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China Securities Regulatory Commission
Circular of the China Securities Regulatory Commission on Promulgating the Measures Governing Equity Incentive Plans of Listed Companies
(For Trial Implementation)
CSRC Company [2005] No. 151
All the listed companies,
With a view to implementing the Some Opinions of the State Council on Promoting the Reform, Opening and Steady Growth of Capital Market
(No.3 [2004] of the State Council) and the Circular of the State Council on Transmitting the Opinions of the China Securities Regulatory
Commission on Improving the Quality of Listed Companies (No.34 [2005] of the State Council), further improving the governance structure
of listed companies, and promoting the regulatory operation and sustained development of listed companies, we hereby promulgate
the Measures for the Administration of Equity Incentive Plans of Listed Companies (For Trial Implementation). Any listed company
that has completed the share-trading reform may implement its equity incentive plan in light of the requirements of the present Measures,
and establish and perfect incentive and inhibiting system.
China Securities Regulatory Commission
December 31, 2005
The Measures Governing Equity Incentive Plans of Listed Companies (For Trial Implementation)
Chapter I General Principles
Article 1
For the purpose of promoting listed companies to establish and perfect their incentive and inhibiting systems, the present Measures
are formulated according as the Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China,
and other relevant laws and administrative regulations.
Article 2
The equity incentive as mentioned in the present Measures means: a listed company uses the stock of its own as the subject matter
to carry through the long-term incentive to its directors, supervisors, senior executives, and other employees.
The present Measures shall be applicable to the equity incentive plan implemented by a listed company through the granting of restricted
stocks, stock options, and by other ways as permitted by any law or administrative regulation.
Article 3
The equity incentive plan implemented by a listed company shall comply with the laws, administrative regulations, the provisions
of the present Measures, and the articles of the company regulation, and shall be conducive to the sustained development of the
listed company, and shall not damage the interests of the listed company.
When implementing the equity incentive plan, the directors, supervisors, and senior executives of a listed company shall, be honest
and in good faith, diligent, and maintain the interests of the company and all its shareholders.
Article 4
When implementing the equity incentive plan by a listed company shall fulfill its obligation of information disclosure in accordance
with the relevant provisions and the requirements of the present Measures strictly.
Article 5
Any professional institution that issues opinions for a listed company equity incentive plan shall be honest and in good faith, diligent,
and ensure that the documents it issues are truthful, accurate, and complete.
Article 6
No one may use the equity incentive plan to make the lowdown trading, manipulate the securities transaction prices, or carry out
the securities fraudulence activities.
Chapter II General Provisions
Article 7
In case a listed company has any of the following circumstances, it shall not be allowed to carry out the equity incentive plan:
1.
The registered accountants issued denial opinions on its annual financial statements in the recent fiscal year or an audit report
on which the opinions can not be expressed.
2.
An administrative punishment has been given by the China Securities Regulatory Commission (hereinafter referred to as the CSRC) due
to its grave violation of laws and regulations within the recent one year; or
3.
Other circumstances as determined by the CSRC.
Article 8
The incentive objects under the equity incentive plan (hereinafter referred to as the eligible participants) may include the directors,
supervisors, senior executives, and core technicians or business personnel in a listed company, and other employees that shall be
granted the equity incentive as the company may deem necessary, but shall not include independent directors.
The following personnel shall not be eligible incentive objects :
1.
Who are condemned publicly by a stock exchange or announced as inappropriate candidates in the recent three years;
2.
Who have been given an administrative punishment by the CSRC due to their grave violation of laws and regulations in the recent three
years; or
3.
Who are not permit as the directors, supervisors, or senior executives of a company according to the Company Law of the People’s
Republic of China.
After the equity incentive plan is adopted by the board of directors through discussion, the board of supervisors of the listed company
shall verify the name list of the incentive objects , and make statements on the verification at the shareholders’ meeting.
Article 9
The incentive objects are directors, supervisors, or senior executives, a listed company shall establish a performance examination
system and examination measures, and the performance examination target shall be the condition to implement the equity incentive
plan
Article 10
A listed company shall not be allowed to provide loans and any other form of finance subsidy to any incentive object according to
the equity incentive plan, including provide guarantee for his loans.
