Administrative Measures for the Pilot Program for Preferred Shares (Revised 2023)
Administrative Measures for the Pilot Program for Preferred Shares (Revised 2023)
Administrative Measures for the Pilot Program for Preferred Shares (Revised 2023)
Order of the China Securities Regulatory Commission No.209
February 17, 2023
The Administrative Measures for the Pilot Program for Preferred Shares, adopted at the 2nd executive meeting of the China Securities Regulatory Commission in 2023 on February 17, 2023, are hereby promulgated with immediate effect.
Yi Huiman, Chairman of the China Securities Regulatory Commission
Annex 1: Administrative Measures for the Pilot Program for Preferred Shares (Revised 2023)
(Adopted at the 16th Chairman's office meeting of the China Securities Regulatory Commission on December 9, 2013, amended by the China Securities Regulatory Commission's Decision on Amending Some Securities and Futures Regulations dated June 11, 2021, and revised at the 2nd meeting of the China Securities Regulatory Commission in 2023)
Chapter I General Provisions
Article 1 The Administrative Measures for the Pilot Program for Preferred Shares (hereinafter referred to as the "Measures") are formulated in accordance with the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), the Securities Law of the People's Republic of China (hereinafter referred to as the "Securities Law"), the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares and the relevant laws and regulations to standardize the issuance and transaction of preferred shares and protect the legal rights and interests of investors.
Article 2 The preferred shares in the Measures refer to the type of shares that is otherwise provided, other than the type of ordinary shares that is generally provided, according to the Company Law, and holders of which precede over holders of ordinary shares in distributing company profit and residual property but are restricted in rights rush as participation in decision-making management of company.
Article 3 Listed companies may issue preferred shares, and unlisted public companies may issue preferred shares to specified investors.
Article 4 The pilot program for preferred shares shall comply with the Company Law, the Securities Law, the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares and the relevant provisions of the Measures and follow the principles of openness, justice and fairness, without fraud, insider trading or market manipulation.
Article 5 Securities companies and other securities service agencies participating in the pilot program for preferred shares shall observe the relevant provisions of laws, regulations and rules of China Securities Regulatory Commission (hereinafter referred to as the "CSRC"), abide by the operation standards and code of conduct recognized in the industry, and be honest, trustworthy and diligent.
Article 6 During the pilot program, preferred shares with different priorities in respect of dividend distribution and residual property distribution shall not be issued, but those with different settings in other terms may be issued.
The issuance of preferred shares with and without mandatory dividend by the same company is not the issuance of preferred shares with different priorities in dividend distribution.
Article 7 Preferred shares under the same terms shall have the same right. The issuance condition, price and nominal dividend rate for each share of preferred shares issued at the same time under the same terms shall be the same; any entity or individual shall pay the same price for the shares they subscribe for.
Chapter II Exercise of Preferred Shareholders' Rights
Article 8 Companies issuing preferred shares shall, in addition to preparing the relevant provisions of articles of association in accordance with the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares, specify the relevant rights and obligations of preferred shareholders in the articles of association in accordance with the Measures.
Article 9 For preferred shareholders being entitled to participate in the residual profit distribution with ordinary shareholders after dividend distribution at the agreed dividend rate, the articles of association shall specify the proportion, conditions and other matters in relation to the participation by the preferred shareholders in the residual profit distribution.
Article 10 In any of the following cases, a company to hold the general meeting shall inform the preferred shareholders and follow the procedures provided in the Company Law and the articles of association for informing ordinary shareholders. Preferred shareholders shall be entitled to attend the general meeting and vote for the following matters with ordinary shareholders by category and has one vote for each preferred share it holds, provided that there are no votes for the company's preferred shares that the company holds:
(1) revision of contents of the articles of association related to preferred shares;
(2) reduction of registered capital of the company by more than 10% at one time or cumulatively;
(3) merger, division and dissolution of the company or change of corporation form;
(4) issuance of preferred shares;
(5) other circumstances specified by the articles of association.
The resolution on above matters shall be passed in the general meeting with more than two thirds of voting rights of ordinary shareholders (including the preferred shareholders whose voting right is restored) as well as more than two thirds of voting rights of preferred shareholders (excluding the preferred shareholders whose voting right is restored).
Article 11 The general meeting of a company may authorize the board of directors to pay the dividend of preferred shares as per the agreement in the articles of association. Where a company fails to pay the dividend of preferred shares as agreed for three accumulative fiscal years or two consecutive fiscal years, from the day following the date when the general meeting approved the program not to distribute profit as agreed, preferred shareholders shall be entitled to present the general meeting and vote together with ordinary shareholders, and each preferred share shall enjoy a certain proportion of voting right as specified in the articles of association.
For preferred shares whose dividend can be accumulated to the next fiscal year, the voting right shall be restored until the company pays all dividends outstanding. For preferred shares whose dividend cannot be accumulated, the voting right shall be restored until the company pays all dividends of the current year. The articles of association may specify other conditions to restore the preferred share voting right.
