Share Repurchase Rules

A draft amendment of China’s Company Law on share repurchasing was submitted to the top legislature for deliberation on October 22.

The Standing Committee of the 13th National People’s Congress will review the draft, which aims to refine and improve the current share repur- chasing system.

Proposed changes include adding the circumstances of application, easing decision-making procedures and introducing information disclosure requirements for companies while reclaiming shares.

Under the current law, companies are forbidden from buying their publicly traded shares back except under four circumstances, such as granting employees equity incentives.

“The amendment is very necessary in that it will help companies establish a long-term motivation mechanism and improve the quality of listed companies,” Liu Shiyu, Chairman of the China Securities Regulatory Commission, said in his introduction to the amendment.

“It will also offer strong legal support for stabilizing capital market expectations under current conditions,” Liu said.

Analysts say stock repurchase operations could send a positive signal to the market and alleviate market jitters in cases of extensive underestimation of shares.