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Reorganizations, Cash Dividends and Share Repurchases


Recently, the China Securities Regulatory Commission, the Ministry of Finance, the State-owned Assets Supervision and Administration Commission, and the China Banking Regulatory Commission have jointly promulgated the Circular on Encouraging Mergers and Reorganizations, Cash Dividends, and Share Repurchases of Listed Companies (the "Circular") for implementation as of the date of promulgation.

The Circular requires that the market-oriented reform regarding mergers and reorganizations shall be vigorously promoted. It is imperative to fully sort out examination and approval items concerning mergers and reorganizations of listed companies, further streamline administration and delegate powers to lower levels, and expand the scope of cancelled examination and approval items. The Circular stresses that a listed company shall establish and perfect a cash dividends system, keep the consistency, rationality, and stability of cash dividends policies, and clarify in articles of association that cash dividends have priority over stock dividends among profit distribution approaches. A listed company competent to pay cash dividends shall distribute profits by cash dividends. In addition, the Circular also proposes that where the stock price of a listed company is lower than the net asset per share or its price earnings ratio or price-to-book ratio is a pre-set range lower than the average level of listed peers, the listed company may take the initiative to repurchase its shares.

Gong Chu, Oscar

A lawyer at DeHeng Law Offices (Shenzhen)

Floor 22/11/19/33, Section B, Anlian Plaza,

No. 4018, Jintian Rd., Shenzhen. 518026 P.R.C

Mobile: +86 135 9049 6399, +86 186 8246 3518