Article 11
A listed company that plans to implement equity incentive plan may, according to the actual conditions of its own company, solve the
source of the target stock through the following ways:
1.
Issuing shares to the incentive objects;
2.
Repurchasing the shares of the company; or
3.
Other ways that permitted by any law or administrative regulation.
Article 12
The aggregate target stock involved in all the effective equity incentive plans of a listed company shall not exceed 10% of the total
equity of the company.
Without the approval of the special resolution of the shareholders’ meeting, the aggregate stock of the company granted to any incentive
object through all the effective equity incentive plans shall not exceed 1% of the total equity of the company.
The total equity as mentioned in paragraphs one and two of this Article refers to the total equity that have been issued by the company
when the shareholders’ meeting approved the last equity incentive plan.
Article 13
A listed company shall set out or specify the following matters in its equity incentive plan:
1.
The purpose of the equity incentive plan;
2.
The basis for determining the incentive objects and the scope thereof;
3.
The quantity of rights and interests to be granted pursuant to, and the class, source, and number of the target stock involved in
the equity incentive plan, and the proportion of the target stock to the total equity of the listed company; in case the equity incentive
plan is implemented by stages, the quantity of rights and interests to be granted each time, and the class, source, and number of
the target stock involved in the equity incentive plan each time, as well as the proportion of the target stock to the total equity
of the listed company;
4.
The incentive objects are directors, supervisors, or senior executives, the quantity of rights and interests may be granted to them
respectively, and the proportions of the aggregate amount of rights and interests to be granted pursuant to the equity incentive
plan; the quantity of rights and interests granted to other incentive objects (respectively or according to the proper classification),
and the proportion of the aggregate amount of rights and interests to be granted under the equity incentive plan;
5.
The effective duration of the equity incentive plan, the date of grant, date of exercise, and the lockup period of the target stock;
6.
The grant price of the restricted stock and the method for determining the grant price, the exercise price of stock options or the
method for determining the exercise price;
7.
The conditions for an incentive object to be granted the rights and interests, and to exercise the rights, for example, the performance
examination system and examination measures, so as to be the condition to implement the equity incentive plan based on the performance
examination target;
8.
The quantity of rights and interests involved in the equity incentive plan, the quantity of the target stock, or the methods and procedures
for adjusting the grant price and the exercise price;
9.
The procedures for the company to grant rights and interests and for the incentive objects to exercise their power;
10.
The rights and obligations of the company and its incentive objects respectively;
11.
How to implement the equity incentive plan in case any alteration is happened to the controlling power of the company, merger, or
division of the company, or the incentive objects have their posts changed, removed, or die, and other matters;
12.
Alteration or termination of the equity incentive plan; and
13.
Other important matters.
Article 14
In case any of the circumstances occurs in Article 7 of the present Measures in a listed company, the equity incentive plan shall
be terminated, and the new rights and interests to the incentive objects shall not be granted continuously , and the exercise of
the rights and interests granted to the incentive objects but have not been exercised yet shall be terminated.
During the implementation of the equity incentive plan, if any incentive object is under any of the circumstances under which he shall
not be permitted as an incentive object as prescribed in Article 8 of the present Measures, the listed company shall not continuing
granting him any right and interest, and the exercise of the rights and interests that have been granted to him but have not been
exercised yet. shall be terminated.
Article 15
The transfer of the stocks obtained by incentive objects pursuant to the equity incentive plan shall comply with the relevant laws,
administrative regulations, and the provisions of the present Measures.
Chapter III Restricted Stocks
Article 16
The restricted stocks as mentioned in the present Measures shall refer to a certain number of stocks of a listed company that are
obtained by incentive objects according to the conditions as set forth in the equity incentive plan.
Article 17
A listed company shall, when granting restricted stocks to the incentive objects, prescribe the performance conditions and the banning
period of carry out in the equity incentive plan.
Article 18
In case a listed company determines the grant price of the restricted stocks on the basis of the market price of the stocks, it shall
not be permitted to grant stock to the incentive objects within the following periods:
1.
30 days before the release of its regular report;
2.
From the duration of the determination procedure of a major transaction or a great event until two trading days after the event is
announced; and
3.
