantee companies, venture capital companies, internet financing platform and other institutions.

10. Restriction to the participation in bidding on government invested public construction projects.

11. Restriction or prohibition to the participation in infrastructure and public utility franchising, and cancellation of existing franchises in accordance to the law.

12. Prohibition, for the subject of punishment, to serve as the legal representative, the responsible person of related production and business units during the statutory time-limit, and the lawful order to change registration of posts already held.

13. Restriction to the registration of non-financial enterprise debt financing instruments.

14. Limitation to the enrollment (recruitment) as a civil servants or staff or public service units.

15. Restriction to the registration as the legal representative of a public service unit.

16. Credit information about the subject of punishment will be notified to financial institutions, to be a major basis to be taken into account in his credit rating, credit financing, management, and withdrawal.

17. Prudent consideration of the management of tax credit.

18. Information about the subject of punishment will be taken into account during the examination and approval of the establishment of securities companies, fund management companies and changes in the holder, the actual controller of more than 5% of shares.

19. Lawful limitation to hold the posts of board member, supervisor, and senior manager of listed companies, securities companies, fund management companies, futures companies. Strict audits of his application for professional qualification in securities, funds, futures. Close attention shall be paid to existing professional qualifications in securities, funds, futures.

20. Close attention to ex durante and ex post supervision shall be paid where domestic listed companies implement equity incentives programs, or where relevant persons become the beneficiary of equity incentives.

21. Restriction to the approval of practice licenses in the inspection and inspection certification industry, restrictions to the release of certificates by certification institutions, restrictions to the release of authentication certificates.

22. Close attention shall be paid to ex durante and ex post supervision of the takeover of listed or unlisted public companies.

23. Restriction to the participation in the exchange of public resources.

(b) Cessation of preferential policies enjoyed by the subject of punishment, or denial of approval of applications for preferential policies.

24. Restriction, suspension, or cancellation of policy financial support.

25. Cessation of implementation of preferential policies in areas such as investment.

(c) Limitations and restrictions to be adopted towards the subject of punishment in work such as that of performance evaluation, comprehensive evaluation, awards for excellent evaluation.

26. Breaches in trust by the subject of punishment shall be a major factor to consider in evaluation, in promotion and appointment.

27. Cancellation of the subject of punishment qualification to participate in awards for excellent evaluation. Denial of issuance of awards such as that of ‘Civilized Unit’, ‘Model of Ethics’, ‘May First Labor Medal’. Honorary titles already awarded shall be revoked after the occurrance of an act of breach of trust.

(d) Other Punishment Measures

28. Disclosure of the act of breach of trust on the ‘Credit China’ website.

29. Insurance institutions shall be encouraged to consider records of breaches in trust by the subject in their determinations of insurance rates.

30. Departments competent for the function of market supervision in all industries will take the subject of punishment as a major subject of supervision, increase the force of day-to-day supervision, raise the proportion and frequency of on the spot inspections and of random inspections.

31. [Breaches of trust] shall be taken into account in the selection of partners for government and social capital cooperation projects.

(e) Strengthening the day-to-day administrative supervision of the housing, urban and rural construction systems.

Administrative departments for housing, urban and rural construction at all levels shall formulate and implement the following measures on subjects of punishment.

32. Increasing the frequency of on-the-spot law enforcement inspections.

33. [Subjects of punishment] shall become a major subject of supervision and monitoring. Establishing a routine system for covert investigation and unannounced inquiries, and conduct non-scheduled random inspections.

34. Interviewing the main responsible person, and enforcing relevant professional training for the main responsible person and other relevant personnel.

35. Suspension of the assessment of relevant qualification certificates, revocation or downgrade of qualification certificates that have already been obtained according to the law;

36. Enforcing market and industry prohibitions on the subject of punishment, according to the law.

37. Where a new breach of trust is found, an aggravated punishment shall be imposed within the scope of discretion, according to the law and to administrative provisions.

IV. Enforcing Joint Punishment

All departments shall, in accordance with the content of the present Memorandum of Understanding, enforce joint punishment according to the law and to administrative provisions.At the same time mechanisms for the regular notification of punishment are established, all departments shall, according to their actual situation, provide regular feedback on the status of enforcement of joint punishment to the National Development and Reform Commission and to the Ministry for Housing and Urban and Rural Construction via the National Credit Information Sharing Platform.

V. Other Matters

All departments should work closely together to implement the present Memorandum of Understanding, formulate relevant implementation rules and procedures for the use, revocation and management of information on breaches of trust, and implement joint punishments according the law and regulations.

The implementation of the present Memorandum of Understanding involves coordination between departments, which shall be agreed upon and solved by all departments.Following the signature of the present Memorandum of Understanding, where any of the laws, regulations, administrative rules and other normative documents that provide the basis of punishment measures shall be amended or revised, the amended version of the law, regulation, rule, or normative document shall prevail.

Appendix: Table of relevant laws and regulations (omitted)

National Development and Reform Commission of the People’s Republic of China

People’s Bank of China

Ministry of Housing and Urban and rural Construction of the People’s Republic of China

CPC Central Committee Organization Department

Propaganda Department of CPC Central Committee

General Office of the State Commission Office for Public Sector Reform 

General Office of the Guiding Committee for the Construction of Spiritual Civilization

Office of the Central Leading Group for Internet Security and Informatization

Ministry of Science and Technology of the People’s Republic of China

Ministry of Industry and Information Technology of the People’s Republic of China.

Ministry of Finance of the People’s Republic of China

Ministry of Human Resources and Social Security of the People’s Republic of China

Ministry of Land and Resources of the People’s Republic of China

Ministry of Environmental Protection of the People’s Republic of China

Ministry of Transportation of the People’s Republic of China

Ministry of Water Resources of the People’s Republic of China

Ministry of Commerce of the People’s Republic of China

State-owned Assets Supervision and Administration Commission

General Administration of Customs of the People’s Republic of China

State Administration of Taxation

State Administration of Quality Supervision, Inspection and Quarantine

State Administration of Work Safety

China Banking Regulatory Commission

China Securities Regulatory Commission

China Insurance Regulatory Commission

National Civil Service Bureau

Civil Aviation Administration of China

ACFTU

Central Committee of the CPC Youth League

National Women’s Federation of China

China Railway Corporation

June 27, 2017

While useful for academic analyses, the English version of the document presented in this post is not legally valid before Chinese courts, and administrative agencies. Readers interested in the official version of this document are encouraged to consult the official website of the State Council, where these Regulations were first posted. This translation is offered ‘as it is’, and for reference only.  All rights on this work belong to the Foundation for Law and International Affairs and to The Coalition for Peace and Ethics. Reproduction of this work is not allowed in any form without prior written consent.  Please consult this Blog’s Terms and Conditions.

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