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Amendment to the Company Law of the PRC
中国公司法 英文

Article 142 of the Company Law of the PRC is amended as 

"A company may not purchase its own shares except in any of the following circumstances:

(I)          to reduce the registered capital of the company;

(II)         to merge with another company (companies) that hold(s) its shares;

(III)        to use the share for employee stock ownership plans or equity incentives;

(IV)        a shareholder requests the company to purchase the shares held by him since he objects to a resolution of the general meeting on the merger or division of the company;

(V)     to use shares for the conversion of corporate bonds issued by a listed company that can be converted into stocks;

(VI)    to use shares by a listed company to maintain the company's value and shareholders' rights when necessary.

Where a company purchases its own shares for reasons specified in Items (I) to (II) of the preceding paragraph, a resolution of the general meeting shall be adopted. Where a company purchases its own shares for reasons specified in Item (III), Item (V) and Item (VI) of the preceding paragraph, a resolution of the board of directors shall be adopted at the meeting of the board of directors present by more than two-thirds of the directors in accordance with the articles of association or the authorization of the general meeting.

Where a company purchases its own shares in accordance with Paragraph I of this article, shares shall be cancelled within 10 days of the date of purchase if the circumstances fall under Item (I), or transferred or cancelled within six months if the circumstances fall under Item (II) or (IV); or transferred or cancelled within three years if the circumstances fall under Item (III), Item (V) or Item (VI) provided that the total shares held by the company shall not exceed 10% of the total issued shares of the company.

A listed company that acquires shares of the company shall perform its information disclosure obligations in accordance with the provisions of the Securities Law of the People's Republic of China. Where a listed company purchases its own shares for reasons specified in Item (III), Item (V) or Item (VI) of the preceding paragraph, the purchase shall be conducted through open and centralized trading.

A company may not accept its own shares as the subject matter of a pledge."

The original of Article 142 was:

" A company may not purchase its own shares except in any of the following circumstances:

(I)          to reduce the registered capital of the company;

(II)         to merge with another company (companies) that hold(s) its shares;

(III)        to reward the staff and workers of the company with shares; or

(IV)        a shareholder requests the company to purchase the shares held by him since he objects to a resolution of the general meeting on the merger or division of the company.

Where a company purchases its own shares for reasons specified in Items (I) to (III) of the preceding paragraph, a resolution of the general meeting shall be adopted. Shares purchased by the company pursuant to the preceding paragraph shall be cancelled within 10 days of the date of purchase if the circumstances fall under Item (I), or transferred or cancelled within six months if the circumstances fall under Item (II) or (IV).

A company’s own shares purchased by the company pursuant to Item (III) of Paragraph One shall not exceed 5% of the total issued shares of the company. The funds used for the purchase shall be taken from the after-tax profits of the company, and the shares purchased shall be transferred to the staff and workers within one year.

A company may not accept its own shares as the subject matter of a pledge."

For the latest version of the Company Law of the PRC, see Company Law of the PRC (2018 version, effective as of October 26, 2018)