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China Securities Regulatory Commission issued pilot guidance on implementation of employee stock ownership plans for listed companies

Guidance on the pilot implementation of employee stock ownership plans by listed companies

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In order to implement the Third Plenary Session of the 18th CPC Central Committee and the "

In order to implement the "Permit of the Central Committee of the Communist Party of China on Several Important Issues Concerning Comprehensively Deepening the Reform,"

In order to implement the spirit of the Third Plenary Session of the 18th CPC Central Committee and the "Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Market" (Guo Fa [2014] No. 17), the China Securities Regulatory Commission drafted The Guiding Opinions on the Pilot Project (hereinafter referred to as the Guiding Opinions) have been released with the consent of the State Council. The Guiding Opinions are divided into four parts, including the basic principles, main content, implementation procedures and information disclosure requirements of the employee stock ownership plan, and the supervision of the employee stock ownership plan, with a total of twenty articles. The relevant situation is explained as follows:

Drafting background

As an effective way for companies to encourage their employees to hold the company's stock, employee stock ownership plans are quite common in mature overseas markets. The pilot implementation of employee stock ownership plans by listed companies is conducive to establishing and improving the benefit-sharing mechanism between workers and owners, improving the level of corporate governance, and enhancing employee cohesion and company competitiveness.

The Third Plenary Session of the 18th CPC Central Committee decided to explicitly propose "allowing mixed ownership economy to implement employee shareholding to form a community of interests between capital owners and workers", providing a clear policy basis for implementing the employee shareholding plan. At present, the phenomenon of employee shareholding in listed companies is relatively common, and the sources of shareholding are diverse. The implementation of employee shareholding pilots in listed companies has a corresponding market basis. At present, there are no special laws and regulations regulating the management of employee shareholdings in listed companies. Rules need to be issued in time to strengthen information disclosure and prevent risks, so as to promote the openness, transparency and standardization of employee shareholding plans of listed companies.

The nature and basic principles of employee stock ownership plans

The Employee Stock Ownership Plan mentioned in the Guiding Opinions refers to a system arrangement in which a listed company obtains shares of the company and holds them for a long time in a legal manner according to the wishes of the employees, and shares are distributed to employees in accordance with the agreement. The holders of the employee shareholding plan are both the settlor and the beneficiary of the shareholding plan. The holders of the employee shareholding plan are entitled to share equity corresponding to the underlying stock based on the capital contribution. The stocks and funds held by the employee stock ownership plan are entrusted property, and the employee stock ownership plan management agency shall not classify the entrusted property into its inherent property.

The Guiding Opinions require that employee stock ownership plans comply with three principles: one is the principle of compliance with laws and regulations, the other is the principle of voluntary participation, and the third is the principle of own risk.

The main content of the "Guiding Opinions"

(1) Funds, stock sources, number and duration of shares held

Funds for employee shareholding plans come from employees' legal remuneration and other methods permitted by laws and administrative regulations. The employee shareholding plan can resolve stock sources by: (1) a listed company repurchasing the company's shares; (2) a secondary market purchase; (3) a subscription to non-publicly issued shares; (4) a voluntary gift from shareholders; Other methods permitted by laws and administrative regulations.

The total number of shares held by the employee stock ownership plan must not exceed 10% of the company's total share capital, and the total number of shares corresponding to the stock equity obtained by a single employee must not exceed 1% of the company's total share capital. The minimum shareholding period for each employee shareholding plan is no less than 12 months.

(II) Management of employee stock ownership plan

Employees can elect representatives or set up corresponding institutions through employee share plan holder meetings to supervise the day-to-day management of the employee share plan, exercise shareholder rights on behalf of the employee share plan holders, or authorize asset management institutions to exercise shareholder rights.

Listed companies can manage the company's employee stock ownership plan by themselves, or they can choose an independent third-party institution to entrust the employee stock ownership plan to a qualified asset management agency for management. Regardless of the management method adopted, the legitimate rights and interests of the employees of the employee shareholding plan should be effectively protected.

(3) Implementation procedures and information disclosure requirements

To implement the employee stock ownership plan, listed companies must fully implement the corresponding procedures in accordance with the provisions of the Guiding Opinions, and do a good job of information disclosure, promptly disclose the implementation of the stock ownership plan to the market, and accept market supervision. If an employee's shareholding plan and participating employees are required to perform the corresponding obligations in accordance with the law, they shall be performed in accordance with the law.

(IV) Supervision of employee stock ownership plans

The China Securities Regulatory Commission will supervise employee shareholding plans. The China Securities Regulatory Commission will punish those who commit illegal activities such as false statements, manipulation of the securities market, and insider trading.

In order to facilitate the information disclosure and account management of employee stock ownership plans, the Guiding Opinions stipulates that stock exchanges and securities registration and settlement agencies should clearly specify the information disclosure requirements of employee stock ownership plans and the requirements for registration and settlement business in their business rules.

Several issues that need to be explained

(I) Voluntary participation principle

Voluntary participation refers to whether employees participate in the employee stock ownership plan voluntarily. When a listed company implements its employee stock ownership plan, it shall fully solicit opinions from employees and perform corresponding procedures. Listed companies may not force employees to participate in the company's employee stock ownership plan by means of apportionment, forced distribution, etc.

(II) About the source of funds and stocks

Regarding the funds and stock sources for the implementation of employee stock ownership plans by listed companies, the Guiding Opinions provide corresponding provisions to support enterprises to resolve sources of funds and stocks in different ways within the scope permitted by laws and administrative regulations, and strengthen the employee stock ownership plans Operability.

(3) Voluntary donations by shareholders and company repurchased stocks to reward employees

Voluntary donation by shareholders as a way to resolve stock sources requires voluntary adoption by shareholders and the implementation of corresponding internal shareholder approval procedures. Voluntary donation by shareholders is a way for employees to obtain shares. After employees obtain company shares in this way, they can enjoy equal shareholder rights with other investors.

When the company adopts the method of repurchasing the company's stocks to reward employees, the employees 'voluntary participation and equal opportunities are used to resolve the sources of employees' shareholding plan shares, and fairness is guaranteed to the greatest extent through decision-making procedures such as shareholder meetings and employee congresses.

(IV) Term of employee stock ownership plan and target stock lock-up period

The employee shareholding plan is long-lasting and effective. The lock-up period for each period of employee shareholding plan is not less than 12 months, and the company can set a longer shareholding period on its own. The implementation of the employee shareholding plan in the form of non-public issuance. According to the "Administrative Measures for the Issuance of Securities by Listed Companies" and the "Detailed Implementation Rules for Non-public Issuance of Listed Companies", the holding period is determined to be 36 months.

(5) Linkage of the Guiding Opinions and related policies

The Guiding Opinions have direct guidance and normative functions for all types of listed companies. The implementation of employee stock ownership plans by listed companies should be based on the "Guidelines". In addition, the implementation of employee stock ownership plans by non-financial state-holding listed companies should comply with relevant state-owned asset supervision and management agencies' requirements for employee shareholding in mixed-ownership enterprises, and the implementation of employee stock ownership plans by financial state-owned listed companies should comply with the Ministry of Finance's financial regulations Provisions on employee shareholding in state-owned listed companies.

(6) Does the implementation of employee stock ownership plan require administrative permission?

Listed companies can implement employee stock ownership plans in different ways according to the Guidance. Except for public issuance, the China Securities Regulatory Commission has no administrative license for the implementation of employee stock ownership plans.

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