CHINA – SAFE NOW ACCEPTS PRE-IPO EQUITY AWARD APPLICATIONS

In the past, China State Administration of Foreign Exchange (“SAFE”) did not accept equity plans launched by private company, even if the awards are granted after the IPO. Now SAFE accepts the registration application of a pre-IPO plan, provided that (i) the application is made after IPO, and (ii) the underlying shares have not been acquired and there is no foreign exchange remittance until SAFE registration is completed. In addition to the documents required for a regular SAFE registration, for the purpose of registering a pre-IPO plan, the details of any prior grants should be disclosed. Although a pre-IPO plan is now registerable in principle, different local SAFE branches still hold different views about pre-IPO registration. Shanghai SAFE is generally open to such an application, but Beijing SAFE may be reluctant and may require additional supporting documents to justify the grants pre-IPO.

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