Article 12 Preferred shareholders shall be entitled to access the articles of association, register of shareholders, corporation bonds stud, minutes of general meeting, resolutions of the board of directors, resolutions of the board of supervisors, and financial and accounting reports.
Article 13 Repurchase of preferred shares by an issuer includes two situations, namely redemption of preferred shares upon requirement by the issuer and put of preferred shares upon requirement by investors, and specific conditions for such repurchase shall be stipulated in the articles of association and in the prospectus. Where an issuer requires redemption of the preferred shares, it must pay all dividends outstanding, except where a commercial bank issues preferred shares for replenishing its capital. After the repurchase of preferred shares, the total number of preferred shares outstanding shall be written down.
Article 14 Directors, supervisors and senior management of a company shall declare to the company the preferred shares of the company they hold and variation of the preferred shares, and shall not transfer more than 25% of the company's total preferred shares they hold each year within their tenure. The articles of association may provide other restrictive provisions on transfer by directors, supervisors and senior management of the company of the preferred shares of the company they hold.
Article 15 In addition to the provisions of the Guiding Opinions of the State Council on Launch of the Pilot Program for Preferred Shares, the number of shareholders and the shareholding ratio shall be calculated for ordinary and preferred shares respectively.
Article 16 Where fixed dividend rate is specified for preferred shares in the articles of association, the same fixed dividend rate may be adopted in the duration of preferred shares, or the fixed dividend rate of each year shall be specified, and the rate of each year may be different; where floating dividend rate is specified for preferred shares in the articles of association, the calculation method for notional dividend rate in the duration of preferred shares shall be specified.
Chapter III Issuance of Preferred Shares by Listed Companies
Section 1 General Provisions
Article 17 Listed companies shall be separated from their controlling shareholders or actual controllers in respect of personnel, assets and finance, and be independent in organization and operation.
Article 18 Listed companies shall have sound internal control systems to ensure their effective operation, conformance with laws and regulations and reliability of financial reports, and the effectiveness of internal control shall be free from any major defect.
Article 19 Where a listed company plans to issue preferred shares, its annual average distributive profit in the latest three fiscal years shall not be less than the dividend of preferred shares of one year.
Article 20 The cash bonus of listed companies in the latest three years shall meet the articles of association and relevant regulatory provisions of the CSRC.
Article 21 Listed companies shall not have any material irregular accounting transactions in the reporting period.
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Order of the China Securities Regulatory Commission No.209
February 17, 2023
The Administrative Measures for the Pilot Program for Preferred Shares, adopted at the 2nd executive meeting of the China Securities Regulatory Commission in 2023 on February 17, 2023, are hereby promulgated with immediate effect.
Yi Huiman, Chairman of the China Securities Regulatory Commission
Annex 1: Administrative Measures for the Pilot Program for Preferred Shares (Revised 2023)
(Adopted at the 16th Chairman's office meeting of the China Securities Regulatory Commission on December 9, 2013, amended by the China Securities Regulatory Commission's Decision on Amending Some Securities and Futures Regulations dated June 11, 2021, and revised at the 2nd meeting of the China Securities Regulatory Commission in 2023)
Chapter I General Provisions
Article 1 The Administrative Measures for the Pilot Program for Preferred Shares (hereinafter referred to as the "Measures") are formulated in accordance with the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), the Securities Law of the People's Republic of China (hereinafter referred to as the "Securities Law"), the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares and the relevant laws and regulations to standardize the issuance and transaction of preferred shares and protect the legal rights and interests of investors.
Article 2 The preferred shares in the Measures refer to the type of shares that is otherwise provided, other than the type of ordinary shares that is generally provided, according to the Company Law, and holders of which precede over holders of ordinary shares in distributing company profit and residual property but are restricted in rights rush as participation in decision-making management of company.
Article 3 Listed companies may issue preferred shares, and unlisted public companies may issue preferred shares to specified investors.
Article 4 The pilot program for preferred shares shall comply with the Company Law, the Securities Law, the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares and the relevant provisions of the Measures and follow the principles of openness, justice and fairness, without fraud, insider trading or market manipulation.
Article 5 Securities companies and other securities service agencies participating in the pilot program for preferred shares shall observe the relevant provisions of laws, regulations and rules of China Securities Regulatory Commission (hereinafter referred to as the "CSRC"), abide by the operation standards and code of conduct recognized in the industry, and be honest, trustworthy and diligent.
Article 6 During the pilot program, preferred shares with different priorities in respect of dividend distribution and residual property distribution shall not be issued, but those with different settings in other terms may be issued.
The issuance of preferred shares with and without mandatory dividend by the same company is not the issuance of preferred shares with different priorities in dividend distribution.
