With the deepening of the reform of state-owned enterprises (SOEs), and since the 2020 State Council government work report proposed to improve the effectiveness of the reform of state-owned enterprises (SOEs) and the implementation of the three-year action plan for SOE reform, some local state-owned enterprises commissions (SASACs) and centralized enterprises (SOEs) began to study and implement the three-year action plan, and formulated the implementation plan to meet the situation of the local and the enterprise. Among them, "Mixed Ownership Reform" ("Mixed Reform") and "Employee Stock Ownership" are gradually becoming hot topics of SOE reform. Through "mixed ownership reform", SOEs can introduce capital from different ownership systems, realizing the complementarity and mutual integration between state-owned capital and non-public capital, which can enhance the vitality and market competitiveness of SOEs. Through "employee shareholding", key employees can realize the long-term interests of the enterprise bundled, the formation of value co-creation, benefit sharing, risk sharing community of destiny, also makes many state-owned enterprises are willing to try this mixed reform. Equity incentives" is a hot topic in the reform of public and private enterprises, which is easily confused with "employee shareholding" in the reform of SOEs. Whether "employee shareholding" and "equity incentives" in the mixed reform of SOEs must obtain the pilot qualification; what is the difference between the two; and what are the main paths and basic processes of the mixed reform of non-listed SOEs ... ...Combined with the provisions of the documents and practical experience, the author tries to make a brief explanation on the above issues.
Q: What are the conditions for the implementation of "Employee Stock Ownership" in SOEs, and is it necessary to obtain the pilot qualification?
A: In August 2015, the Central Committee of the Communist Party of China and the State Council on deepening the reform of state-owned enterprises of the Guiding Opinions (Zhongfa [2015] No. 22) (hereinafter referred to as the "Guiding Opinions") was issued, a new round of mixed reform of state-owned enterprises kicked off, "Guiding Opinions" said to explore the implementation of mixed ownership of employee shareholding, adhere to the pilot first. As a supporting document of the Guiding Opinions, in August 2016, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Finance and the Securities and Futures Commission jointly announced the "Opinions on the Pilot Employee Stock Ownership of State-Held Mixed Ownership Enterprises" (SASAC Reform [2016] No. 133) (hereinafter referred to as No. 133), which provides for the principle of employee ownership of state-controlled mixed-ownership enterprises, the conditions of the pilot enterprises, and the employees of enterprises to take up shares, enterprise employee shareholding management, and implementation of pilot work, etc. Document 133 is the main guiding document for the implementation of employee shareholding plan for the reform of state-owned enterprises under mixed ownership.
According to the provisions of Circular 133, SOEs that can implement mixed reform through "employee shareholding" shall have the following conditions: 1) Commercial enterprises whose main business is in a fully competitive industry or field; 2) Reasonable shareholding structure, with a certain percentage of shares held by non-public shareholders, and directors recommended by non-public shareholders on the board of directors. 3) Sound corporate governance structure, with the establishment of an employee shareholding management system and a pilot implementation plan; 4) A sound corporate governance structure, with the establishment of an employee shareholding management system, and a pilot implementation plan. 3. Sound corporate governance structure, establishment of a market-oriented labor and personnel distribution system and performance appraisal and evaluation system, and the formation of a market-oriented mechanism that allows managers to move up and down, employees to move in and out, and incomes to move up and down.4. More than 90% of the operating revenues and profits are derived from the external market of the enterprise group in which it operates.
No. 133 is the guidance for pilot enterprises, and this three-year action plan for state-owned enterprise reform of employee shareholding mixed reform requirements are "prudent and stable", requiring strict implementation of the relevant audit procedures, standardize the operating procedures, I believe that the implementation of the "Employee Shareholding "No. 133 for the determination of the pilot enterprises, pointed out that the pilot employee shareholding of local state-owned enterprises, by the provincial people's government supervision and management of state-owned assets to coordinate the relevant departments, based on the review of the declaration materials to determine. Carry out the pilot central enterprises belonging to the sub-enterprises, by the state-owned shareholder units in the review of the relevant declaration materials on the basis of the report to fulfill the responsibilities of the funder to determine the institutions. There are also some provinces and cities in the introduction of employee shareholding rules, the restructuring of the enterprise can be in the mixed reform for the establishment of the project at the same time, to obtain the implementation of employee shareholding of the corresponding approval, which is consistent with the effectiveness of obtaining the pilot qualification.
Q: What are the regulations on the shareholding ratio, the scope of employees and the price of shares for "employee shareholding" in the mixed reform of SOEs?
A: Shareholding ratio: According to the provisions of Article 133, the shareholding ratio of employees of the pilot enterprises shall be determined in light of the scale of the enterprise, industry characteristics, stage of enterprise development and other factors. In principle, the total amount of employee shareholding shall not be higher than 30% of the total share capital of the company, and the shareholding ratio of a single employee shall not be higher than 1% of the total share capital of the company. Enterprises may adopt appropriate methods to reserve part of the equity for newly introduced talents. The proportion of employee shareholding in state-controlled listed companies shall be determined in accordance with the relevant provisions of securities regulation. Meanwhile, after the implementation of employee shareholding, the controlling position of state-owned shareholders shall be ensured, and their shareholding ratio shall not be lower than 34% of the total share capital of the company, i.e. relative holding.
Scope of employees: In addition to the Guiding Opinions and No. 133, the policy basis for regulating employee shareholding in the mixed reform of state-owned enterprises mainly includes the following: "Opinions on Regulating Employee Shareholding and Investment in State-Owned Enterprises" (SASDF Reform [2008] No. 139) (hereinafter referred to as No. 139); "Opinions on the Development of Mixed Ownership Economy in State-Owned Enterprises" (Guo Fa [2015] No. 54); "Opinions on Deepening the Pilot Mixed Ownership Reform of Several Policies"; "Opinions on Deepening the Mixed Ownership Reform Pilot Opinions on Certain Policies (FRCE [2017] No. 2057); and Operational Guidelines for Mixed Ownership Reform of Central Enterprises (SASP [2019] No. 653). According to the provisions of Article 139, the principle of employee shareholding is limited to holding the equity of the enterprise, and if necessary, it can also hold the equity of the restructured enterprise at a higher level, but it is not allowed to directly or indirectly hold the equity of subsidiaries at all levels funded by the enterprise, the equity participation in the enterprise, and the equity of other enterprises funded by the Group Company. That is, it is usually said that the "lower hold upper", not "upper hold lower". In addition, according to the provisions of Article 133, the shareholding employees shall be scientific researchers, management personnel and business backbones who work in key positions and have a direct or greater impact on the company's business performance and sustainable development, and who have signed labor contracts with the Company. Leaders of state-owned enterprises appointed by the CPC Central Committee, the State Council and local party committees, governments and their departments and agencies shall not hold shares. Outside directors and supervisors (including employee representative supervisors) shall not participate in employee shareholding. If more than one immediate family member is in the same enterprise, only one person can hold shares, etc.
Price of shareholding: According to the provisions of the 133rd Circular, before the employees take up the shares, the pilot enterprise shall be subject to financial auditing and asset evaluation in accordance with the relevant regulations. The price of employee shares shall not be lower than the approved or filed net asset evaluation value per share. The author believes that the "share price" here only refers to the price of employees alone into the enterprise, if the enterprise synchronized with the introduction of external investors and employee shareholding, but also should be through the property rights trading institutions to openly solicit investors, according to the investor's subscription price to determine the price of the employee shares and the proportion of shares, the employee share price should be the same as the price of external war chests. The price of employee shares should be consistent with the price of external investors, and not simply equal to the appraised value of net assets, to ensure that the price of employee shares is fair and equitable
Q: Is it necessary to obtain the pilot qualification for the implementation of "equity incentive" in the mixed reform of SOEs?
A: The pilot qualification for the implementation of "employee shareholding" in the mixed reform of SOEs does not mean that the implementation of "equity incentives" must also obtain the pilot qualification. in February 2016, the Ministry of Finance, the Ministry of Science and Technology, the State Council's State-owned Assets Supervision and Administration Commission (SASAC) issued the "Interim Measures for Equity and Dividend Incentives for State-owned Science and Technology Enterprises". Interim Measures on Equity and Dividend Incentives for State-owned Science and Technology-based Enterprises" (Cai Zi [2016] No. 4) (hereinafter referred to as No. 4), which stipulates that for state-owned science and technology-based enterprises, equity incentives can be implemented as long as they comply with the corresponding implementation conditions. In terms of the approval process, for sub-enterprises belonging to the central enterprise group, the relevant materials shall be reported to the central enterprise group company for approval; and local state-owned enterprises shall be reported to the departments or agencies at the same level that fulfill the responsibility of supervising state-owned assets for approval. With the reform of the state-owned capital authorization and management system, many local SASACs have now released the approval authority of equity incentive programs of their second-tier subsidiaries to the SASAC's next-tier enterprise groups for approval.