From the day when other great event that may affect the stock price occurs until two trading days after the event is announced.
Chapter IV Stock Options
Article 19
The stock options as mentioned in the present Measures shall refer to the right of the incentive objects granted by a listed company
to purchase a certain number of shares of the company within a certain period in the future at the pre-determined price and conditions.
The incentive objects may purchase a certain number of shares of a listed company through the stock options granted to them at the
pre-determined price and conditions within a prescribed time limit, or may waive such right.
Article 20
The stock options granted to an incentive object shall not be transferred, used as guaranty or for repayment of debts.
Article 21
According to the stock options plan approved by the shareholders’ meeting through deliberation, the board of directors of a listed
company can determine to grant the stock options once for all or by installment, but the aggregate target stocks involved in the
stock options that are granted accumulatively shall not exceed the total target stocks involved in the stock options plan.
Article 22
The interval between the grant date of the stock options and the first exercisable date of the granted stock options shall not be
less than one year.
The effective duration of the stock options shall not exceed 10 years calculated from the date of grant.
Article 23
A listed company shall prescribe that the incentive objects exercise power by installment within the effective duration of the stock
options.
After the expiry of the effective duration of the stock options, no one can exercise the stock options that have been granted but
have not been exercised yet.
Article 24
When granting stock options to the incentive objects, a listed company shall, determine the exercise price or the method to determine
the exercise price. The exercise price shall not be lower than the following prices, whichever is higher:
1.
The closing sales price of the target stock of the company at one trading day before the promulgation of the excerpts of the draft
of the equity incentive plan; and
2.
The average closing sales price of the target stock of the company within 30 trading days before the promulgation of the excerpts
of the draft of the equity incentive plan.
Article 25
In case a listed company needs to adjust the exercise price or the number of stock options due to ex-right or ex-dividend of the target
stocks or other reasons, it may make adjustment according to the principles and ways as set forth in the stock options plan.
In case a listed company adjusts the exercise price or the number of stock options according to the preceding paragraph, which shall
be made by the way of a resolution made by its board of directors and approved by the shareholders’ meeting after deliberation, or
be determined by the board of directors upon the authorization of the shareholders’ meeting.
The attorney shall issue the professional opinions to the board of directors on whether the aforesaid adjustment complies with the
present Measures, the articles of regulation of the company, and the provisions of the stock options plan.
Article 26
A listed company shall not be permit to grant stock options to the incentive objects within the following periods:
1.
30 days before the promulgation of the regular report;
2.
From the duration of the determination procedure of a major transaction or a great event until 2 trading days after the matter is
announced; and
3.
From the day when any other great event that may affect the stock price occurs until 2 trading days after the matter is announced.
Article 27
The incentive objects shall exercise power from the second trading day after the announcement of the regular report of a listed company,
until 10 trading days before the announcement of the next regular report, but shall not exercise power during the following periods:
1.
From the duration of the determination procedure of a major transaction or a great event until 2 trading days after the matter is
announced; and
2.
From the day when any other great event that may affect the stock price occurs until 2 trading days after the announcement is made.
Chapter V Implementation Procedures and Information Disclosure
Article 28
The salary and examination committee established under the board of directors of a listed company shall be responsible for drafting
out the draft of an equity incentive plan. The salary and examination committee shall establish sound rules of procedure, and the
draft of the equity incentive plan drafted by it shall be submitted to the board of directors for discussion.
Article 29
The independent director shall present his independent opinions on whether the equity incentive plan is conducive to the sustained
development of a listed company, and whether it obviously damaged the interests of the listed company and all of its shareholders.
Article 30
A listed company shall, within 2 trading days after its board of directors has adopted the draft of the equity incentive plan through
deliberation, announce the resolutions of the board of directors, the draft summary of the equity incentive plan, and the opinions
of the independent director.
The draft summary of the equity incentive plan shall at least include the contents as set forth in items (1) to (8), and item (12)
of Article 13 of the present Measures.
Article 31
A listed company shall retain an attorney to issue legal opinion on its equity incentive plan, and present professional opinions
at least on the following matters:
1.
Whether the equity incentive plan complies with the provisions of the present Measures;
2.
Whether it has gone through legal procedures for the equity incentive plan;
3.
