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Rules and Regulations
  • Index number:
    000014453-2012-00145
  • Dispatch date:
    2012-05-15
  • Publish organization:
    State Administration of Foreign Exchange
  • Exchange Reference number:
  • Name:
    Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration over Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies
Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration over Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies

The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government; the branches in Shenzhen, Dalian , Qingdao , Xiamen , and Ningbo ; and all designated Chinese-funded foreign exchange banks:

 

In order to regulate and improve the foreign exchange administration over  involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies, in accordance with the Regulations on the Foreign Exchange Administration of the People’s Republic of China, the Measures for the Administration of Individual Foreign Exchange Rules (Decree No. 3 [2006] of the People’s Bank of China), and relevant regulations and provisions, the relevant matters are hereby notified as follows:

 

I. “Overseas Listed Companies” stated in this Circular refer to companies listed on overseas stock exchanges (including that of Hong Kong, Macau, and Taiwan ).

 

“Equity Incentive Plans” refer to the plans of Overseas Listed Companies, in terms of their own stocks, to provide equity incentives in the domestic companies to such individuals who have employment or labor relations with the companies as directors, supervisors, senior management, and other employees, including stock option plans, employee stock ownership plans, and other equity incentive methods permitted by the laws and regulations.

 

“Domestic Companies” refer to domestic institutions, such as Overseas Listed Companies registered in China, Overseas Listed Companies’ branches (including representative offices) in China, and parent companies, subsidiaries, or partnership enterprises at all levels in China that have shareholding relationships or actual control relationships with the Overseas Listed Companies.

 

“Domestic Individuals” (hereinafter referred to as “Individuals”) refer to the directors, supervisors, senior management, and other employees of Domestic Companies as specified in Article 52 of the Regulations on the Foreign Exchange Administration of the People’s Republic of China, including Chinese citizens (including those of Hong Kong, Macau, and Taiwan) and foreign individuals.

 

II. The Individuals involved in an Equity Incentive Plan of an Overseas Listed Company shall, through the Domestic Company with which they are affiliated, entrust a domestic agency (hereinafter referred to as the “Domestic Agency”) to centrally handle relevant matters such as the foreign exchange registration, the account opening, and the fund transfer and exchange; and the matters of the above Individuals such as option exercises, purchases and sales of relevant stocks or equities, and relevant fund transfers shall be centrally handled by an overseas institution (hereinafter referred to as the “Overseas Trustee”).

 

The Domestic Agency shall be a Domestic Company involved in the Equity Incentive Plan, or another domestic institution which may handle asset custody business and is selected by the Domestic Company in accordance with the law.

 

III. The Domestic Agency shall, in terms of the involvement of Individuals in Equity Incentive Plans, centrally handle the foreign exchange registration with the local branches or offices of the State Administration of Foreign Exchange (SAFE) (hereinafter referred to as the “local foreign exchange authorities”) upon the strength of the following materials:

 

(1) A written application, together with the Foreign Exchange Registration Form for the Involvement of Domestic Individuals

in Equity Incentive Plans of Overseas Listed Companies (see Annex 1, hereinafter referred to as the “Foreign Exchange Registration Form”)

 

(2) Evidentiary materials that prove the authenticity of the Equity Incentive Plans, such as relevant announcements of the Overseas Listed Companies (where such plans involve state-owned enterprises and require approval by relevant authorities or need such approval due to other reasons, the approval documents from such authorities must be submitted);

 

(3) The power of attorney or agreement in which the Domestic Companies authorize the Domestic Agency to centrally handle matters related to the involvement of the Individuals in the Equity Incentive Plans;

 

(4) Letters of commitment issued by the Domestic Companies in which they vouch for the veracity of the employment or labor relations between them and the Individuals (together with the documents that specify such information, including the lists of the Individuals, their identity certificate numbers, and the involved equity incentive types, etc.);

 

(5) The required supplementary materials, in the case that the contents of the aforesaid materials are not consistent with one another or cannot prove the authenticity of the transactions.

 

Where the above materials are examined and determined to be error-free, the local foreign exchange authorities shall issue to the Domestic Agencies the relevant foreign exchange registration certificates for the Equity Incentive Plans.

