1. Cases
(1) Overview of the case
In December 2016, a listed company on the Shenzhen Stock Exchange held a general meeting of shareholders to deliberate and approve the "Proposal on the Company's < 2016 Restricted ** Incentive Plan (Draft) > and its Summary".
In January 2017, the company disclosed the "Announcement on the Completion of the Registration of the First Grant of Restrictive ** in 2016", which granted restrictive ** to Zhao, Song, Chen and other incentive objects, and the restricted ** granted was lifted in three phases.
During the implementation of the above-mentioned restrictive incentive plan, Mr. Zhao served as a supervisor of the company from April 2017 to April 2018. Mr. Song and Mr. Chen served as supervisors of the company on April 18, 2017 and January 4, 2019 respectively.
On December 2, 2017 and December 19, 2018, the company respectively disclosed the announcement on the achievement of the first and second lifting of the restriction period of the restricted incentive plan. Among them, the company disclosed that Zhao and Song met the conditions for lifting the sales restriction during the first and second release periods, and the information disclosure was untrue and inaccurate. On December 19, 2018, the company disclosed that Chen met the conditions for lifting the restriction during the second release period, but failed to timely disclose that he no longer met the conditions for lifting the restriction when he served as a supervisor on January 4, 2019.
The company shall repurchase and cancel the restricted ** held by Zhao Mouming, Song Mouhua and Chen since they served as supervisors, and Zhao, Song and Chen shall terminate the exercise of the rights and interests that have been granted but have not yet been exercised since they served as supervisors, and shall not lift the restrictive **. However, the company did not repurchase and cancel the above-mentioned incentive objects in accordance with the regulations, and had not yet lifted the restriction on sales, but handled the lifting of the restriction on sales for Zhao Mouming and Song Mouhua during the first release period, and the number of restricted sales was 14400,000 shares and 80,000 shares, listed and circulated in January 2018; Zhao Mouming, Song Mouhua, and Chen handled the second lifting of the sales restriction period, and the number of sales restrictions lifted was 1080,000 shares, 60,000 shares, 480,000 shares, listed and circulated on January 21, 2019.
As a result, the listed company, 2 supervisors, the secretary of the board of directors and the then supervisor were issued a regulatory letter by the Shenzhen Stock Exchange.
(2) Case analysis
According to Article 8 of the Measures for the Administration of Equity Incentives of Listed Companies, the incentive recipients shall not include independent directors and supervisors. Article 18 stipulates that in the course of the implementation of the equity incentive plan, if there are circumstances that prohibit the incentive object as stipulated in Article 8, the listed company shall not continue to grant its rights and interests, and the rights and interests that have been granted but not yet exercised shall be terminated. Zhao Mouming, Song Mouhua and Chen, the company's equity incentive objects, served as supervisors during the implementation of equity incentives, violating the "Measures for the Administration of Equity Incentives of Listed Companies" and the relevant regulations of the company. Therefore, the company should repurchase and cancel the restrictive ** held by Zhao Mouming, Song Mouhua and Chen Mouhua from the date of serving as supervisors, and should not handle the lifting of the restriction on sale.
2. It cannot be an equity incentiveRestrictive conditions of the implementation object
(1) For listed companies
1.The audit report of the financial accounting report of the most recent fiscal year has been issued by a certified public accountant with a negative opinion or cannot express an opinion;
2.The audit report on the internal control of financial reporting for the most recent fiscal year was issued by a certified public accountant with a negative opinion or unable to express an opinion;
3.Failure to distribute profits in accordance with laws and regulations, articles of association, and public commitments within the last 36 months after listing;
4.Where laws and regulations stipulate that equity incentives shall not be implemented;
5.Other circumstances as determined by the China Securities Regulatory Commission.
