Many bosses of start-up companies, due to the lack of knowledge and experience related to equity, will encounter such problems when they want to implement equity incentives and design equity structures, or fall into some misunderstandings, resulting in unreasonable equity structure design or unsuccessful implementation of equity incentives.
Equity structure design
Before designing the ownership structure, we should clearly realize that the ownership structure is not a simple shareholding ratio or investment ratio, but should be based on the shareholding ratio, through a series of adjustments to shareholders' rights, the functions and powers of shareholders' general meeting and board of directors, voting procedures and so on.
1. Equity ratio, company management and company decision-making.
Equity is a kind of ownership based on investment. The management right of a company comes from equity or authorization based on equity. Enterprise decision-making comes from equity, and at the same time it affects the direction and scale of enterprise management. As long as shareholders have investment, they will have certain decision-making power, and the difference lies in the degree of decision-making participation and influence.
Second, the controlling shareholder
Shareholders with decision-making power are legally controlling shareholders. There are two ways to obtain the controlling shareholder: first, the direct actual investment reaches more than 50%; Second, the actual direct investment has not reached 50%, but the equity ratio is the largest. Then, by absorbing the shareholders, close friends and close relatives of affiliated companies, the holding situation is formed in the company in the form of alliance.
Three. Acquisition of voting rights
If the above two methods fail to become the controlling shareholder of the company, how can we control the company? In this case, it is necessary to make great efforts to draft the articles of association at the beginning of the company's establishment in order to expand its voting rights. To achieve the purpose of this equity design, generally speaking, we have certain market advantages, technical advantages or management advantages, and we can exchange these advantages for voting rights to make up for the lack of investment funds.
Fourth, the weakening or strengthening of equity.
The weakening or strengthening of equity is for the protection of the interests of actual investors and the consideration of attracting outstanding talents. Conventional equity design follows the principle of equal capital contribution and equal rights. However, in the case of dormant shareholders and dry shares, once someone asks for their complete shareholder rights, or asks for the dissolution of the company and the distribution of surplus assets, it will push the company to a dangerous situation. Therefore, in practice, the articles of association, shareholders' contracts and other forms are used to restrain and clarify the rights of relevant shareholders, so as to effectively avoid future disputes.
Verb (abbreviation for verb) voting procedure
The shareholders' meeting and the board of directors are common voting departments for major issues of the company, but how to design voting forms and procedures needs to be determined according to the actual situation of the company. Some closed-end companies stipulate that when shareholders transfer shares to the outside world, only 2/3 of all shareholders' voting rights can be passed; Some companies have special restrictions on the proportion or time limit for their heirs to enter the decision-making and management levels of the company after the death of shareholders.
In a word, investors should fully consider their own investment purpose, investment amount and investment proportion to the company, and conduct in-depth analysis and consideration of the ownership structure in view of various advantages, so as to better safeguard their own interests and lay the foundation for the steady development of the company.
Equity incentive design
The design of ownership structure is mainly aimed at the investors of enterprises, which is naturally their due right. When the company is on the right track and growing day by day, talent is the most urgently needed resource. How to stabilize employees and attract outstanding talents? Introducing equity incentive plan is a common method.
Design elements
The successful equity incentive scheme first considers the development cycle of the enterprise, chooses the way suitable for the enterprise, and then begins to design the scheme, mainly around six key factors.
1, incentive object
There are generally three ways to motivate the object, namely, the equity beneficiary. One is full participation, mainly in the initial stage; The second is that most employees hold shares, which is mainly suitable for retaining more talents to support the development of enterprises in the high-speed growth period; The third is the shareholding of key employees, and the beneficiaries are mainly managers and key skilled personnel. The selection of incentive objects should have certain principles, and those who do not meet the requirements should not be ignored, and equity incentives should not be turned into equity gains or equity rewards.
2. Incentive mode
There are three commonly used medium and long-term incentives: equity, option and benefit sharing. Each method has its advantages and disadvantages, as well as specific applicable preconditions. No matter which way is adopted, we should give consideration to the organic combination of incentive mechanism and restraint mechanism, and really give play to the enthusiasm of employees.
3. The total amount of employee stock ownership and its distribution
This mainly solves the total amount of equity incentives, the number of equity incentives for each beneficiary, and the number of stocks reserved for later incentives. How to determine it can be determined according to the actual situation of the company. Generally speaking, the number of shares of each beneficiary is basically determined according to the position and personal value ability.
4. Stock sources
In the distribution of shares, the source of shares of listed companies is more troublesome, which needs to be reviewed by the CSRC and approved by the shareholders' meeting. The sources of stocks generally include directional issuance, stock market repurchase, transfer of major shareholders, stock inventory and so on. Among them, the stock in the inventory refers to the part that the company repurchases from the market. According to the needs of stock options or other long-term incentive mechanisms, the reserved shares will be sold again at some time in the future.
5. Sources of funds
The stock purchase method is also the source of funds for buying stocks. Generally, there are employees' cash contributions, public welfare funds accumulated by the company over the years, welfare funds, financing provided by the company or major shareholders, and employees' mortgage loans to banks with equity. These methods are simple to operate, and some methods will generate financial expenses and have to pay taxes repeatedly. The company will take the form of employee-funded purchase, and deduct money directly from the salary in proportion, which is conducive to the control of employees.
6. Exit mechanism
Some agreements made by the withdrawal mechanism for employees to withdraw from the incentive scheme include the following three situations: the first is normal resignation, and enterprises often continue to let these employees enjoy equity or options according to contracts; The second is abnormal resignation. If the employee's resignation does not cause losses to the company and does not violate the confidentiality agreement, most companies can still allow the equity gains that have been granted; The third is expulsion, which cancels the right to enjoy equity income in accordance with relevant regulations.
Perform eight steps
Generally speaking, companies are more willing to launch equity incentive plans when the industry is depressed, because the assessment indicators launched at this time are easier to complete and the effect is more ideal. The implementation of the equity incentive plan includes the following eight steps:
The first step is to determine the content of equity cooperation, including what to do and the business scope of the company.
The second step is to understand the ownership structure. Stock tree right can be divided into three meanings: option (only dividend right, unregistered, also known as dividend right by private enterprises); Virtual shares (registered on the premise of completing a certain goal or time, which need to be agreed in advance in the form of contract); Registered entity (the right of registration is protected by laws and regulations).
The third step is to plan financial management scientifically.
The fourth step is to constantly absorb the culture of all outstanding employees and build a good unified cultural system.
The fifth step is to clarify the key points of giving shares, such as options or virtual shares within two years. If you don't keep shares within two years, you can turn them into registered shares for more than two years, but you will be compensated according to the percentage of registered capital after leaving.
The sixth step, power supervision, such as financial power and strategic power belong to the group board of directors, the appointment and removal of core cadres belong to the group president, and personnel recruitment and performance management belong to the general manager of molecular companies.
The seventh step is to make detailed provisions on salary distribution.
The eighth step is to formulate a commercial confidentiality agreement.
When designing equity incentives, we should also estimate the potential financial impact that may be caused to the company to help enterprises make comprehensive judgments. At the same time, equity incentive also has a certain life cycle, which should be adjusted appropriately in the changes of macro-environment and policy environment. For example, in early years, in order to motivate employees and raise funds internally, Huawei adopted the form of issuing virtual restricted shares to the backbone, but now the crowd and backbone of this dividend incentive are gradually misplaced. Therefore, the majority of small and medium-sized companies should learn from Huawei's stock incentive model and make rational adjustments in light of their own actual conditions. Equity structure and equity incentive are the guarantee of the company's sustainable development, which need to be carefully and scientifically set up by integrating various factors in design.
The above is the answer given by Jingbang Consulting according to your question, hoping to help you. 17 after consulting bangbang, I focused on one thing: share reform.