The Standing Committee of the National People's Congress deliberated and approved the "Decision on Revising the 'Company Law of the People's Republic of China' by the Standing Committee of the National People's Congress" (the "Decision" for short) on October 26, 2018. It has revised the rules on the corporate shares repurchase system in Article 142 of the Company Law, and the revision shall come into force from the date of issuance, marking an important step in the fundamental system reform of the Chinese capital market. The Decision has newly added the situations for shares repurchase, simplify the repurchase routing and set up the treasury stock system according to the demand for market development. All these have granted more decision-making power to companies, allowing them to have more convenient and more marketized choices in safeguarding corporate value, repaying investors and carrying out long-term incentive mechanism, and they are of great significance to improving the quality of listed companies and actively repaying investors.
The Decision requires that a listed company, when repurchasing its shares, should fulfill its information disclosure obligation according to the Securities Law with a view to protect investor's right to know. Previously, when the amendment to the "Company Law" was soliciting public opinions, the Shanghai Stock Exchange (SSE) had started to formulate and revise the relevant business rules on shares repurchase and its format guideline under the guidance of the China Securities Regulatory Commission (CSRC), to guide listed companies to fulfill their information disclosure obligation according to law and help companies to manage specific businesses on trading, ownership transfer, inventory, deregistration, transfer and creditor protection arrangement related to shares repurchase. Currently, the drafts of the relevant business rules and the format guideline of shares repurchase have been formed. The SSE will, under the unified deployment and arrangement of the CSRC, revise and improve them as soon as possible for their early release and implementation.
Listed companies on the SSE have actively responded to the Decision since its issuance, and an increase has been seen in the number of Shanghai listed companies in releasing repurchase scheme and carrying out shares repurchase. A total of 30 listed companies on the SSE have released their notices on shares repurchase in these two days (Saturday and Sunday) since the issuance of the Decision on October 26, among which 14 have released the shares repurchase proposal or plan, and 16 have released the progress in shares repurchase. At this point, the SSE will adhere to its idea of laying equal stress on regulation and service, focus on the policy consultation and rules interpretation for the Decision, especially the information disclosure and business handling for the newly-added situation of shares repurchase in the Decision, support and guide listed companies to carry out shares repurchase according to law, and maintain the corporate value and the shareholders' rights and interests.
Meanwhile, the SSE will continue to exert strict requirement on the information disclosure of the companies and their controlling shareholders, directors, supervisors and senior executives, and prevent such inappropriate behaviors as benefit transfer, insider trading and market manipulation through shares repurchase, thus giving full play to the role of the new shares repurchase system and promoting the sound and stable development of the capital market.
