Rules of Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies

 2018-06-25  54


· Document Number:No. 24 [2017] of the Shanghai Stock Exchange

· Area of Law: Securities

· Level of Authority: Industry Regulations

· Date issued:05-27-2017

· Effective Date:05-27-2017

· Status: Effective

· Issuing Authority: Shanghai Stock Exchange

 

Notice of the Shanghai Stock Exchange on Issuing the Detailed Implementing Rules of the Shanghai Stock Exchange for Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies
(No. 24 [2017] of the Shanghai Stock Exchange)
All listed companies:
Recently, the China Securities Regulatory Commission (“CSRC”) has revised and issued the Several Provisions on Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies (Announcement No. 9 [2017], CSRC). In accordance with such Provisions, the Shanghai Stock Exchange (hereinafter referred to as the “SSE”) has developed the Detailed Implementing Rules of the Shanghai Stock Exchange for Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies (hereinafter referred to as the “Detailed Implementing Rules,” see the Annex for details), which, as approved by the CSRC, are hereby issued, and shall come into force on the date of issuance. The relevant matters are hereby announced as follows:
I. All companies shall effectively conduct publicity and education relating to the Detailed Implementing Rules, and remind the relevant shareholders, directors, supervisors and senior executives to strictly comply with the provisions of the Detailed Implementing Rules. A special reminder shall be given that after the issuance of the Detailed Implementing Rules, if the controlling shareholder, a shareholder holding 5% or more shares, director, supervisor or senior executive of a listed company plans to reduce its or his shareholding through auction, it or he shall report the shareholding reduction plan to the SSE 15 trading days before sale for the first time, and make an announcement.
II. Before completing the debugging of its technical system jointly with the technical systems of securities companies, the SSE will, under relevant interim arrangements, handle shareholding reduction by shareholders through block trading in accordance with the Detailed Implementing Rules.
III. The SSE shall oversee shareholding reduction by shareholders, directors, supervisors and senior executives. If any regulatory violation is found, regulatory measures or disciplinary actions shall be taken against the violator in accordance with business rules. If the circumstances are serious, the violation shall be reported to the CSRC for investigation and handling.
IV. If you have any inquiry in the implementation of the Detailed Implementing Rules, please consult the SSE in a written form.