(2) For the incentive object
1.independent directors and supervisors;
2.Shareholders or actual controllers who individually or collectively hold more than 5% of the shares of listed companies and their spouses, parents and children (except for the Science and Technology Innovation Board, ChiNext and Beijing Stock Exchange);
3.Identified as an unsuitable person by the ** Exchange, the China Securities Regulatory Commission and its dispatched agencies in the last 12 months;
4.In the past 12 months, the China Securities Regulatory Commission (CSRC) and its dispatched agencies have been subject to administrative penalties or market bans for major violations of laws and regulations;
5.Those who are prohibited from serving as directors or senior managers of the company as stipulated in the Company Law of the People's Republic of China;
6.Insider trading occurs due to the disclosure of insider information such as the sale of the company's ** without knowing the inside information of the equity incentive;
7.Other laws and regulations stipulate that it is not allowed to participate in the equity incentive of a listed company;
8.Other circumstances as determined by the China Securities Regulatory Commission.
3. Under the New Company LawChanges in subject restriction requirements
(1) Changes in restrictions on entity requirements
1.close relatives of directors, supervisors and senior executives;
2.Enterprises directly or indirectly controlled by directors, supervisors, senior executives or their close relatives;
3.Affiliates who have other related relationships with directors, supervisors and senior executives.
(2) Understanding of changes to legal provisions
Article 182 of the Company Law does not clearly specify the object of the equity incentive under this article, but in fact, the equity incentive plan is also a contract or transaction, and this provision should be observed. The New Company Law draws on the relevant rules on related party transactions of directors, supervisors and senior executives of listed companies, and expands the definition of related party on the basis of the definition of related party in the current Company Law.
4. How does the company repurchase equity? What's changing in the new law?
In order to protect the rights of small and medium-sized shareholders, so that they can sell and withdraw from the company in a fair way under special circumstances. Article 74 of the old law regulates this issue, but the new law has been changed to article 89.
Compared with the old law, the new law adds the following points:
1.The controlling shareholder of the company abuses the rights of shareholders and seriously damages the interests of the company or other shareholders have the right to request the company to acquire its equity in accordance with a reasonable **.
2.The equity of the Company acquired by the Company due to the circumstances specified in paragraphs 1 and 3 of this Article shall be transferred or cancelled within six months in accordance with the law.
In a series of cases in comprehensive practice, it is not difficult to find that equity repurchase is not so difficult, and in general, it does not violate the mandatory provisions of the Company Law and the law, and the purpose is to help resolve shareholder conflicts and ensure the company's market survival. The law does not prohibit shareholders from withdrawing from the company outside of the statutory repurchase rights, which is also in line with the original legislative intent of supporting the autonomy of the parties.
Fifth, Ping's theory
1.In practice, there is often a misunderstanding that "equity incentive disputes" are an independent cause of action. However, in fact, the relevant disputes are often filed on the basis of "equity transfer disputes", "shareholder qualification confirmation disputes" and "shareholder capital contribution disputes". Therefore, lawyers should pay full attention to it when determining litigation strategies. From the perspective of prior prevention and control, when implementing an equity incentive plan, the dispute resolution procedures and reasons should be reasonably explained and agreed upon.
2.After the revision of the new law, the restrictions on the recipients of incentives are also clearer. In the newly amended provisions, the law focuses on protecting the legitimate rights and interests of other shareholders of the company, and greatly improves the exit mechanism.
3.In the above case, a typical situation has emerged, that is, the incentive recipient first participated in the incentive plan and then became a supervisor of the company. In fact, this situation is not uncommon, but how to deal with the relevant issues requires the attention of the company and its legal counsel and make relevant adjustments in a timely manner.
6. Governing Law
1. Articles 89 and 182 of the Company Law.
2. Articles 8 and 18 of the Measures for the Administration of Equity Incentives of Listed Companies.
That's all for today's sharing, for more legal issues of equity and M&A, welcome to pay attention to and consult Dr. Wang Ping, co-founder of ZhongYin Guangzhou Law Firm and a practical equity and M&A lawyer.