 

IV. Individuals may use their lawful funds in China , such as self-owned foreign exchange in their individual foreign exchange deposit accounts or RMB, for the purpose of involvement in Equity Incentive Plans. Where the self-owned foreign exchange funds are used for the purpose of such involvement, the banks shall handle the relevant fund transfer formalities upon the strength of such materials as the copies of the foreign exchange registration certificates for the Equity Incentive Plans affixed with the seals of the Domestic Agencies, and the supporting materials for the employment and labor relations between the Individuals and the Domestic Companies. Where RMB funds are used for the purpose of the involvement, the Individuals shall transfer the RMB funds to the accounts of the Domestic Agencies which shall then centrally handle the relevant formalities for foreign exchange purchases or payments in accordance with Article 5 hereof.

 

V. Where the Domestic Agencies need to remit funds out of China for the purpose of the involvement of Individuals in Equity Incentive Plans, they shall, on a yearly basis, submit an application to the local foreign exchange authorities for the limit of the foreign exchange payments, upon the strength of the written application, the foreign exchange registration certificates for the Equity Incentive Plans (such certificates are not necessary in cases of an initial application of foreign exchange registration for the Equity Incentive Plans), and the latest completed Foreign Exchange Registration Forms.

 

Where the above materials are examined and determined to be error-free, the local foreign exchange authorities shall issue to the Domestic Agencies the foreign exchange registration certificates for Equity Incentive Plans, specifying the relevant limit of foreign exchange payments; the banks shall handle the relevant formalities for the foreign exchange purchases and payments of the Domestic Agencies within the limit of the foreign exchange payments upon the strength of such certificates.

 

VI. The Domestic Agency shall open a special domestic foreign exchange account with the bank upon the strength of the foreign exchange registration certificate for an Equity Incentive Plan. The scope of the receipts of such an account is as follows: the foreign exchange funds transferred from the individual foreign exchange deposit accounts, the foreign exchange funds acquired from foreign exchange purchases centrally carried out by the Domestic Agency on behalf of the Individuals, the principal and earnings remitted back after the sale by the Individuals of the stock or equity under the Equity Incentive Plans, the dividend remitted back, and other receipts approved by the local foreign exchange authority. The scope of the expenditures is as follows: funds required for the purpose of involvement in Equity Incentive Plans to be paid overseas, funds required for the purpose of foreign exchange settlement for funds remitted back from overseas or required for the purpose of transferring to the individual foreign exchange deposit accounts, and other expenditures approved by the local foreign exchange authority.

 

VII. After the foreign exchange revenue acquired from the involvement of Individuals in Equity Incentive Plans is transferred back to China, the banks shall transfer such revenue from the special domestic foreign exchange accounts of the Domestic Agencies to the relevant individual foreign exchange deposit accounts upon the strength of the materials which shall be submitted by the Domestic Agencies, such as the relevant written applications, the foreign exchange registration certificates for the Equity Incentive Plans, and the overseas transaction vouchers; such revenue shall be managed and used in accordance with the relevant provisions for individual foreign exchange deposit accounts.

 

In terms of the amount in the funds transferred back, which corresponds to the original principal used for the purchase of foreign exchange, and all the earnings, the Domestic Agencies may also centrally handle the foreign exchange settlement formalities for the Individuals with the banks upon the strength of the above materials, and transfer the funds acquired from the foreign exchange settlement to the relevant individual domestic RMB accounts.

 

VII. Where there is any material change to the Equity Incentive Plans of the Overseas Listed Companies (such as amendments to the key clauses in the original plans or the addition of new plans, or changes to the original plans due to such material events as M&As or restructurings of the Overseas Listed Companies or the Domestic Companies), or the Domestic Agencies or the Overseas Trustees are changed, the Domestic Agencies shall handle the alteration registration procedures with the local foreign exchange authorities upon the strength of a written application, the original foreign exchange registration certificate for the Equity Incentive Plan, the latest completed Foreign Exchange Registration Form, and the relevant evidentiary materials attesting to the authenticity of the transactions, within three months upon the occurrence of such change.

