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SZSE recently issued the Announcement Format of Shareholding Increase Plan and Implementation of Major Shareholders, Directors, Supervisors and Senior Executives of Listed Companies (hereinafter referred to as Shareholding Increase Announcement Format) and Announcement Format of Share Repurchase Plan and Implementation of Listed Companies (hereinafter referred to as Repurchase Announcement Format). This is another measure by SZSE to continuously regulate the information disclosure requirements on hot market matters, strengthen the binding force on listed companies, major shareholders, directors, supervisors and senior executives so as to effectively protect the legitimate rights and interests of investors.
Since the beginning of this year, some listed companies disclosed the plans of shareholding increase or share repurchase by their major shareholders, directors, supervisors, and senior executives. This has aroused widespread attention in the market. In order to maintain stock price stability, return investors and optimize capital structure, listed companies carry out share repurchase. Based on their confidence in business operation and development and their rational judgment on business valuation, the major shareholders, directors, supervisors, and senior executives of listed companies decide to increase their shareholding. Such behaviors are conducive to boosting market confidence and promoting healthy market development. SZSE supports qualified listed companies and their major shareholders, directors, supervisors, and senior executives in law-based repurchase and shareholding increase.
In order to improve the integrity and accuracy of listed companies’ disclosure of shareholding increase plans and share repurchase plans and ensure prudential and enforceable shareholding increase and repurchase, SZSE timely sorted out the problems found in daily supervision and released these two formats to further standardize information disclosure requirements.
Refined disclosure requirements on the subject, content, and implementation status of shareholding increase
The Shareholding Increase Announcement Format is applicable to the case where the controlling shareholders, major shareholders, directors, supervisors and senior executives of listed company voluntarily disclose the shareholding increase plan. Based on the principle of information disclosure integrity and continuity, such disclosure must include the following four aspects.
First, basic information of shareholding increase subjects. That include the subjects’ names, shareholding status, and shareholding lessening within the 6 months prior to the announcement. If a shareholding increase plan has been disclosed within the 12 months prior to the announcement, relevant implementation status must be included.
Second, main content of shareholding increase plans. When the subjects develops a plan, the down limit or range of increase volume or amount must be explicit and the upper limit must be smaller than the double of the down limit. It is also required to express if there is a price premise for shareholding increase and, if yes, ensure the executability. The implementation period and the way of increasing shareholding have to be clear. And it has to be disclosed that whether the shareholding increase is based on the subjects’ specific identity and if there is a lock-up period.
Third, implementation risks of the shareholding increase plan. These includes that the company share price continues to exceed the price range disclosed in the plan, that the fund is not in place to implement the plan, or that in the process of shareholding increase by means of financing, the increased shares are forced to be liquidated due to continuous stock price fall. In case of relevant risks emerging during the implementation process, they should be disclosed in a timely manner.
Fourth, implementation of the shareholding increase plan. The obligor of information disclosure shall promptly disclose the actual shareholding increase or the specific reasons for the non-performance of shareholding increase when half of the original shareholding increase period is passed. Upon the expiration of the original shareholding increase implementation period or the completion of the scheduled increase plan, the implementation result shall be disclosed in time.
Clear disclosure requirements for the content of share repurchase plans, review procedures and implementation progress
The Repurchase Announcement Format is applicable to the case where listed companies repurchase public shares by way of central bidding. On the bases of invoking and executing the higher-level rules, it sets forth clear requirements on three aspects:
First, main content of the repurchase plan. Specific information disclosure on such items as repurchased share volume, total funds used, repurchase price and implementation period is required. Also, the repurchase proposer, the time of proposal, the proposer’s stock trading within the 6 months prior to repurchase and where there is a plan of share lessening in the next 6 months have to be disclosed.
Second, plan review, implementation procedure and risk warnings. It explicitly stated that listed companies shall perform the review procedure at shareholders general meetings when they terminate the repurchase plan and shall not authorize the board to decide such termination.
Third, progress of the repurchase plan. It specifies that when the plan is approved at shareholders general meetings, listed companies shall apply for a repurchase account in a timely manner and disclose the time schedule of performing the progress obligation.
SZSE has upheld the concept of strict comprehensive law-based supervision with regard to the following issues so as to prevent “bamboozling shareholding increase/share repurchase”: some listed companies’ incomplete and not prudent information disclosure on shareholding increase or share repurchase plans, lack of subsequent execution binding force, poor execution result, and cause of market questions. For example, SZSE circulated a notice of criticism to a company’s chairman of the board for releasing a shareholding increase plan but then canceling the plan. A letter of supervision was issued to a company for it overly postponed the setting up of a repurchase account after disclosing the repurchase plan and did not make timely disclosure of the repurchase report and progress.
An SZSE officer said that when developing repurchase or shareholding increase plans, the shareholders, directors, supervisors and senior executives of listed companies should cut their coats according to their cloth. They should reasonably evaluate relevant feasibility to truly perform the obligation of honesty and trustworthiness and should not harm investors’ interests by way of any bamboozling shareholding increase/share repurchase. Next, SZSE will continue to intensify the efforts on regulating shareholding increase and share repurchase, put in place the information disclosure requirements and guide relevant parties to increase shareholding and repurchase shares as per law. Accordingly, this will help safeguard market operation order and boost the long-term sound and stable development of capital market.
