China Securities Regulatory Commission: Strictly regulate the reduction of large shareholders and effectively prevent bypass reduction

(Original title: Interim Measures for the Administration of the Reduction of Shares Held by Shareholders of Listed Companies, Rules for the Administration of Shares Held by Directors, Supervisors and Senior Managers of Listed Companies and Their Changes, promulgated by the CSRC)

In order to implement the Several Opinions of the State Council on Strengthening Supervision and Preventing Risks and Promoting the High Quality Development of the Capital Market listed company Regulatory Opinions (for trial implementation), CSRC The Interim Measures for the Administration of Share Reduction by Shareholders of Listed Companies (hereinafter referred to as the Measures for the Administration of Share Reduction) and the Rules for the Administration of Shares and Changes in Shares of the Company Held by Directors, Supervisors and Senior Executives of Listed Companies (hereinafter referred to as the Rules for Changes in Shareholdings) were issued today and will come into force as of the date of promulgation.

The shareholding reduction system is an important basic system in the capital market. In order to implement the requirements of recent relevant documents on comprehensively improving the shareholding reduction rule system, strictly regulating the shareholding reduction of major shareholders, especially controlling shareholders and actual controllers, and resolutely preventing all kinds of bypass shareholding reduction, the CSRC issued the Several Provisions on the Reduction of Shareholdings by Shareholders, Directors, Supervisors and Senior Managers of Listed Companies (hereinafter referred to as《 Provisions on reduction of holdings 》）On this basis, the Administrative Measures for Shareholding Reduction was drafted, and the Rules for Shareholding Changes were revised simultaneously, and public comments were solicited from April 12 to 27, 2024. All parties in the market generally support the content of the rules and put forward suggestions for modification and improvement. The CSRC studied them item by item, carefully adopted them, and revised the rules accordingly.

There are 31 articles in the Measures for the Management of Shareholding Reduction, which generally maintain the basic framework and core content of the Regulations on Shareholding Reduction, upgrade the original normative documents to regulations, and improve the relevant content in response to the prominent problems reflected by the market: first, strictly regulate the reduction of major shareholders. Clarify that the controlling shareholders and actual controllers shall not reduce their shares through centralized bidding transactions or block transactions under the circumstances of breaking the distribution, breaking the net, and failing to meet the dividend standards; Increase the pre disclosure obligation of major shareholders before reducing their holdings through block trading; The persons acting in concert with the major shareholders are required to abide by the shareholding reduction restrictions together with the major shareholders. Second, effectively prevent bypass underweight. Require the transferee of the agreement transfer to lock up for six months; Clarify the division due to divorce, dissolution, separation, etc shares After that, all parties continue to jointly comply with the shareholding reduction restrictions; Clarify that judicial enforcement and default disposal of pledge financed funds and bonds shall be subject to relevant share reduction requirements according to different share reduction methods; It is prohibited for major shareholders to sell securities or participate in derivatives transactions with the Company's shares as the subject matter; It is prohibited to refinance and lend restricted shares and sell securities borrowed by shareholders of restricted shares. Third, detailed provisions on liability for violations. Clarify that illegal share reduction can be ordered to buy back and turn over the price difference to the listed company, and list the specific circumstances that should be punished. In addition, it also strengthened the obligations of the secretary of the listed company and the board of directors.

The revised Shareholding Change Rules absorbed and integrated the requirements of the Regulations on Shareholding Reduction to regulate the share reduction of directors, supervisors and senior executives, and further clarified that after the divorce of directors, supervisors and senior executives, all parties will continue to abide by the original restrictions on share reduction; The window period for prohibiting stock trading was optimized, and the directors, supervisors and senior executives were supported to increase their shares in accordance with the law.

In the next step, the CSRC will continue to strengthen the supervision of shareholders' shareholding reduction, crack down on and severely punish illegal shareholding reduction, and maintain the market trading order.

Interim Measures for the Administration of Share Reduction by Shareholders of Listed Company.pdf