How does a private listed company make an equity incentive plan?

In the whole life cycle of an enterprise, equity incentives, as a long-term incentive mechanism, run throughout. Enterprises need to focus on different priorities at different stages, and usually need to dynamically adjust the design and implementation of incentive plans by matching factors such as the company's long-term development plan and manpower scale planning.

In the early stage of entrepreneurship, due to the small number of employees in the company and the relatively clear working status, the selection of incentive objects and the number of awards can be determined according to the importance and contribution of incentive objects. When the company reaches the growth stage or the middle and late stage of development, it is necessary to use scientific methods to calculate the number of incentives and the cost of exercising rights. At the same time, it is necessary to adjust the option pool, and focus on and improve the exit mechanism.

From the perspective of the selection of incentive tools, unlisted companies generally choose options, because options are the most flexible in actual operation, and a small number of companies will grant options and restrictions at the same time. After the listing of the enterprise, there is a process of gradual substitution and transformation of options and restrictive **, **options are becoming fewer and fewer, and the proportion of restrictive ** is getting higher and higher.

The equity incentive mechanism needs to be tailored to the specific situation of the enterprise and cooperate with the listing path chosen by the subsequent enterprise in order to maximize the effect of equity incentive.

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The Measures for the Administration of Equity Incentives of Listed Companies (hereinafter referred to as the "Administrative Measures") have made clear provisions on the exercise of rights involved in the implementation of equity incentives by A-share listed companies.

According to the Administrative Measures, when a listed company grants an option, the exercise shall not be less than the par amount, and in principle, it shall not be lower than the higher of the following:

1) The average trading price of the company on the first trading day before the announcement of the draft equity incentive plan;

2) One of the average trading prices of the company in the 20 trading days, 60 trading days or 120 trading days before the announcement of the draft equity incentive plan.

In addition, the "Administrative Measures" stipulate:

If it is necessary to adjust the equity or quantity due to the ex-rights, ex-dividends or other reasons of the target, the board of directors of the listed company shall make adjustments in accordance with the principles, methods and procedures stipulated in the equity incentive plan. ”

This involves the adjustment of equity** or quantity, which may include allotment, share reduction, dividends, additional issuance, conversion of capital reserve into share capital, distribution of ** dividends, share splitting, etc.

In the past two years, with the opening of the Science and Technology Innovation Board, more and more new economy companies have come to list on A-shares, and the relevant regulations of the regulatory authorities on equity incentives have been gradually adjusted.

In the past, the A-share main board did not allow equity incentives to be implemented across periods. The company planning to IPO must ensure that the "equity structure is clear", which requires the enterprise to accelerate the exercise of options or terminate the option incentive plan before filing, which ultimately makes it difficult for the equity incentive to achieve the desired effect.

At present, the A-share main board, the Growth Enterprise Market and the Science and Technology Innovation Board have all accepted the inter-temporal implementation of equity incentives. It's just that for the equity incentive plan formulated before listing and implemented after listing, there are some stricter restrictions on Brother Wu's eyes.

According to the "Answers to Several Questions on Initial Public Offering Business (Revised in June 2020)".

For the option incentive plan formulated before the initial offering declaration and implemented after listing, the exercise of the option shall be determined by the shareholders themselves, but in principle, it shall not be lower than the audited net assets or valuation of the appraisal cavity in the most recent year";

In addition, "if the incentive object exercises its rights to subscribe after the issuer is listed, it shall promise not to subscribe within three years from the date of its own rights, and at the same time promise that after the expiration of the above-mentioned period, it shall be implemented in accordance with the relevant provisions of the directors, supervisors and senior management personnel." ”

The equity incentive of A-shares attaches more importance to the long-term nature of the incentive and guides the incentivee to grow side by side with the company for a longer time.

The equity incentive provisions of listed companies are mainly to motivate employees to destroy their better jobs, but the right to lease shares is owned by the listed company, and employees have the right to temporary income.

Because the period in which the company is listed is sensitive, the equity incentive should be comprehensive and meticulous, and the following points should be paid attention to in general:

1.Try not to choose options as equity incentive plans. Because the option equity incentive will bring about the uncertainty of the company's share capital size and the structure of the stock code, and the uncertainty of the equity value of the company to be listed, the cost of the option incentive plan is not easy to determine, resulting in the company's operating performance before listing is not easy to determine.

2.The real equity incentive ratio should not be too large, otherwise it may lead to the transfer of actual control.

If there is only one incentive person, the incentive shares are generally 8%-10% of the total shares;

If there are more than one person, it is generally no more than 15%.

The larger the size of the company's share capital, the smaller the ratio;

Too much of it is subject to legal risks and can also harm the interests of shareholders.

The main person in charge can account for no less than 30% of the total number of incentive shares, that is, when the total equity incentive is 15%, the main person in charge is about 5%.

3.Informal equity incentive plans can easily lead to unclear equity and become a substantial obstacle to IPO, and try to avoid using trust, nominee holding, etc.

4.Virtual shareholding refers to the act of investors investing funds in the company, and the company issues a certificate of ownership to the investor without registering for industry and commerce.

Since there is no industrial and commercial registration, the relationship between the investor and the enterprise may be an equity relationship or a creditor's relationship, and once the investor and the enterprise or shareholders have a disagreement, disputes will arise, which will definitely become a serious obstacle for the enterprise in the listing process.

5.It should be noted that the equity incentive method of obtaining equity by way of capital increase should be noted that the capital increase** shall not be less than the net assets per share.

1. What are the specific contents of the equity repurchase provisions?

The specific content of the equity repurchase regulations is that the company can acquire the company's shares under the following circumstances: reduce the company's registered capital; merger with other companies holding shares in the Company; Use the shares for employee stock ownership plans or equity incentives; Shareholders request to acquire their shares because they disagree with the resolution of the general meeting of shareholders to merge and divide the company; The shares are used to convert the corporate bonds issued by the listed company that can be converted into **; It is necessary for a listed company to maintain the value of the company and the rights and interests of shareholders.

Article 142, Paragraph 3 of the Company Act prohibits a company from acquiring shares of the company. However, there is an exception for any of the following circumstances: (3) using the shares for employee stock ownership plans or equity incentives.

Non-listed companies can implement equity incentives. When the company uses the shares for employee stock ownership plans or equity incentives, it can acquire the shares of the company. The total number of equity incentive shares shall not exceed 10% of the total share capital of the company, and the employees on equity incentives shall actually enjoy the right to dividends and income of shareholders.

[Legal basis].

Paragraph 1 of Article 142 of the Company Law of the People's Republic of China shall not acquire the shares of the company. However, any of the following circumstances are excepted: (1) reducing the registered capital of the company; (2) merger with other companies holding shares of the Company; (3) Using shares for employee stock ownership plans or equity incentives; (4) Shareholders request the company to acquire their shares because they disagree with the resolution of the general meeting of shareholders to merge or divide the company; (5) The shares are used to convert the corporate bonds issued by the listed company that can be converted into **; (6) It is necessary for the listed company to maintain the company's value and shareholders' rights and interests.