On December 15, 2023, China Securities Regulatory Commission (“CSRC”) issued the revised Rules for Share Repurchases by Listed Companies, and Shenzhen Stock Exchange (“SZSE”) issued the Guidelines for Self-regulation of Listed Companies No. 9 – Share Repurchase (Revised in 2023) (hereinafter referred to as the “Guidelines No. 9”). This revision aims to optimize and improve the repurchase system, better play the positive role of repurchase and promote the stable operation and high-quality development of the capital market.

In the early stage, public comments for the Guidelines No. 9 have been solicited. On the basis of fully absorbing reasonable suggestions from all sectors of society, this revision integrates the relevant requirements of the comprehensive registration-based IPO system reform and the reform of the independent director system. In accordance with the new revisions and adjustments of the higher-level rules, this revision focuses on optimizing and improving the following aspects.

Firstly, relaxing repurchase conditions. The Guidelines No. 9 further optimizes the implementing conditions for repurchase to improve the flexibility and convenience of listed companies in share repurchase. Among them, one of the conditions for repurchase necessary to preserve the company value and shareholders’ equity, namely, cumulative decline in the closing price of the company’s shares over 20 consecutive trading days, is changed from 30% to 20%. Meanwhile, the condition that repurchase can be implemented only after one year upon listing is adjusted to “six months upon listing”. In addition, the restrictions on window period for annual reports, semi-annual reports, quarterly reports, performance forecasts and preliminary earnings estimates are deleted.

Secondly, improving mechanism arrangements. The Guidelines No. 9 encourages listed companies to perfect the share repurchase mechanism in their articles of association or other governance documents, specifying specific arrangements such as trigger conditions and procedures for share repurchase. The Guidelines No. 9 also proposes to give full play to the role of the board of directors in preserving the company value and shareholders’ equity and promote the improvement of governance of listed companies.

Thirdly, ensuring effective system connection. The Guidelines No. 9 makes adjustments in accordance with the requirements of the comprehensive registration-based IPO system and specifies the specific time range in which share repurchase and share issuance cannot be conducted simultaneously. According to the latest requirements of the reform of the independent director system, the Guidelines No. 9 cancels the mandatory requirement for independent directors to express opinions on share repurchase and their obligation to disclose the relevant information.

Next, SZSE will earnestly implement the guidelines of the Central Economic Work Conference and the Central Financial Work Conference. Under the unified leadership of CSRC, we will adhere to the principles of seeking progress while maintaining stability, promoting stability through progress and building the new before discarding the old and firmly advance the key tasks of capital market reform, development and stability. We will also continuously improve the construction of basic systems, focus on enhancing the hub function of the capital market, further stimulate market vitality, boost market confidence and better serve high-quality economic and social development.