Brokerages in China must have net assets of at least 20 million yuan (HK$18.59 million) to underwrite domestic share sales under new rules that took effect yesterday. The requirement is more stringent for lead underwriters, which must have at least 50 million yuan of net assets and have underwritten at least three share sales, or have three years' experience in underwriting. The rules, issued by the Securities Commission of the State Council, apply to securities houses and brokerages and are seen as a move towards improving investor protection and risk management. A Shenzhen brokerage official said: 'The new rules have set out minimum qualifications for brokerages involved in underwriting such as working capital and asset base, whereas in the past such requirements were ambiguous.' The new rule incorporates some of the requirements set down in the provisional rules governing share issuing and trading issued in 1993, and a broader rule on share sales. The rules stipulate that a company which issues more than 30 million shares or expects to raise more than 50 million yuan in a share sale must be underwritten by an underwriting syndicate and not a single underwriter. Analysts say the rule will not force existing brokerages out of business, as many have met the new capital requirements. The Shanghai Securities News said rules for the underwriting of foreign share issues would be formulated later. Securities houses and brokerages should apply to the China Securities Regulatory Commission, the nation's top securities watchdog, for underwriting licences. An underwriter must have not broken any laws for at least one year and not underwrite a company in which it holds more than 7 per cent of shares or if it is one of that firm's top five shareholders.