Article 7 Preferred shares under the same terms shall have the same right. The issuance condition, price and nominal dividend rate for each share of preferred shares issued at the same time under the same terms shall be the same; any entity or individual shall pay the same price for the shares they subscribe for.
Chapter II Exercise of Preferred Shareholders' Rights
Article 8 Companies issuing preferred shares shall, in addition to preparing the relevant provisions of articles of association in accordance with the Guiding Opinions of the State Council on Launch of Pilot Program for Preferred Shares, specify the relevant rights and obligations of preferred shareholders in the articles of association in accordance with the Measures.
Article 9 For preferred shareholders being entitled to participate in the residual profit distribution with ordinary shareholders after dividend distribution at the agreed dividend rate, the articles of association shall specify the proportion, conditions and other matters in relation to the participation by the preferred shareholders in the residual profit distribution.
Article 10 In any of the following cases, a company to hold the general meeting shall inform the preferred shareholders and follow the procedures provided in the Company Law and the articles of association for informing ordinary shareholders. Preferred shareholders shall be entitled to attend the general meeting and vote for the following matters with ordinary shareholders by category and has one vote for each preferred share it holds, provided that there are no votes for the company's preferred shares that the company holds:
(1) revision of contents of the articles of association related to preferred shares;
(2) reduction of registered capital of the company by more than 10% at one time or cumulatively;
(3) merger, division and dissolution of the company or change of corporation form;
(4) issuance of preferred shares;
(5) other circumstances specified by the articles of association.
The resolution on above matters shall be passed in the general meeting with more than two thirds of voting rights of ordinary shareholders (including the preferred shareholders whose voting right is restored) as well as more than two thirds of voting rights of preferred shareholders (excluding the preferred shareholders whose voting right is restored).
Article 11 The general meeting of a company may authorize the board of directors to pay the dividend of preferred shares as per the agreement in the articles of association. Where a company fails to pay the dividend of preferred shares as agreed for three accumulative fiscal years or two consecutive fiscal years, from the day following the date when the general meeting approved the program not to distribute profit as agreed, preferred shareholders shall be entitled to present the general meeting and vote together with ordinary shareholders, and each preferred share shall enjoy a certain proportion of voting right as specified in the articles of association.
For preferred shares whose dividend can be accumulated to the next fiscal year, the voting right shall be restored until the company pays all dividends outstanding. For preferred shares whose dividend cannot be accumulated, the voting right shall be restored until the company pays all dividends of the current year. The articles of association may specify other conditions to restore the preferred share voting right.
Article 12 Preferred shareholders shall be entitled to access the articles of association, register of shareholders, corporation bonds stud, minutes of general meeting, resolutions of the board of directors, resolutions of the board of supervisors, and financial and accounting reports.
Article 13 Repurchase of preferred shares by an issuer includes two situations, namely redemption of preferred shares upon requirement by the issuer and put of preferred shares upon requirement by investors, and specific conditions for such repurchase shall be stipulated in the articles of association and in the prospectus. Where an issuer requires redemption of the preferred shares, it must pay all dividends outstanding, except where a commercial bank issues preferred shares for replenishing its capital. After the repurchase of preferred shares, the total number of preferred shares outstanding shall be written down.
Article 14 Directors, supervisors and senior management of a company shall declare to the company the preferred shares of the company they hold and variation of the preferred shares, and shall not transfer more than 25% of the company's total preferred shares they hold each year within their tenure. The articles of association may provide other restrictive provisions on transfer by directors, supervisors and senior management of the company of the preferred shares of the company they hold.
Article 15 In addition to the provisions of the Guiding Opinions of the State Council on Launch of the Pilot Program for Preferred Shares, the number of shareholders and the shareholding ratio shall be calculated for ordinary and preferred shares respectively.
Article 16 Where fixed dividend rate is specified for preferred shares in the articles of association, the same fixed dividend rate may be adopted in the duration of preferred shares, or the fixed dividend rate of each year shall be specified, and the rate of each year may be different; where floating dividend rate is specified for preferred shares in the articles of association, the calculation method for notional dividend rate in the duration of preferred shares shall be specified.
Chapter III Issuance of Preferred Shares by Listed Companies
Section 1 General Provisions
Article 17 Listed companies shall be separated from their controlling shareholders or actual controllers in respect of personnel, assets and finance, and be independent in organization and operation.
Article 18 Listed companies shall have sound internal control systems to ensure their effective operation, conformance with laws and regulations and reliability of financial reports, and the effectiveness of internal control shall be free from any major defect.
Article 19 Where a listed company plans to issue preferred shares, its annual average distributive profit in the latest three fiscal years shall not be less than the dividend of preferred shares of one year.
Article 20 The cash bonus of listed companies in the latest three years shall meet the articles of association and relevant regulatory provisions of the CSRC.
Article 21 Listed companies shall not have any material irregular accounting transactions in the reporting period.
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