Monday January 11 2016
News Source: Global Disclosures
Focus: Major Shareholdings
Type: General
Country: China
The CSRC (China Securities Regulatory Commission) has introduced further restrictions on share sales by major shareholders to prevent major sell-off.
Background
This follows the premature shutting down of Chinese mainland markets for the second time in a week after the benchmark index CSI300 of 7% was breached at 09:58am. Recent market volatility is in response to the pending lifting of a 6 month major shareholding selling ban, imposed on 08 July 2015.
New Rules
The new rules will be effective from Saturday 09 January 2016, one day after the initial ban expires. The new rules will cap selling by major shareholders at 1% or less of the company’s total shares every 3 months, where the shareholder holds 5% or more of the company’s total shares.
The rules will apply to selling on the secondary market during the pre-opening session, where large transactions are ordinarily conducted. The CSRC has stated that the new rules will not apply to shares bought on the secondary market.
Article VIII requires that where there is an intention to sell, a notification must be made to the Shanghai and Shenzhen Bourse 15 trading days ahead of the transaction. This replaces the previous requirement whereby shares acquired up to the initial public offering by major shareholders had to be held for at least a year, but could be subsequently traded freely, subject to disclosure requirements.
The annex to the CSRC Announcement [2016] No. 1 can be viewed at the linka above.
Please also see our article regarding the 6 month restrictions imposed by The CSRC on sales by major shareholders below: