Measures for the Administration of the Funds Involved in the Participation in Equity Incentives of Domestically Listed Companies by Foreign Employees

(Issued by the People's Bank of China and the State Administration of Foreign Exchange on, and effective as of, January 23, 2019.)

1 . These Measures have been formulated pursuant to relevant laws and regulations such as the PRC People's Bank of China Law, the PRC Regulations for the Control of Foreign Exchange and the Measures for the Control of the Foreign Exchange of Individuals (issued with Order of the People's Bank of China [2006] No.3) in order to regulate the administration of funds involved in the participation in A-share equity incentives of domestically listed companies by foreign employees.

2 . Where a domestically listed company implements equity incentives in accordance with the Measures for the Administration of the Equity Incentives of Listed Companies (issued with Order of the China Securities Regulatory Commission No.148) and foreign employees of such company participate in such equity incentives, the listed company and its foreign employees shall carry out relevant matters, such as registration and fund transfer, in accordance herewith.

3 . The People's Bank of China and its (sub-)branches shall monitor, administer and inspect renminbi matters relating to the participation in equity incentives of domestically listed companies by foreign employees. The State Administration of Foreign Exchange and its (sub-)branches shall monitor, administer and inspect foreign exchange matters relating to the participation in equity incentives of domestically listed companies by foreign employees.

4 . The State Administration of Foreign Exchange subjects the participation in equity incentives of domestically listed companies by foreign employees to administration by means of registration. The foreign employees of a domestically listed company shall altogether entrust the company implementing the equity incentives to centrally carry out the relevant registration procedures.

5 . When the foreign employees of a domestically listed company participate in its equity incentives, the listed company shall, within 30 days after the announcement of its equity incentive plan, carry out registration of the participation in the equity incentives of a domestically listed company by foreign employees with the branch/office of the State Administration of Foreign Exchange of the place where it is located (the Forex Authority) on the strength of the following materials:

(1)   a written application, including but not limited to the basic particulars of the domestically listed company, the basic details of its equity incentive plan, the amount to be remitted inward in connection with the participation in its equity incentives by the foreign employees, etc.;

(2)   a Registration Form for the Participation in the Equity Incentives of a Domestically Listed Company by Foreign Employees (see Annex 1);

(3)   evidentiary materials, such as the relevant announcements of the domestically listed company, attesting to the genuineness of the equity incentive plan;

(4)   a letter of undertaking issued by the domestically listed company to the effect that the employment or service relationship with its foreign employees is genuine (accompanied by a list, the types of ID documents and the ID document numbers of the foreign employees participating in the equity incentive plan, the type of equity incentive plan involved, etc.); and

(5)   other materials the provision of which the Forex Authority requires.

After the Forex Authority reviews the aforementioned materials and finds them in order, it shall issue to the domestically listed company the appropriate registration certificate for the participation in the equity incentives of a domestically listed company by foreign employees (the Registration Certificate). The domestically listed company shall, on the strength of the Registration Certificate, and its foreign employees shall, on the strength of photocopies of the Registration Certificate, carry out cross-border receipt and payment, fund transfer and conversion matters relating to the participation in the domestically listed company's equity incentives by the foreign employees.

6 . The funds required for the participation in the equity incentives of a domestically listed company by a foreign employee may come from his/her revenue lawfully sourced in China or, alternatively, from funds remitted inward from abroad.

7 . Where a foreign employee of a domestically listed company participates in its equity incentives with funds remitted inward from abroad, he/she shall remit the funds from abroad into the domestically listed company's account or into his/her personal bank settlement account.

Where a foreign employee participates in equity incentives using the funds in his/her domestic foreign currency account, he/she shall, after converting the funds, transfer the same into the domestically listed company's account or into his/her personal bank settlement account.

Once the bank has checked the Registration Certificate, it shall carry out the account crediting procedures, or conversion and account crediting procedures, for the domestically listed company or its foreign employee based on the information contained in the relevant controlled information form of the State Administration of Foreign Exchange's capital account information system.