Whether the listed company has fulfilled its obligation on information disclosure;
4.
Whether there is any circumstance that obviously damages the interests of the listed company and all of its shareholders, and circumstance
that is in violation of the relevant laws and administrative regulations in the equity incentive plan; and
5.
Other matters need to be stated.
Article 32
When the salary and examination committee under the board of directors of a listed company believes necessary, it may request the
listed company to retain an independent financial consultant to issue professional opinions on the feasibility of the equity incentive
plan, whether it is conducive to the sustained development of the listed company, whether it damages the interests of the listed
company, as well as its affect to the shareholders’ interests.
The independent financial consultant shall issue a report of an independent financial consultant, or present the professional opinions
at least on the following matters:
1.
Whether the equity incentive plan complies with the provisions of the present Measures;
2.
The feasibility of implement the equity incentive plan by the company;
3.
The checking opinions on the scope and qualification of the incentive objects.
4.
The checking opinions on the amount of rights and interests granted under the equity incentive plan;
5.
Financial measurement on the company’s implementation of the equity incentive plan;
6.
The impact of implementation of equity incentive plan by the company on the sustained management capacity of the listed company and
shareholders’ rights and interests;
7.
The checking opinions on whether the listed company has provided any form of financial imbursement to the incentive objects;
8.
Whether the equity incentive plan exists any circumstance that obviously damages the interests of the listed company and all of its
shareholders;
9.
The reasonableness of the performance examination system and examination measures of the listed company; and
10.
Other matters that shall be stated.
Article 33
After the equity incentive plan is approved by the board of directors through deliberation, a listed company shall report the relevant
documents to the CSRC for archival filing, and send the copies to the stock exchange and the securities regulatory bureau at the
locality of the company at the same time.
The archival filing documents of the equity incentive plan of a listed company shall include following documents:
1.
Resolution of the board of directors;
2.
The equity incentive plan;
3.
Legal opinion;
4.
The report of an independent financial consultant in case an independent financial consultant is retained;
5.
The relevant documents of approval in case the implementation of the equity incentive plan by a listed company shall be approved
by the relevant departments in accordance with the regulation; and
6.
Other documents to be required by CSRC.
Article 34
If CSRC does not demur to the application materials for archival filing of the equity incentive plan within 20 workdays from the
day when it receives the complete application materials, a listed company may deliver a notice for convening the shareholders’ meeting
to discuss and implement the equity incentive plan. If CSRC demur within the aforesaid time limit, the listed company shall not
deliver a notice for convening the shareholders’ meeting and implement the equity incentive plan.
Article 35
A listed company shall, when delivering a notice for convening shareholders’ meeting, publicize the legal opinion at the same time;
if it has retained an independent financial consultant, it shall also publicize the report of the independent financial consultant.
Article 36
An independent director shall collect entrusted vote right to all the shareholders with regard to the equity incentive plan.
Article 37
The shareholders’ meeting shall vote on the following contents of the equity incentive plan:
1.
The quantity of rights and interests, and the class, source, and number of target stock concerned in the equity incentive plan;
2.
The determining basis and scope of the incentive objects;
3.
The amount of rights and interests granted to directors and supervisors under the equity incentive plan respectively and the method
for determination of the amount of rights and interests; the amount of rights and interests granted to senior executives and other
incentive objects (respectively or according to proper classification), or the method for determination of the amount of rights and
interests;
4.
The valid period of the equity incentive plan, and the lockup period of the target stock;
5.
The conditions on which the incentive objects may be granted rights and interests and exercise power;
6.
The grant price of the restricted stock or the determination method to the grant price, the exercise price of the stock options or
the determination method to the exercise price;
7.
The quantity of rights and interests, number of target stock, and the adjusting method and procedures to the grant price and the
exercise price concerned in the equity incentive plan;
8.
Alteration and termination of the equity incentive plan;
9.
The authorization to the board of directors on handling the relevant matters of the equity incentive plan; and
10.
Other matters need to be voted by the shareholders’ meeting.
The resolutions shall be made by the shareholders’ meeting on the aforesaid matters and adopted by more than two thirds of the voting
rights held by the presenting shareholders.
