On May 27, 2017, the China Securities Regulatory Commission (CSRC) released the "Some Provisions on Shareholding Lessening by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies" (CSRC Announcement  No. 9 Document, hereinafter referred to as "Announcement No. 9"), and the Shanghai Stock Exchange (SSE) issued the supportive "Detailed Implementation Rules of SSE for Shareholding Lessening by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies" (the "Detailed Rules" for short). As an important part of the construction of the fundamental system for the securities market and an essential measure for the "law-based, all-around and strict" regulation, the Detailed Rules is of great and far-reaching significance in guiding rational investment, protecting investors' rights and interests and maintaining the market order. 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 (Some major shareholders transfer shares by way of block trading, and then relevant receivers sell the shares on the secondary market) 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 the directors, supervisors and senior executives 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.
Since the implementation of the Detailed Rules, the listed companies, members and investors have paid close attention, and raised various questions about how to understand and apply the Detailed Rules. After earnest summarization and study and reporting to the CSRC, the SSE released the "Q & A on 'Detailed Implementation Rules of SSE for Shareholding Lessening by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies' (1)", the "Q & A (1)" for short", to reply to the questions concerned by the market participants, in a bid to facilitate the listed companies' information disclosure and ensure that the shareholding lessening by the shareholders, directors, supervisors and senior executives is in line with laws and regulations.
The contents of the Q & A (1) are mainly in the following four aspects: the first is how the Detailed Rules is applied to the 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, the implementation of equity pledge agreement, bestowal and so on. The second is the 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, how the Detailed Rules is specifically applied after the major shareholders' shareholding lessening or the agreement-based transfer of specific shares, the shareholding lessening sequence for mixed ownership, and so on. The third is the implementation of "separating the new from the old" for the Detailed Rules, including the situations of banning shareholding lessening existing before the issuance of the Detailed Rules, the resignation of the directors, supervisors and senior executives, the follow-up shareholding lessening for the block trading, and so on. The fourth is other issues, mainly including whether the transfer among the persons acting in concert constitutes shareholding lessening, whether it is applicable to B shares and H shares, and so on.
The SSE will continue to pay attention to the relevant issues in the implementation of the Announcement No. 9 and the Detailed Rules, step up the regulation and further standardize the shareholding lessening behaviors of relevant market participants. The SSE will timely take the regulatory measures for or impose disciplinary sanctions on the violations in shareholding lessening founded in regulation, and report the serious violations to the CSRC for investigation and treatment.