The problem of equity division, what are the disadvantages of equity division

The reform of the division of shares is to reform the non-tradable shares into tradable shares, but although the state-owned shares can be gradually circulated, the name is still the state-owned shares and corporate shares, of course, the tradable shares are not 100 percent, and if they are all called tradable shares, then many problems will not be clear.

What is the Split Share Reform? To put it bluntly, it is to take the state-owned shares that could not be listed and circulated before (including other forms that cannot be circulated) to the market for circulation, which was not called the reform of equity division before, and was called state-owned shares in the past, but now it has been repackaged and launched again. Among the trillion-yuan market value of the two exchanges in the mainland, Shanghai and Shenzhen, the current marketable market value is only 830 billion yuan, and the non-tradable market value of state-owned shares and other non-tradable stocks reaches one trillion yuan.

If state-owned shares and so on obtain the right to circulate, the two exchanges in Shanghai and Shenzhen can circulate twice as much as once, and the market can only move in one direction, that is. If we take into account that state-owned shares are basically obtained for one yuan per share, and most of the tradable shares are purchased at a premium of several times or more than ten times, then the losses suffered by the shareholders of tradable shares in the state-owned shares are easy to see.

All A shares of a company that has completed the reform of the share division system are already tradable shares. The current non-tradable shares are only required by the CSRC to shareholders of non-tradable shares after obtaining the right to circulate. The shares can only be divided into batches within a certain period of time (that is, a restricted period is established).

The main purpose of such an arrangement is to protect the interests of small and medium-sized investors.

Legal Analysis: Disadvantage 1: Free Rider; In layman's terms, it is generally referred to as "minority shareholders do not work", that is, after some employees become partners, their motivation to work not only does not increase, but weakens.

Disadvantage 2: moral hazard; The moral hazard mentioned here refers to the short-term stock price of the equity incentive object through short-term performance improvement, so as to achieve the purpose of obtaining this short-term benefit. Then we can avoid these shortcomings through rational design when designing the system.

Disadvantage 3: misalignment of interests; The purpose of the partnership system is to align everyone's interests with those of the company. However, because of people's different personalities, different abilities, different work contents, and different responsibilities, these factors will make everyone's interests misaligned.

Disadvantage 4: The attractiveness is greatly reduced; Is it useful to have a declining corporate equity incentive? Is equity in a loss-making business worth anything?

This is a very real problem. If you want to turn losses into profits through equity incentives and partnership systems, it is not impossible, but it is very difficult! Disadvantage five:

inconsistent with the company's strategy; There is no perfect governance model and management method, and what is applicable is the best! But as an entrepreneur and leader, you must understand that the shortcomings are in the first place, the risks are in the first place, how to solve or control them, and consider whether you and the enterprise can take these risks.

Legal basis

Guiding Opinions on the Reform of Equity Separation of Listed Companies》 Article 10 Adhere to the market-oriented orientation of reform, and pay attention to creating a market mechanism conducive to actively and steadily resolving the problem of equity division. According to the reform process of equity division and the overall situation of the market, the "separation between the old and the new" will be implemented at the right time, and the company will no longer distinguish between tradable shares and non-tradable shares for the first public issuance. Listed companies that have completed the reform of equity division will give priority to refinancing, and can implement management equity incentives, and at the same time reform the refinancing supervision method to improve refinancing efficiency.

The specific implementation and assessment measures for the equity incentive of the management of listed companies, as well as the supporting supervision system, shall be formulated separately by the ** regulatory department in conjunction with relevant departments. If a proposed overseas listed company involving the equity of A-shares, as well as a spin-off subsidiary of an A-share listed company intends to be listed overseas, it shall be implemented after the completion of the equity division reform. For the transfer of non-tradable shares of a listed company by agreement, it is necessary to make corresponding arrangements for the equity division reform, or to operate in combination with the company's equity division reform.

Equity division refers to the fact that the shares of listed companies on the A** market are divided into tradable shares and non-tradable shares according to whether they can be listed and traded on the ** exchange. The former is mainly called tradable shares, and the main components are public shares; The latter are non-boring round search shares, most of which are state-owned shares and corporate shares. Shareholders hold the same ** but do not have the same rights, for example, shareholders who hold non-tradable shares cannot trade like shareholders who hold tradable shares**.