China mulls revising share repurchase terms in draft law amendment

A draft amendment on China's Company Law, concerning share repurchasing, was on Monday submitted to the country's top legislature for deliberation.

The Standing Committee of the 13th National People's Congress will review the draft, which aims to refine and improve the current share repurchasing system.

Proposed changes include adding circumstances of application, easing decision-making procedures and introducing information disclosure requirements for companies in reclaiming shares.

Under the current law, companies are forbidden from buying back their publicly traded shares except under four circumstances, such as granting employees equity incentives.

"The amendment is very necessary in that it will help companies establish a long-term motivation mechanism and improve the quality of listed companies," Liu Shiyu, chairman of the China Securities Regulatory Commission, said in his introduction on the amendment to the legislature.

"It will also offer strong legal support for stabilizing capital market expectations under the current conditions."

Share repurchasing is believed to be a necessary corporate tool in conducting mergers, acquisitions and restructuring, and plays a vital role in improving governance structure and stabilizing share prices.

Analysts believe stock repurchase operations could send a positive signal to the market and alleviate market jitters in cases of extensive underestimation of shares.

CSRC data showed companies listed at the Shanghai and Shenzhen exchanges had carried out 2,169 share repurchases since 2014, with a total net worth of nearly 53 billion yuan (about US$7.6 billion).

An official with the CSRC said supporting policies on share repurchases were being prepared to prevent loopholes in supervision.