JC Master · Listed Company Securities Compliance Column | A Must-Read on Equity Dividends! Key Post-Dividend Matters to Watch Out For

The high-quality development of the capital market hinges on the compliance foundation of listed companies. As the registration-based system is fully implemented and regulatory frameworks are iteratively refined, securities compliance has become a central pillar for the stable operation of listed offices. Accurately aligning with regulatory guidance and fortifying compliance safeguards are critical enablers for enterprises to navigate market cycles.
 

To this end, we have established this dedicated column, focusing on the core areas of securities compliance for listed companies: summarizing the key points of new regulatory rules, deconstructing the rationale behind typical enforcement actions, dissecting the essence of court rulings, and thoroughly examining the practical challenges of compliance. Adopting a legal‑professional perspective, we employ clear, pragmatic language and scenario‑based analysis to interpret compliance requirements, map out risk pathways, and offer actionable guidance, helping companies strengthen their internal control systems, mitigate compliance risks, and enhance the effectiveness of their compliance management.
 

When compliance thrives, enterprises thrive; when compliance is stable, development is stable. We hope this column will serve as a trusted professional partner for listed companies—helping them discern regulatory trends, address compliance challenges, mitigate compliance risks, and strengthen the foundations of sustainable growth—so that together we can foster the sound and healthy development of the capital market.

With the conclusion of the annual shareholders’ meetings, listed companies have entered the peak period for implementing equity distributions. Over the past two weeks, we have reviewed the key aspects of equity distribution. Dividend tax We believe you’ve gained valuable insights from the calculation and withholding guide. In this article, we’ll continue to walk you through the end-to-end processes related to equity distribution—don’t forget to add these tasks to your to-do list.

 

I. Ex-dividend and ex-rights reference price
 

When a listed company distributes profits, stock dividends and capitalizations increase the company’s total share capital, while cash dividends reduce the distributable profits. Both the increase in total share capital and the reduction in distributable profits diminish the per‑share value of the company’s equity. To reflect the company’s true intrinsic value, these effects must be accounted for or stripped out of the stock’s market price. The exchange will, in the context of equity distributions, … Record date for equity On the next trading day, the company’s stock price will be adjusted for the ex‑dividend and ex‑rights dates.
 

According to the trading rules of the Shanghai, Shenzhen, and Beijing Stock Exchanges, the formula for calculating the ex‑dividend/ex‑rights reference price is as follows:
 

SSE: Ex‑dividend (ex‑rights) reference price = [(Previous closing price − Cash dividend) + Rights issue price × Proportion of outstanding shares change] ÷ (1 + Proportion of outstanding shares change)
 

Shenzhen Stock Exchange and Beijing Stock Exchange: The ex‑dividend (ex‑rights) reference price is calculated as follows: [Previous closing price − cash dividend + rights issue price × share adjustment ratio] ÷ (1 + share adjustment ratio).
 

Because the profit distribution plan may involve cases where distributions are not based on the total share capital or other differentiated arrangements—most commonly, shares repurchased and held in a dedicated account do not participate in profit distribution—the cash dividends and the proportion of changes in tradable shares must be adjusted accordingly. In the Shanghai market, these adjusted figures are referred to as the “virtual cash dividend” and the “virtual change in tradable shares.” Taking the Shanghai market’s calculation formula as an example, and assuming no rights issue is involved, the formulas for calculating the adjusted cash dividends and the adjusted proportion of changes in tradable shares are as follows:
 

Cash dividend per share for virtual allocation = (Total number of shares eligible for distribution × Actual cash dividend per share) ÷ Total outstanding shares as of the record date for this equity distribution (including treasury shares and other shares not entitled to dividends).
 

The proportion of changes in circulating shares subject to virtual allocation is calculated as follows: (Total number of shares eligible for distribution × Actual stock dividend and capitalization ratio) ÷ Total outstanding shares as of the record date for this equity distribution (including treasury shares and other shares not entitled to dividends).
 

To illustrate how the ex‑dividend and ex‑rights reference price is calculated under a differentiated dividend policy, consider the following example: Suppose Company A, listed on the Shanghai Stock Exchange, announces a profit distribution plan of RMB 1 per share in cash dividends and a capitalization of reserves at a ratio of 0.4 shares for every share held. On the record date, the stock’s closing price was RMB 10 per share, with a total outstanding share capital of 100 million shares and 1 million shares held in the treasury. In this case:
 

Cash dividend per virtual share = (99,000,000 × 1) ÷ 100,000,000 = RMB 0.99
 

Proportion of change in circulating shares due to virtual allocation = (99,000,000 × 0.4) ÷ 100,000,000 = 0.396 shares
 

Ex‑dividend (ex‑rights) reference price = (10 − 0.99) ÷ (1 + 0.396) = RMB 6.45 per share
 

Note: The Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Beijing Stock Exchange use identical calculation formulas; however, the terminology differs. For example, the Shanghai market formula refers to the “proportion of changes in circulating shares,” while the Shenzhen and Beijing markets use the term “proportion of share changes.”
 

II. Closed-loop Matters Following the Implementation of the Equity Distribution
 

Due to adjustments in the secondary market price of shares resulting from rights and dividend deductions, and due to share transfers and capitalizations increasing the company’s total share capital, once profit distribution is completed, relevant documents require that, for specific circumstances, corresponding approval procedures be followed to adjust either the price or the number of shares. Care must be taken to ensure that the cash dividend and the proportionate changes in tradable shares are accurately reflected. The following case illustrates this:
 

(1) Adjusting the grant (exercise) price or quantity of equity incentives

1. Adjustment of the Grant Price:

2. Adjustment of the Granted/Attributed Quantity:
 

(II) Adjustment of the Purchase Price under the Employee Stock Ownership Plan

(3) Adjustment of the repurchase price for Class I restricted shares

(4) Adjust the upper limit of the repurchase price and the projected number of shares to be repurchased in the buyback plan.

(5) Adjustment of the Conversion Price for Convertible Corporate Bonds

(6) Adjusting the issue price and the number of shares to be issued in a private placement.

(7) Adjust the issue price and the number of shares to be issued in connection with the acquisition of assets.

(8) Adjustment Convertible bond The share exchange price

(9) Adjustment of the Share Reduction Plan

1. The first approach is to directly disclose an announcement adjusting the share reduction plan.

2. The second approach is to directly disclose the adjusted reduction amount in the announcement of the share‑sale results.

(10) Adjusting the price range and the share‑purchase quantity range of the increase‑holding plan.

(11) Adjusting the issuance price for share reductions under IPO commitments.

(This article reflects the author’s personal views and is intended solely for informational purposes; it does not constitute legal advice or an interpretation of the law by JC Master Law Office. This disclaimer is hereby made.)

This article is published by Jiangsu JC Master Law Office. The author is Jiangsu JC Master Law Office, and the copyright belongs to the author. Please cite the original source when reprinting; violations will be prosecuted.