 

IX. Where the Equity Incentive Plans are terminated due to their expiration, or such material events as their de-listing from the overseas securities markets or M&As or restructurings of the Domestic Companies, the Domestic Agencies shall handle the foreign exchange de-registration procedures for the Equity Incentive Plans with the local foreign exchange authorities upon the strength of a written application, the original foreign exchange registration certificate for the Equity Incentive Plan, and other relevant evidentiary materials, within twenty working days upon such termination.

 

Where the above materials are examined and determined to be error-free, the local foreign exchange authorities shall handle the relevant foreign exchange de-registration formalities for the Equity Incentive Plans; after such formalities are completed, the Domestic Agencies may handle the subsequent procedures for the settling of the accounts and the fund exchange.

 

X. The Domestic Agencies shall submit the Filing Form for the Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies (see Annex 2) to the local foreign exchange authorities within the first three working days of each quarter. The account opening banks for the Domestic Agencies shall submit to the local foreign exchange authorities the Form for the Opening and Closing of Special Domestic Foreign Exchange Accounts for Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies (see Annex 3), and the Form for Receipts and Payments in Special Domestic Foreign Exchange Accounts for Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies (see Annex 4), within the first three working days of each month.

 

The local foreign exchange authorities shall examine and summarize the relevant forms and then submit the relevant information thereof to the SAFE within the first five working days of each month.

 

XI. Where the Individuals are involved in the Equity Incentive Plans of Overseas Listed Companies and make foreign-related collections and payments via the special domestic foreign exchange accounts opened by the Domestic Agencies, the Domestic Agencies shall make an indirect declaration of the balance of payments statistics in accordance with the relevant provisions.

 

XII. The SAFE and its branches shall supervise, administer, and inspect the foreign exchange business related to the involvement of Individuals in Overseas Listed Companies. Where the Individuals, Domestic Companies, the Domestic Agencies, or the bank violate this Circular, the SAFE and its branches may take relevant regulatory measures and impose relevant administrative penalties in accordance with the law.

 

XIII. The materials required under this Circular for the relevant application and record shall be in Chinese and shall be legally binding; where there are versions in multiple languages, such as Chinese and other languages, the legally binding Chinese version shall prevail.

 

XIV. This Circular shall come into effect as of the date of issuance. At the same time, the Circular of the General Affairs Department of the State Administration of Foreign Exchange on Printing and Distributing the Operational Rules on Foreign Exchange Administration over Involvement of Domestic Individuals in Employee Stock Ownership Plans and Share Option Schemes of Overseas Listed Companies (Hui Zong Fa No. 78 [2007]) and the Circular of the General Affairs Department of the State Administration of Foreign Exchange on Delegating Authority for Examining and Approving the Quotas for Initial Purchases and Payments in Foreign Exchange and the Opening of Foreign Exchange Accounts for Involvement of Domestic Individuals in Employee Stock Ownership Plans of Overseas Listed Companies (Hui Zong Fa No. 2 [2008]) shall be repealed.

 

The branches and foreign exchange administrative departments of the SAFE shall, upon receipt of this Circular, forward it as soon as possible to the central sub-branches, the sub-branches, and the foreign-funded banks within their respective jurisdictions. All designated Chinese-funded foreign exchange banks shall, upon receipt of this Circular, forward it to their respective branches and sub-branches as soon as possible. In cases of any problems during implementation, please report them to the Capital Account Management Department of the SAFE in a timely manner.

 

Annex: 1. Foreign Exchange Registration Form for the Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies

2. Filing Form for the Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies

3. Form for the Opening and Closing of Special Domestic Foreign Exchange Accounts for Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies

4. Form for the Receipts and Payments in Special Domestic Foreign Exchange Accounts for Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies

 

 

 

February 15, 2012





FILE: Annex 1:Foreign Exchange Registration Form for the Involvement of Domestic Individuals in Equity _0
FILE: Annex 2:Filing Form for the Involvement of Domestic Individuals in Equity Incentive Plans of Over_0
FILE: Annex 3:Form for the Opening and Closing of Special Domestic Foreign Exchange Accounts for Involv_0
FILE: Annex 4:Form for Receipts and Payments in Special Domestic Foreign Exchange Accounts for Involvem_0

The English translation may only be used as a reference. In case a different interpretation of the translated information contained in this website arises, the original Chinese shall prevail.

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