Article 38
After an equity incentive plan is adopted by the shareholders’ meeting through discussion, a listed company shall handle information
disclosure matters at the stock exchange, and handle the relevant depository and clearing matters at the securities depository and
clearing institutions with the relevant documents
Article 39
A listed company shall open a securities account at the securities depository and clearing institution in accordance with the business
rules of the securities depository and clearing institution for the implementation of the equity incentive plan.
Any stock options that have not been exercised, and the target stock that can not be transferred shall be locked up.
Article 40
After the incentive objects’ application for the exercise of the stock options and the lock and unlock of the restricted stock are
confirmed by the board of directors or the institution authorized by the board of directors, a listed company shall file an application
for the exercise to the stock exchange, after the stock exchange has made confirmation on it, the securities depository and clearing
institution shall handle the depository and clearing matters.
The stock options that have been exercised shall be written off timely.
Article 41
Unless being authorized clearly by the shareholders’ meeting, a listed company shall apply to the shareholders’meeting for deliberation
and approval to alter the matters listed in Article 37 of the present Measures in the equity incentive plan.
Article 42
A listed company shall disclose the implementation situation of the equity incentive plan in its regular report within the report
period, including:
1.
the scope of incentive objects within the report period;
2.
the aggregate amount of rights and interests granted, exercised, and invalidated within the report period;
3.
the accumulated aggregate amount of rights and interests having been granted but not exercised at the end of the report period;
4.
all previous adjustment on the grant price and the exercise price within the report period and the updated grant price and exercise
price after the adjustment;
5.
name and duties of directors, supervisors, and senior executives respectively, and the situation of all previous granted to and exercise
of power by them within the report period;
6.
equity alteration situation due to the exercise of power by incentive objects; and
7.
accounting disposal method for equity incentive.
Article 43
A listed company shall disclose the accounting disposal of equity incentive in its financial statements according to the relevant
provisions.
Article 44
A stock exchange shall clarify the requirements for information disclosure concerned in the equity incentive plan in its business
rules.
Article 45
The securities depository and clearing institution shall clarify the requirements for handling depository and clearing business involved
in the equity incentive plan in its business rules.
Chapter VI Supervision and Punishment
Article 46
In case there is any false records in the financial and accounting documents of a listed company, the incentive object who is responsible
shall return all the interests he has obtained pursuant to the equity incentive plan within 12 months from the day when the financial
and accounting documents are announced.
Article 47
In case a listed company implements the equity incentive plan without complying with the provisions of the present Measures, the CSRC
shall order it to correct, and give a punishment to the company and the relevant responsible persons according to law. During the
period of ordering correction, the CSRC shall not accept the application documents of the company.
Article 48
In case a listed company fails to disclose the relevant information of the equity incentive plan according to the present Measures
and other relevant provisions, or the information disclosed by it has false recordation, misguide statement , or great omission,
the CSRC shall order it to correct, and give a punishment to the company and the relevant persons held to be responsible according
to law.
Article 49
In case anyone makes up a story on the performance, manipulates market or makes lowdown trading, obtains improper interests by making
use of the equity incentive plan, the CSRC shall confiscate the illegal gains according to law, and take market entering prohibition
measures and other measures to the relevant person who is held to be liable, if a crime come into existence, he shall be transferred
to the judicial department for investigation and punishment according to law.
Article 50
In case the relevant professional institutions that issue opinions on the equity incentive plan for a listed company fails to fulfill
the diligent duty, or the professional opinions issued by them have false record, misguiding statement, or great omission, the CSRC
shall take such measures as the supervision talk, issuing warning letter, ordering to rectify, and etc. to the relevant professional
institutions and the personnel who signed on the opinions, and transfer them to the competent departments in charge of the relevant
professional institutions for punishment; if the circumstance is serious, they shall be given warnings, fines and other punishment;
if an illegal securities act come into existence, they shall be subject to legal liabilities according to law.
Chapter VII Supplementary Provisions
Article 51
The following terms in the present Measures shall have the following meanings:
“Senior Executive” means a manager, vice-manager, person-in-charge of finance, secretary of the board of directors of a listed company,
and other personnel prescribed by the articles of regulation of the company.
