CHINA: SSE Issue Q&A on Detailed Rules for Shareholding Lessening

Wednesday January 17 2018

On 12 January 2017, the Shanghai Stock Exchange (SSE) issued a Q&A on Detailed Rules for Shareholding Lessening by Shareholders, Directors, Supervisors, Senior Executives of Listed Companies.

This follows the China Securities Regulatory Commission (CSRC) releasing on 27^th May 2017, the “Provisions on Shareholding Lessening by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies”  (CSRC Announcement [2017] No. 9 Document), and the SSE issuing the supporting document “Detailed Implementation Rules of SSE for Shareholding Lessening by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies” .

Since the implementation of the Detailed Rules, the shareholders, directors, supervisors and senior executives have reduced their shareholding in an orderly and transparent way, and the shareholding lessening has been stable in the market on the whole.

The loophole in the “bridge-crossing” shareholding lessening has been mended in the block trade, with the average daily shareholding lessening in the block trade at RMB220 million on the SSE, down by 41% from the daily average of RMB370 million before the implementation of the Detailed Rules.

The “reckless” shareholding lessening by these same parties has been alleviated, with the average daily shareholding reduction by directors, supervisors and senior executives at RMB12 million after the implementation of the Detailed Rules, shrinking by 31.42% compared with the daily average of RMB17 million before the implementation.

Due to various questions about how to understand and apply the Detailed Rules, the SSE has released the aforementioned Q&A to reply to the questions received by market participants. The contents of the Q&A includes information on the following:

• How the Detailed Rules are applied to special businesses, including issuing shares to buy assets and issuing shares for supportive financing, the employee stock ownership plan, the equity incentive, the judicial enforcement and the implementation of equity pledge agreements;
• Interpretation of the specific provisions in the Detailed Rules, including how the shareholding lessening proportion limit is applied to the major shareholders reducing the shareholding to less than 5% in the auction trading and the block trading in any consecutive 90 days; and
• Does transfers among persons acting in concert constitute shareholding lessening, and whether it applies to B Shares and H Shares.

Click on the link above for further information.