Q: What is the difference between "employee shareholding" and "equity incentive" in the mixed reform of SOEs?
A: The key difference between "employee shareholding" and "equity incentives" in the mixed reform of SOEs, apart from the need to obtain the pilot qualification, lies in the fact that the core purpose of the employee shareholding method is to "bind" rather than "incentivize". The core purpose of employee shareholding is to "bind" rather than "incentivize". Employees who hold shares therefore share the company's development goals and the goal of enhancing the return on capital, and at this point, employees who hold shares have the same important role as strategic investors. Therefore, for employee shareholding and equity incentives, the rights and obligations of employees are different, employee shareholding generally enjoy the right to vote, management decision-making rights, the right to income, etc., while equity incentives are generally mainly reflected in the right to income. Secondly, it is the difference whether it is included in the appraisal system or not. Employee shareholding generally does not need to establish an appraisal system, while equity incentives need to establish an appraisal system and appraisal methods for the incentive recipients. In addition, in the payment of personal income tax, employee shareholding and equity incentives are also different.
As mentioned earlier, the main regulation of "employee shareholding" in the mixed reform of state-owned enterprises is Article 133, and the main regulation of equity incentives for science and technology-based enterprises is Article 4. Comparing No. 133 and No. 4, it can be seen that there are many differences between "employee shareholding" and "equity incentives" in the mixed reform of state-owned enterprises, such as in the shareholding program and method, the basic conditions of the mixed reform enterprise, the conditions of the employees, the mode of capital contribution, the price of the equity, the lock-up period, the development and approval of the program, etc. are different. There are many differences between "equity incentive" and "shareholding program".
Q: What are the modes of "employee shareholding" for SOEs' mixed reform?
A: According to the provisions of Circular 133, the employees of the pilot enterprises can hold shares directly in their personal names, or through the shareholding platforms such as corporate enterprises, partnership enterprises and asset management plans. If the shareholding is held through an asset management plan, leveraged financing shall not be used. The shareholding platform shall not engage in any business activities other than shareholding. For the aforementioned four modes of "individual shareholding", direct shareholding by individual employees is relatively simple and the tax burden on equity transfer is low. However, once the employees change, it will affect the stability of the equity structure of the pilot enterprise. Therefore, the individual direct shareholding mode is suitable for enterprises with fewer staff and less expected changes. For the corporate enterprise shareholding mode, because the withdrawal involves the shareholders' meeting decision-making and other more cumbersome, and there will be double taxation problems, the choice in practice is very little. The disadvantages of the asset management plan are the cumbersome procedures for its establishment, the need to be filed with the Fund Industry Association, and the need for employees to meet the qualifications for subscription. In practice, most of the pilot enterprises have adopted limited partnership as the shareholding platform for the implementation of employee shareholding, mainly due to the following considerations: first, it can ensure the stability of the shareholding structure of the pilot enterprises, and the changes of the employees will not directly affect the shareholding structure of the pilot enterprises; secondly, the limited partners are not involved in the daily operation of the partnership enterprise, and the general partners can realize the effective control over the shareholding platform, and it is easier to operate and facilitate the subsequent personnel decision-making in shareholders' decision-making. This makes the operation easier and facilitates the management of subsequent staff changes. Thirdly, it can avoid paying enterprise income tax at the level of shareholding platform.
