China: CSRC Releases Regulatory Guideline for Stock Incentive and Employee Stock Ownership Plans

The China Securities Regulatory Commission released the Guideline No. 6 for Supervision of Unlisted Public Companies – Regulatory Requirements for Stock Incentive and Employee Stock Ownership Plans (Trial) (the “Guideline”).  The Guideline consists of 3 parts.  The first part of the Guideline defines the recipients, incentive mode and pricing methods of stock incentive and stipulates performance appraisal indicators, rights exercising by stages, information disclosure and etc.  The second part of the Guidline focuses on the employee stock ownership plans (“ESOP”) and sets requirements for the source of funds and stocks in the ESOP, forms of shareholding, management methods and for information disclosure.  The third part of the Guideline explicitly prohibits illegal activities such as insider trading by means of stock incentive and ESOP.  The National Equities Exchange and Quotations (“NEEQ”) also released the Guidelines for Handling the Stock Incentive and Employee Stock Ownership Plans.  The regulatory system for stock incentive and ESOP in NEEQ now has been officially implemented.

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