Annex: Detailed Implementing Rules of the Shanghai Stock Exchange for Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies
Shanghai Stock Exchange
May 27, 2017
Annex
Detailed Implementing Rules of the Shanghai Stock Exchange for Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies
Article 1 For the purposes of regulating shareholding reduction by shareholders, directors, supervisors and senior executives of companies listed on the Shanghai Stock Exchange (hereinafter referred to as the “SSE”), maintaining the market order, and protecting the lawful rights and interests of investors, these Detailed Rules are developed in accordance with the Company Law, the Securities Law, the Several Provisions on Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies issued by the CSRC, the Stock Listing Rules and Trading Rules issued by the SSE, and other relevant provisions.
Article 2 These Detailed Rules shall apply to the following shareholding reduction conduct:
(1) Shareholding reduction by principal shareholders, that is, the controlling shareholders and shareholders holding 5% or more shares (hereinafter collectively referred to as “principal shareholders”) of listed companies reduce shareholding, excluding the reduction of holding of shares they obtained through auction.
(2) Shareholding reduction by specific shareholders, that is, shareholders other than principal shareholders reduce their holding of shares offered before companies' IPO and shares privately offered by listed companies (hereinafter collectively referred to as “specific shares”).
(3) Shareholding reduction by directors, supervisors and senior executives.
These Detailed Rules shall apply to the reduction of holding of shares obtained by such methods as judicial enforcement, execution of equity pledge agreements, gifts, exchangeable corporate bonds swaps, and stocks return swaps.
Where specific shares are involved in non-trade transfer before the removal of restrictions on sale, these Detailed Implementing Rules shall apply to the transferee's follow-up reduction of holding of such shares.
Article 3 A shareholder, director, supervisor or senior executive that reduces shareholding shall comply with laws, administrative regulations, departmental rules, regulatory documents, these Detailed Rules and other business rules of the SSE. If it or he makes any commitment on the shareholding ratio, shareholding period, shareholding reduction methods and price, among others, it or he shall strictly fulfill such commitments.
Article 4 Where a principal shareholder or specific shareholder reduces shareholding by auction, the total shareholding reduction shall not exceed 1% of the company's total shares in any consecutive 90 days.
Where a shareholder holding shares privately offered by a listed company reduces the holding of such shares through auction, in addition that the shareholder shall abide by the provision of the preceding paragraph, the number of shares sold by the shareholder shall not exceed 50% of the total number of privately-offered shares held by the shareholder within the 12-month period as of the date when the restricted sale of the shares is removed.
Article 5 Where a principal shareholder or specific shareholder reduces shareholding by block trading, the total number of shares sold shall not exceed 2% of the company's total shares in any consecutive 90 days.
The transferor and transferee in block trading shall specify the number, nature, type and price of the shares they trade in, and comply with the relevant provisions of these Detailed Rules.
The transferee shall not transfer the transferred shares within six months after the transfer.
Article 6 Where a principal shareholder or specific shareholder reduces shareholding by means of agreement-based transfer, the proportion of shares transferred to a single transferee shall not be lower than 5% of the company's total number of shares, and the lower limit of the transfer price shall be subject to the provisions on block trading, unless it is otherwise provided for in any law, administrative regulation, departmental rule, regulatory document or the business rules of the SSE.
Where a principal shareholder reduces shareholding by way of agreement-based transfer, and it no longer has the status of principal shareholder after shareholding reduction, the transferor and the transferee shall comply with the provision of paragraph 1 of Article 4 of these Detailed Rules on the proportion of shareholding reduction within six months, and shall fulfill the information disclosure obligation in accordance with the provisions of Articles 13, 14 and 15 of these Detailed Rules respectively.
Where, after a shareholder reduces the holding of specific shares by way of agreement-based transfer, the transferee reduces the holding of shares transferred to it within six months, the transferor and the transferee shall comply with the provision of paragraph 1 of Article 4 of these Detailed Rules on the proportion of shareholding reduction.
Article 7 Where a shareholder opens several securities accounts, the shares held in all securities accounts shall be calculated on a consolidated basis. If a shareholder opens a client credit securities account, the shares held in such an account and ordinary securities accounts shall be calculated on a consolidated basis.
Where a shareholder opens several securities accounts and client credit securities accounts, the number of shares that may be reduced in each account shall be distributed and determined based on the proportion of the number of relevant shares in each account.
Article 8 When the proportion of shareholding reduction prescribed in Article 4 or 5 of these Detailed Rules is calculated, the number of shares held by a principal shareholder and its persons acting in concert shall be calculated on a consolidated basis.
The Measures for the Administration of the Acquisition of Listed Companies shall apply to the determination of persons acting in concert.
Article 9 Under any of the following circumstances, a principal shareholder of a listed company shall not reduce shareholding:
(1) The listed company or principal shareholder is suspected of involvement in any violation of law or crime on securities and futures and is under case investigation by the CSRC or the judicial authority, or it has not been six months after an administrative penalty decision is made or a criminal judgment is rendered.
(2) It has not been three months after the principal shareholder is given a public reprimand by the SSE due to the violation of business rules of the SSE.
(3) Any other circumstance prescribed in laws, administrative regulations, departmental rules, regulatory documents and the SSE's business rules.
