China Securities Regulatory Commission issues legal interpretation clarifying 5% and 1% shareholding change thresholds under listed company takeover rules

The China Securities Regulatory Commission issued Securities and Futures Legal Application Opinion No. 19 to unify how changes in investors’ equity interests are measured and how Articles 13 and 14 of the Measures for the Administration of Takeovers of Listed Companies should be applied. The interpretation takes effect on issuance and is intended to standardise the disclosure and related obligations triggered by changes in shareholding levels. The opinion clarifies that the “each increase or decrease of 5%” and “each increase or decrease of 1%” thresholds refer to reaching the next whole-number multiple of 5% or 1%. It also states that where an investor passively hits these thresholds due to changes in a listed company’s share capital, the investor does not need to perform disclosure or sale restriction obligations, and the listed company should instead announce the investor’s shareholding change caused by the capital change. For transitional arrangements, the CSRC adopts a “new-old cut-off” approach: the new rules apply from issuance, while past violations that are newly identified after implementation are to be handled under the principle of applying the old rules and, where relevant, the lighter outcome. The CSRC noted it had previously consulted publicly on the interpretation and that key practical comments were adopted, and it will carry out further policy explanation and implementation work.