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.

Circular 7 sets out the initial SAFE registration filing requirements and documents required. After the employee share plan SAFE approval, there are several ongoing SAFE 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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    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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    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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    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.

In practice, local SAFE bureaus have different requirements for subsequent SAFE registration, and it is recommended that enterprises consult and communicate with the in-charge SAFE authorities before registration.

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