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On November 23, SZSE officially issued the Information Disclosure Guidelines for the High-Ratio Bonus Issue and Stock Dividend Distribution of Listed Companies (hereinafter referred to as the Guidelines) and amended relevant announcement formats. The Guidelines came into effect on the date of promulgation. It is not applicable to the already disclosed plans of high-ratio bonus issue and stock dividend distribution. This is SZSE's another important measure to continuously regulate listed companies' information disclosure, improve the basic system of the capital market, promote listed companies' quality and guide the market to return to value investment.
The market pays close attention to the high-ratio bonus issue and stock dividend distribution. SZSE insists on paying equal attention to supervision and education.
The essence of bonus issue and stock dividend distribution is the internal structural adjustment of shareholders' equity, which has no material impact on a company's profitability, and the shareholders' equity does not increase accordingly. However, in recent years, some companies hyped this and there were violations that seriously damaged investors' rights and interests such as insider trading and cooperation with shareholding lessening and trading restriction releasing. SZSE has always treated the high-ratio bonus issue and stock dividend distribution as one of the key regulatory issues. Through improving rules and strengthening supervision and investor education, we are determined to prevent concept hype and purify the market environment.
First, to develop information disclosure rules. In February 2016, the Announcement Format for High-ratio Stock Dividend Distribution was released, which was later revised according to new market conditions in December 2016. It specifies disclosure requirements for the matching between such dividend distribution and performance growth, and the related shareholding lessening plans, so as to standardize listed companies' information disclosure of high-ratio distribution from the source.
Second, to strengthen supervision. Once SZSE finds that listed companies' disclosure of such distribution plans is inaccurate or incomplete, or the companies hype such plans and cooperate with shareholders to reduce their shareholding, SZSE will adopt timely supervision measures such as issuing letters of inquiries and transaction verification and report abnormal transactions to CSRC in a timely manner.
Third, to strengthen investor education. In the "Investor Education" section on the SZSE official website, SZSE releases articles on the risks of high-ratio stock dividend distribution to help investors understand its essence rationally and avoid speculation.
Judging from the disclosure of such distribution plans by SZSE-listed companies in recent years, SZSE has achieved positive results in its strict supervision. The numbers of companies that disclosed such plans from 2015 to 2017 were 256, 147 and 47 respectively, which dropped sharply year by year. Besides, the dividend distribution ratio was also significantly reduced and there was almost no ultra-high-ratio dividend distribution. So far, there is no pre-disclosure of such plans for this year. Meanwhile, the market reaction is also more rational as speculations of such concept stocks have cooled down obviously. The Guidelines issued this time is based on previous supervision practices, appropriately introduces "hard constraints" on high-ratio bonus issue and stock dividend distribution, and establishes a set of restraint rules to link the distribution with performance growth, shareholders' share lessening and restriction lifting of restricted shares.
Moderately set rules of hard constraints to standardize stock bonus issue and dividend distribution ratio and disclosure window period.
The Guidelines consists of 14 articles, specifying the requirements for listed companies and related entities in 3 aspects: bonus issue and stock dividend distribution ratio, disclosure window period and future shareholding lessening plan disclosure. It has filled the gap of rules to prevent the risks of violations and hypes and guide companies to focus on the main business, continuously improve their quality, rationally arrange investor returns, and return investors with good performance.
First, to establish a mechanism that links the bonus issue and stock dividend distribution ratio with the companies' performance. In view of the mismatch between previous ultra-high-ratio distribution and performance growth, the Guidelines specifies a negative list that "if there is performance loss, or the net profit is down 50% year-on-year, or the EPS after bonus issue and stock dividend distribution is less than CNY0.2, such companies must not disclose bonus issue and stock dividend distribution plans." Also, it is required that the distribution ratio per share shall be linked with the growth rate of net profit or net assets. For example, for the ratio of 10 bonus or dividend shares per 10 shares, a company's net profit compound growth rate in the last two years must be greater than 100% or the growth rate of net assets at the end of the period must exceed 100% compared to the beginning of the period. Meanwhile, for companies that enjoy continuous net profit growth in the last two years and an EPS of not-less-than-CNY1 in the last three years, there is no requirement in net profit growth to support well-performing companies' needs of bonus issue and stock dividend distribution.
Second, to clarify the disclosure window period of high-ratio bonus issue and stock dividend distribution plans. The public have been criticizing the market turmoil that such plans go hand in hand with restriction lifting of restricted shares and shareholding lessening plans because they damage the legitimate rights and interests of investors. Therefore, the Guidelines stipulates that companies shall not disclose such plans in case of shareholding lessening in the last 3 months by proposed shareholders, controlling shareholders and their persons acting in concert, directors, supervisors, and senior managers; or shareholding lessening plans by the same in the next 3 months; or the 3 months before and after the expiration of lock-up period for restricted shares (excluding the restricted shares in stock option incentive).
Third, to refine the disclosure requirements of phased shareholding lessening plans. The Guidelines stipulates that relevant shareholders should promise that there is no share lessening plan in the next 3 months and disclose the lessening plans for the next 4 to 6 months. They should ensure the implementation of such plans as promised to constrain the use of such distribution to cooperate with shareholding reduction, and clarify the hidden risks of share lessening for investors.
Fully consider market demands and rationally reserve institutional space.
While strengthening the supervision of high-ratio bonus issue and stock dividend distribution, the Guidelines also fully considers companies' actual needs to expand share capital and enhance market liquidity. For distributions that do not meet the high-ratio distribution standard, it is not mandatory to implement the Guidelines. Thus, there is institutional space for companies' normal bonus issue and stock dividend distributions. They can independently decide the scope of equity expansion according to actual needs. However, SZSE will pay full attention to the distribution behaviors that deliberately avoid the high-ratio distribution standard in daily supervision. We will comprehensively make judgement and take corresponding supervision measures based on companies' performance, share lessening by their shareholders and restriction lifting.
During the formulation of the Guidelines, SZSE has adhered to the principle of openness, extensively listened to market opinions, discussed the feedback one by one, fully absorbed reasonable suggestions, and amended and improved the Guidelines accordingly. In the process of soliciting opinions, some companies suggested that no high-ratio bonus issue or stock dividend distribution plans shall be disclosed 3 months before and after the expiration of lock-up period for stock option incentive shares. After careful research, SZSE believes that the restricted shares from stock option incentive account for a relatively low proportion, and that such incentive is an important tool for listed companies, especially innovative enterprises, to attract and keep talents. There should be some reserved space in policy. Therefore, based on the exposure draft, SZSE made corresponding revision to clarify that the disclosure window period of high-ratio bonus issue and stock dividend distribution is not applicable to the restriction lifting of stock option incentive shares.
NEXT 2018-11-27