Article 10 Under any of the following circumstances, a director, supervisor or senior executive of a listed company shall not reduce his shareholding:
(1) The director, supervisor or senior executive is suspected of involvement in any violation of law or crime on securities and futures and is under case investigation by the CSRC or the judicial authority, or it has not been six months after an administrative penalty decision is made or a criminal judgment is rendered.
(2) It has not been three months after the director, supervisor or senior executive is given a public reprimand by the SSE due to the violation of business rules of the SSE.
(3) Any other circumstance prescribed in laws, administrative regulations, departmental rules, regulatory documents and the SSE's business rules.
Article 11 Where a listed company falls under any of the following circumstances, thereby triggering off the delisting risk warning standard, as of the date when the relevant decision is made to the delisting or resumption of listing of the company's stocks, its controlling shareholder, actual controller, directors, supervisors and senior executives and their persons acting in concert shall not reduce the holding of the company's shares:
(1) The listed company is given an administrative penalty by the CSRC for fraudulent issuance or illegal disclosure of major information.
(2) The listed company is transferred to the public security authority for the suspected crime of fraudulent issuance, or the suspected crime of illegal disclosure or nondisclosure of important information.
(3) Any other serious illegal circumstance leading to delisting.
Where a listed company discloses that it has no controlling shareholder or actual controller, the largest shareholder and the actual controller of the largest shareholder shall abide by the provisions of the preceding paragraph.
Article 12 A director, supervisor or senior executive who resigns before the expiration of the tenure shall abide by the following restrictive provisions during the tenure determined in office and within six months after expiration of the tenure:
(1) The shares transferred each year shall not exceed 25% of the total number of shares held in the company.
(2) The shares held in the company shall not be transferred within six months after resignation.
(3) Other provisions of laws, administrative regulations, departmental rules, regulatory documents and the SSE's business rules on the transfer of shares by directors, supervisors and senior executives.
Article 13 Where a principal shareholder, director, supervisor or senior executive of a listed company plans to reduce its or his shareholding through auction, it or he shall report the shareholding reduction plan to the SSE 15 trading days before sale for the first time, and make an announcement.
The shareholding reduction plan as prescribed in the preceding paragraph shall include but not be limited to the number of shares to be sold, sources, time range and way of shareholding reduction, price range, the reason for shareholding reduction and other information. The time range of shareholding reduction disclosed each time shall not exceed six months.
Article 14 Within the time range of shareholding reduction, a principal shareholder, director, supervisor or senior executive shall disclose the progress of shareholding reduction when the holding of more than a half of the shares is reduced or more than a half of the time for shareholding reduction has passed. If the proportion of shareholding reduction by the controlling shareholder or actual controller of a company and its or his persons acting in concert reaches 1% of the total number of shares of the company, an announcement on such a matter shall be made within two trading days as of the date when the fact occurs.
Within the time range of shareholding reduction, if a listed company discloses stocks with high possibility of dividends distribution or conversion into capital, or plans merger, acquisition, restructuring or any other major matter, a principal shareholder, director, supervisor or senior executive shall immediately disclose the progress of shareholding reduction, and state whether the shareholding reduction is relevant to the aforesaid major matters.
Article 15 Where a principal shareholder, director, supervisor or senior executive reduces its or his shareholding through auction on the SSE, it or he shall, within two trading days after the implementation of the shareholding reduction plan or after the expiration of the disclosed time range of shareholding reduction, announce the specific information on shareholding reduction.
Article 16 Where the equity of a principal shareholder of a listed company is pledged, the shareholder shall notify the listed company within two days as of the date when the fact occurs, and make an announcement in accordance with the disclosure requirements of the SSE for matters relating to the pledge of shareholders' shares.
Article 17 Where a shareholder, director, supervisor or senior executive reduces shareholding in violation of these Detailed Rules, evades the provisions of these Detailed Rules through transactions, transfer or other arrangements, or violates other business rules of the SSE, the SSE may take regulatory measures or disciplinary actions such as giving a written warning, circulating a notice of criticism, giving a public reprimand and restricting trading. If the illegal shareholding reduction leads to abnormal fluctuation of stock price, seriously affects the market trading order, or damages the interests of investors, the SSE will impose a heavier punishment on the violator.
Where shareholding reduction is suspected of violating any law, regulation, rule or regulatory document, the SSE will report it to the CSRC for investigation and punishment as required.
Article 18 For the purposes of these Detailed Rules, the total number of shares means the sum of RMB ordinary shares (A shares), RMB special shares (B shares) and overseas listed shares (including H shares) of a listed company.
Article 19 These Detailed Rules and any amendment thereto shall come into force after being deliberated and adopted by the board of governors of the SSE and approved by the CSRC.
Article 20 These Detailed Rules shall be subject to interpretation by the SSE.
Article 21 These Detailed Rules shall come into force on the date of issuance. The Notice on Matters concerning the Implementation of the Several Provisions on Shareholding Reduction by Principal Shareholders, Directors, Supervisors and Senior Executives of Listed Companies (No. 5 [2016], SSE) issued by the SSE on January 9, 2016 shall be repealed concurrently.
In the case of any discrepancy between these Detailed Rules and other rules issued before these Detailed Rules come into force, these Detailed Rules shall prevail.