Circular 7 is the regulation that governs the State Administration of Foreign Exchange (SAFE) and relates to foreign exchange management of employee share plans. It applies to employee participants of companies that are listed outside of mainland China.

Once you have registered your employee share plan with SAFE, there are several ongoing registration requirements including:

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    Quarterly Filing

    The domestic agency shall submit the Record Form of Domestic Individuals' Participation in Equity Incentive Plans of Overseas Listed Companies. This is to be submitted within three working days at the beginning of each quarter.

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    When the equity incentive plan is terminated due to the expiration of the plan or other reasons, the domestic agency is to apply for a SAFE de-registration within 20 working days after the termination of the plan.

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    A SAFE amendment filing with relevant documents, is to be submitted within three months after the occurrence of major changes. Major changes include amendments to the key terms, a change of plans due to an M&A, and other major amendments.

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    Foreign exchange quota renewal

    If you need to transfer funds from China, you should apply for the amount of foreign exchange quota in the annual filing.

What are the non-compliance risks with SAFE Circular 7

The SAFE authority will supervise, administer and inspect individuals' participation in foreign exchange business related to non-PRC listed companies. If individuals, domestic companies, domestic agencies or banks violate this notice, the SAFE authority may take corresponding regulatory action and deliver administrative penalties according to law.

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