8 . If a foreign employee of a domestically listed company wishes to remit abroad proceeds from the sale of shares or equity under the equity incentives or dividends derived from his/her participation in the equity incentives, or purchase foreign exchange therewith and transfer the same into his/her domestic foreign currency account, he/she may carry out the outward remittance or foreign exchange purchase and transfer with the bank on the strength of the following materials:

(1)   a Registration Certificate;

(2)   his/her ID document (his/her ID document shall be consistent with the type of ID document and ID document number provided on the Registration Form for the Participation in the Equity Incentives of a Domestically Listed Company by Foreign Employees at the time the domestically listed company carried out registration);

(3)   the document issued by the securities company attesting to the domestic transaction by the foreign employee under the equity incentives or proof of the dividends being credited to his/her securities account; and

(4)   other genuineness related supporting documentation required by the bank.

9 . If, after a foreign employee of a domestically listed company has remitted funds from abroad to participate in its equity incentive plan, the conditions for unlocking the restricted shares do not materialize or the stock options are not exercised, the domestically listed company or its foreign employee may return abroad the funds remitted inward by the foreign employee on the strength of the following materials:

(1)   a Registration Certificate;

(2)   relevant genuineness related supporting documentation, such as the announcement by the domestically listed company that it is buying back the restricted shares under the equity incentives; and

(3)   proof that the foreign employee remitted the funds inward from abroad.

10 . When a domestically listed company or a foreign employee thereof carries out the cross-border receipt or payment of funds under the equity incentives, it/he/she shall carry out international receipt and payment reporting in accordance with provisions such as the Measures for Reporting Statistics on International Receipts and Payments and the Implementing Rules for Reporting Statistics on International Receipts and Payments Through Banks (Hui Fa [2015] No.27).

A bank shall, in accordance with the Data Reporting Specifications (see Annex 2), completely and accurately submit data relating to the cross-border receipt, payment and conversion of funds under the participation in equity incentives of domestically listed companies by foreign employees in a timely manner.

A bank shall accurately and completely submit renminbi cross-border receipt and payment information to the renminbi cross-border receipt and payment information management system in a timely manner in accordance with the relevant management requirements of the renminbi cross-border receipt and payment information management system.

11 . If an announced material change to an equity incentive plan occurs or if a change in the information of a foreign employee of a domestically listed company participating in its equity incentive plan occurs, the domestically listed company shall, on the strength of a written application, the original Registration Certificate, a newly completed Registration Form for the Participation in the Equity Incentives of a Domestically Listed Company by Foreign Employees and genuineness related supporting documents such as the relevant announcement, carry out with the Forex Authority registration amendment of the participation in the equity incentives of the domestically listed company by foreign employees within 30 days after the announcement.

12 . If a domestically listed company terminates its implementation of equity incentives and no foreign employee has exercised his/her rights, it shall, on the strength of a written application, the original Registration Certificate and genuineness related supporting documents such as the relevant announcement, cancel with the Forex Authority the registration of the participation in the equity incentives of the domestically listed company by foreign employees within 30 days after the announcement.

13 . A foreign employee of a domestically listed company who participates in its equity incentives shall comply with these Measures and the provisions of relevant departments, such as the China Securities Regulatory Commission. Such an employee may not violate these Measures or the provisions of a relevant department, such as the China Securities Regulatory Commission, by engaging in other securities trading activities.

14 . If a domestically listed company, a foreign employee thereof or a bank violates these Measures in the course of handling matters relating to the participation by such employee in the domestically listed company's equity incentives, the People's Bank of China and the State Administration of Foreign Exchange and its (sub-)branches shall impose penalties in accordance with relevant provisions.

15 . Where a Hong Kong, Macao or Taiwanese employee of a domestically listed company participates in its equity incentives, matters shall be handled with reference hereto.

16 . The People's Bank of China and State Administration of Foreign Exchange are responsible for the interpretation of these Measures.

17 . These Measures shall be effective as of the date of issuance. In the event of a discrepancy between these Measures and other relevant administrative provisions, these Measures shall prevail.

Annexes:

1 . Registration Form for the Participation in the Equity Incentives of a Domestically Listed Company by Foreign Employees (omitted)

2 . Data Reporting Specifications for Cross-border Receipts and Payments/Conversion and Sale of Foreign Exchange Relating to the Participation in the Equity Incentives of a Domestically Listed Company by Foreign Employees (omitted)