Share Re­pur­chase Rules

Beijing Review - - THIS WEEK -

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.

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