Taihe · Listed Company Securities Compliance Column | Share Cancellation Procedures: Penalties for Failure to Timely Cancel Repurchased Shares
Release Date:
2026-07-28
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 firms. 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 pragmatic language and scenario‑based analysis to clarify 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 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.
Share repurchases used to reduce a company’s registered capital—hereinafter referred to as “repurchase and cancellation”—are one of the key tools for listed companies’ market‑capitalization management. Investors often view such moves as genuine positive developments, as they can effectively enhance the earnings per share. However, recently, a certain listed company botched what should have been a favorable move and was penalized for failing to carry out the repurchase and cancellation in a timely manner.
The listed company SNGF repurchased a cumulative total of 32.4166 million shares from November 26, 2024, to April 8, 2025, and on April 9, 2025, disclosed the “Announcement on the Completion of Share Repurchase and Changes in Shareholdings,” stating that it intends to cancel, within 12 months from the date of completion of the share repurchase, the repurchased shares representing 1.5% of the total share capital, thereby reducing its registered capital.
In accordance with Article 17, Paragraph 1 of the Rules on Share Repurchases by Listed Companies (CSRC Announcement No. 63 of 2023), the company is required by law to cancel the repurchased shares within ten days from the date of repurchase; however, SNGF erroneously disclosed that such cancellation would occur within twelve months. Furthermore, SNGF did not disclose the “Announcement on Reducing Registered Capital through Share Repurchases and Notifying Creditors” until September 15, 2025, at which time it proceeded to cancel 16.2083 million shares among those already repurchased.
In response to the aforementioned violations, the Guangdong Securities Regulatory Bureau has imposed administrative regulatory measures in the form of issuing warning letters to SNGF, Chairman Hu Moumou, General Manager Han Moumou, and Board Secretary He Moumou.
This violation primarily stems from the untimely cancellation of repurchased shares and should be given due attention in practice.
Compliance requirements for share repurchases and cancellations:
Rules on Share Repurchases by Listed Companies (Revised in 2025)
Article 17, Paragraph 1: If a listed company repurchases shares pursuant to paragraph (1)(i) of Article 2 of these Rules, it shall cancel such shares within ten days from the date of the repurchase. ; In the event that shares are repurchased pursuant to the circumstances set forth in subparagraphs (2), (3), and (4), the total number of shares held by the company shall not exceed ten percent of the company’s total outstanding shares, and such shares must be disposed of within three years in accordance with the purposes disclosed in compliance with applicable laws. If the shares are not disposed of for the disclosed purposes, they shall be cancelled prior to the expiration of the three-year period.
Article 2, Paragraph 1: For the purposes of these Rules, “share repurchase by a listed company” refers to the acquisition of the company’s own shares by a listed company pursuant to one of the following circumstances: (1) Reduction of the company’s registered capital (2) Using shares for an employee stock ownership plan or equity incentive scheme; (3) Using shares to convert convertible corporate bonds issued by the listed company into shares; (4) As necessary to safeguard the company’s value and the rights and interests of its shareholders.
Practical basis for the share repurchase and cancellation procedure:
Total Conclusion:
As shown in the table above, with respect to the share cancellation procedures for repurchased shares used to reduce registered capital, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Beijing Stock Exchange differ in their application and information disclosure processes. The Shanghai Stock Exchange and the Shanghai Branch of China Securities Depository & Clearing Corporation require listed companies to… Submit the cancellation application concurrently with the disclosure of the repurchase completion results. Following the SSE’s approval of the share cancellation application, the matter is internally routed to China Securities Depository & Clearing Corporation Shanghai Branch, which directly processes and completes the share cancellation without requiring the listed company to submit a separate application to the branch.
The share cancellation procedures for the Shenzhen Stock Exchange and the Beijing Stock Exchange stipulate that, following the disclosure of the share repurchase results, the listed company must submit an application to China Securities Depository & Clearing Corporation Limited (CSDC). Upon completion of the share cancellation by CSDC, the listed company shall issue a separate announcement titled “Announcement on Completion of Share Cancellation Following Share Repurchase and Related Share Changes.”
(1) Aviation Materials Co., Ltd. (688563)
Announcement on the Results of the Share Repurchase and Shareholding Changes
Announcement Summary: As of July 17, 2026, the Company has completed the current share repurchase. Upon the Company’s application, it will cancel the 640,452 shares repurchased on July 21, 2026, with China Securities Depository & Clearing Corporation Limited, and promptly carry out the relevant procedures for change of registration and other related formalities.
(2) Zhongyao Holdings (000950)
Announcement on the Progress and Results of Share Repurchases and Share Changes
Announcement Summary: As of July 2, 2026, the company has repurchased a cumulative total of 15,406,600 shares through its dedicated share-repurchase securities account via centralized bidding transactions.
Announcement on the Completion of Share Repurchase and Cancellation and on Shareholder Equity Changes
Announcement Summary: On July 8, 2026, the company completed the cancellation procedures for the aforementioned repurchased shares at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.
(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 Taihe Law Firm. This disclaimer is hereby made.)
This article is published by Jiangsu Taihe Law Firm. The author is Jiangsu Taihe Law Firm, and the copyright belongs to the author. Please cite the original source when reprinting; violations will be prosecuted.
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