“Target Stocks” means the stocks of a listed company granted to or purchased by the incentive objects under the authorization pursuant
to the equity incentive plan.
“Rights and Interests” means the stocks and stock options obtained by the incentive objects pursuant to the equity incentive plan.
“Day of Grant” means the day when a listed company grants stock options to the incentive objects. The day of grant shall be the
trading day.
“Exercise” means the act of an incentive object who purchases the shares of a listed company with the pre-determined price and condition
within a prescribed time limit pursuant to the equity incentive plan.
“Day of Exercise” means the day when the incentive objects may start exercise their powers. The day of exercise shall be the trading
day.
“Exercise Price” means the price is determined by a listed company to the incentive objects when it grants stock options for encourage
them to purchase the shares of the listed company.
“Grant Price” means the price is determined by a listed company to the incentive objects when it grants restricted stock for encourage
them to purchase the shares of the listed company.
The expressions “exceed”, “less than” as mentioned in the present Measures shall not include the said number itself.
Article 52
The present Measures shall be applicable to the companies who are listed in Shanghai Stock Exchange and Shenzhen Stock Exchange.
Article 53
The present Measures shall come into
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China Securities Regulatory Commission
Notice of China Securities Regulatory Commission on Relating Issues of Investment Bank Funds Deposit in Monetary Market
Zheng Jian Fa [2005] No.121
Fund management companies, fund trusteeship banks:
In order to further standardize the operation of fund investment in monetary market, to promote the sound development of monetary
market funds, in accordance with such laws and rules as Law of The People’s Republic of China on Securities Investment Fund, the
Measures for the Administrative Operation of the Securities Investment Fund, Interim Provisions on the Management of Monetary Market
Funds and etc., notice of the relating issues on fund investment bank deposit in monetary market is hereby given as follows:
1.
Monetary market funds may be invested in cash deposit, deposit at call, deposit within one year (one year included).
2.
Deposit bank of the fund in monetary market shall be the commercial banks which enjoy the qualification of fund trustee, of commission
operation of securities investment funds, or of the trustee of investor(s) of legal foreign investment institutions.
3.
The investment of monetary market funds in time deposit shall not exceed 30% of the net value of fund asset.
4.
Monetary market funds invested in bank deposit shall sign general cooperative agreement with the parent bank or its authorized branches
and deposit funds wherein.
5.
Monetary market funds invested in bank deposit shall sign detailed agreement with the deposit bank and clarify such particulars as
type of deposit, time limit, interest rate, sum, account number, means of reconciliation, means of withdrawal, accountant management.
Clauses of early withdrawal in the agreement of time deposit shall be agreed on for the purpose of preventing liquidity risk in special
cases.
6.
Fund manager and fund trustee shall establish time conciliation mechanism with deposit bank(s) to ensure the authenticity and veracity
of the monetary market funds deposit account and its accounting.
7.
Fund manage and fund trustee shall, in accordance with the Notice herein and the relating provisions and the written agreement signed
on the basis of bank deposit of monetary market funds, define the rights and obligations and responsibilities of the two parties
in such procedures as agreement signing, account opening and management, delivery and implementation of investment order, fund appropriation,
account checking, maturity honor, documents custody, and the issue, delivery and custody of deposit confirmation so as to ensure
fund asset safety and the legitimate interest of fund holders.
8.
Fund manager shall strengthen the assessment and research on bank deposit of monetary market funds , establish and perfect , with
regard to bank deposit, its business process, duty and responsibility and risk controls and supervision and auditing system.
9.
Fund trustee shall strengthen the supervision and auditing on bank deposit of monetary market funds, strictly examine and review such
documents as the relating agreements, accountant data, investment directive, deposit confirmation, and severely actualize the custody
duties.
10.
Fund manage and fund trustee shall, when carrying out deposit operation of monetary market funds, strictly abide by such provisions
as The People’s Republic of China on Securities Investment Fund, the Measures for the Administrative Operation of the Securities
Investment Fund, Interim Provisions on the Management of Monetary Market Funds and etc., and those national provisions relating to
account management, interest administration, payment settlement and etc.
11.
This Notice shall come into effect as of the date of its promulgation.
China Securities Regulatory Commission
November 21, 2005
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