As the "employee shareholding" mixing reform stipulated in No. 133 generally requires SOEs to obtain the qualification of pilot enterprises, and No. 4 of the equity incentive for a specific range of state-owned science and technology-based enterprises, whether it is possible to break through the previous documents through other innovative ways to achieve similar reform effects? In recent years in the practice of mixed reform of state-owned enterprises, there are indeed a lot of innovative breakthroughs, try to cite two examples: 1, the introduction of employee shareholding in the mixed reform of Zhongke Xingtu Co. Ltd. is one of the earliest enterprises engaged in the R&D and industrialization of digital earth products in China. Star map to create a high level of innovation team, in order to further scientific research and technical personnel and enterprise binding, star map decided to implement the mixed reform. Instead of implementing employee shareholding in accordance with Circular 133 or Circular 4, CSTC regarded the company's core employees as strategic investors and introduced employee shareholding through public listing.From December 2017 to March 2018, CSTC listed its shares on the Beijing Assets and Property Rights Exchange to solicit new investors, and, based on the assessed value of the net assets filed with the State-owned Assets Supervision and Administration Department and after competitive negotiation, introduced investment institutions established by the After competitive negotiation, the company introduced an investment organization established mainly by its employees. Although most of the partners of the investment organization are employees of the Company, there are also some high net worth external investors. Employees and external investors are based on the future development prospects of the company and investment in the company. 2, the new wind photoelectronics technology Co., Ltd. to introduce employee shareholding in the mixed reform. New wind also belongs to the scientific and technological innovation enterprises, high-quality talent is the key to sustainable development of the company, in order to attract and retain the core talent, the new wind decided to implement the mixed reform. The new scenery also did not follow the 133rd or 4th implementation of employee shareholding, but by the company's employees to the fair value of the transfer of equity by non-public capital. Natural person shareholders will hold 1.41 million shares of the new wind to the company's employees at a consideration of 8 yuan / share, the transfer price is also based on the results determined by the asset evaluation report as a reference to determine by consensus, and the same period of time there is no substantial difference between the price of external investors into the company. However, it should be noted that, according to the State-owned Assets Supervision and Administration Commission of the State Council [2005] No. 78, large state-owned and state-controlled enterprises and their wholly-owned or controlled enterprises engaged in the main business of the large enterprises of the important state-owned property rights and state-owned equity in listed companies are not transferred to the management. If a large state-owned enterprise plans to implement a management shareholding program, it can only do so by way of capital increase.
In the practice cases of other regions, it can be seen that in order to make the role of "employee shareholding" in the mixed reform of SOEs really play a role, and to highlight the operational efficiency of the mixed reform enterprises, many SOEs tend to adopt a diversified means of mixed reform program. In addition to the introduction of the pilot program of employee shareholding, the formation of a modern corporate governance structure, the implementation of professional manager system, the differentiation of enterprise salary distribution and other reform initiatives can play a role in ensuring the effectiveness of the implementation of employee shareholding.
Q: What are the main paths and processes of mixed reform for non-listed SOEs?
A: The mixed reform of non-listed SOEs is mainly implemented in an open, fair and impartial manner through the property rights trading market, including the transfer of equity by the original shareholders and the introduction of new shareholders by capital increase in two ways; in compliance with the "Measures for the Supervision and Administration of Enterprises' State-owned Assets Transactions", which stipulates that the circumstances that can be taken by way of non-public agreement to increase the capital or transfer of equity can be exempted from the approval of the state-owned assets supervisory authority or the consideration of decision-making by state-funded enterprises. to enter into transactions.
The basic process of mixed reform of non-listed SOEs includes: the SOE conducts a study on the feasibility and necessity of mixed reform and determines the direction of mixed reform; formulates a mixed reform plan, focusing on whether the design of the proportion of shareholding and the arrangements for operation and management of the mixed reform plan are in compliance with the laws, regulations and requirements of State-owned Assets Supervision and Regulation, and whether it can stimulate the enthusiasm of the non-public capital and enhance the vitality and competitiveness of the SOE, and whether the steps of the mixed reform can make use of the relevant national tax preferential policies and reduce the cost of reform; performs the following tasks Whether the steps of mixed reform can make good use of relevant national tax preferential policies and reduce the reform cost; fulfill the internal decision-making and external approval procedures; conduct financial audits and asset assessments, and the assessment results need to be approved or filed; enter into transactions and fulfill the transaction process according to the provisions of each property rights exchange, and fulfill the procedures according to Decree No. 32 for exemptions from entering into transactions; and finally, apply for the registration of changes and complete the delivery. The whole mixed reform process involves many professional links and details, and it is recommended that enterprises hire external experts and intermediaries to participate in the feasibility study stage, so as to ensure that the mixed reform is carried out in a compliant and smooth manner.
