Core Viewpoint - The Supreme People's Court has released a draft interpretation of the Company Law, introducing ten special provisions aimed at addressing key issues in corporate governance, including the recovery of illegal compensation, the validity of commitments, and regulations on anti-takeover measures, which will have a profound impact on the capital market [1][2]. Group 1: Recovery of Illegal Compensation - Companies can demand the return of excessive compensation, stock, or options from directors and senior executives if there are significant violations such as false financial reporting [4][5]. - This provision aims to deter executives from engaging in fraudulent activities to inflate company performance for personal gain, as they may face significant financial repercussions [4][5]. - The enforcement of this rule is expected to reduce the likelihood of financial fraud among listed companies, as the penalties for such actions have become more severe [5]. Group 2: Invalid Commitments - The draft specifies that certain commitments made by companies, such as guaranteed returns on private placements, will be deemed invalid, aligning with the regulatory spirit of prohibiting profit transfer [9][10]. - Financial assistance provided by companies to obtain shares will also be invalidated, which is intended to prevent unfair practices that harm minority shareholders [10]. - Agreements linked to market value, such as buyback clauses or compensation agreements, will be rendered ineffective, further reducing the risk of stock price manipulation [12][13][14]. Group 3: Anti-Takeover Measures - New regulations have been introduced to prevent companies from improperly restricting shareholder rights or excluding specific individuals from holding positions through amendments to company bylaws [16][18]. - This aims to enhance corporate governance and protect the rights of minority investors, particularly in cases where companies are controlled by a few individuals [18]. Group 4: Additional Key Provisions - The draft includes provisions regarding the handling of pledged shares during performance commitments and the validity of major asset transaction contracts that lack shareholder approval [20][21]. - It clarifies the effectiveness of bondholder meeting resolutions and the litigation status of trustees in cases of default, ensuring better protection for bondholders [22][23].

Core Viewpoint - The Supreme People's Court has released a draft for public consultation regarding the interpretation of the Company Law, which includes specific provisions for listed companies, aiming to enhance transparency and protect the interests of investors [1]. Group 1: Regulations on Executive Compensation - Article 85 introduces the concept of "returning illegal compensation," allowing companies to request the return of excessive compensation or stock options from directors and senior management when financial reports are found to be misleading [1]. - This new provision aims to correct improper compensation distribution and uphold the interests of the company and its investors, filling a gap in previous regulations regarding the return of illegal compensation [1]. Group 2: Validity of Market Value Adjustment Clauses - Article 82 states that market value adjustment clauses in agreements between investors and listed companies are invalid if they impose obligations on the company or its controlling shareholders to repurchase shares or provide monetary compensation when certain market value metrics are not met [3]. - Article 83 declares that any guaranteed return clauses in private placements that violate regulatory requirements are also invalid, protecting the interests of the company and minority shareholders [3][4]. Group 3: Regulation of Anti-Takeover Measures - Article 79 outlines the regulation of anti-takeover measures, stating that any amendments to company bylaws that unfairly restrict shareholder rights or impose unreasonable limitations on the qualifications of directors and senior management are invalid [6]. - This provision aims to prevent the abuse of control by major shareholders and protect the rights of minority investors, aligning with the legislative trend of safeguarding investor interests [7]. Group 4: Context and Implications - The draft is a response to the need for clearer regulations regarding significant asset transactions, market value management, and private placement guarantees, which have historically harmed minority investors [7]. - The Supreme People's Court's initiative is based on extensive research and consultations with experts, aiming to unify judicial standards and enhance compliance within the industry [7].