Why should we set up a shareholding platform?

Hui Jing Stock Right Liu Xiaoyu

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Why should we establish a shareholding platform? What are the advantages and disadvantages?

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When the enterprise develops to a certain stage, in order to improve the enthusiasm and creativity of the team and retain the management and core employees of the company with limited salary, a long-term incentive mechanism-equity incentive is widely adopted. Equity incentive is mainly to give employees some shareholders' rights and interests by attaching conditions, so that they can have a sense of ownership, thus forming a common interest with enterprises, promoting the common development of enterprises and employees, and ultimately helping enterprises achieve the long-term goal of stable development. It is one of the most commonly used ways to motivate employees.

Enterprises implement equity incentives. Employees can directly hold shares in the company or set up a shareholding platform. Employees hold shares in the shareholding platform, and the shareholding platform holds shares in the target company. In other words, employees indirectly hold shares in the target company through the shareholding platform. If the number of incentive targets is small, for example, only a few core executives are involved, then it is best to adopt the method of employee direct shareholding. This method is simple, the incentive object gains higher trust, has equal shareholder rights with the major shareholders, and has the best incentive effect. If the number of incentive targets is too large, people will often leave or be dismissed, because no matter how many shareholders are increased or decreased, the ownership structure and shareholder information will change accordingly, and the enterprise will have to go to the industrial and commercial department to go through the formalities of change registration. This has brought a lot of unnecessary troubles to enterprises, so it is not appropriate to adopt the way of employees holding shares directly, and it is necessary to adopt the way of indirectly holding shares through the shareholding platform.

When it comes to shareholding platforms, there are mainly two forms, limited company system and limited partnership enterprise. Comparatively speaking, the advantages of the limited partnership shareholding platform are as follows:

First, ensure the control of the founder.

If it is a startup, the first consideration is the founder's control over the company. When the company develops to a certain stage, for the management staff and core technicians, the simple salary can no longer keep them or the company can't pay them to stay. At this time, the company can implement equity incentives. When equity incentive becomes the only choice, enterprises are thinking about whether there is any way to keep the control of the company in their own hands, and then use part of equity to motivate employees. The shareholding platform, especially the limited partnership shareholding platform, can perfectly realize this idea of the enterprise, which is conducive to the founder to maintain control over the company and ensure efficient decision-making in the business process, thus ensuring that the control of the company is firmly in the hands of the founder himself. The incentive object does not enjoy the decision-making power, which avoids the decision-making cost brought by the decentralization of equity, and the founder can realize quick and effective decision-making It can be seen that the establishment of the shareholding platform can meet the different needs of different roles.

Second, avoid cumbersome industrial and commercial changes.

The company implements equity incentive. Due to the large number of employees, there will be more demands and special circumstances, which will inevitably lead to resignation, dismissal or other changes. If you directly hold shares, it will inevitably lead to frequent changes in the business of the operating entity, which is not conducive to the company's compliance operation, will greatly increase the cost of meetings and compliance, and may also increase many equity defects that should not have occurred, which is not conducive to the follow-up financing or other capital operation of the startup company.

Third, it is convenient to reduce taxes.

Compared with the company's shareholding platform, the establishment of the shareholding platform can reduce the company's tax burden. Double taxation on shareholders and enterprises can be avoided. Limited partnership enterprises do not need to pay enterprise income tax, and adopt the method of "paying first" to determine the partners as taxpayers. The company's shareholding platform inevitably involves the comprehensive tax rate of repeated taxation.

Fourth, set aside option pool to introduce investment.

Option pool can be reserved by setting up a shareholding platform to facilitate the introduction of financing in the future. Option pool is a part of the shares reserved by the company to encourage talents before financing. In contrast, when investors choose the target company, they are more inclined to reserve the company in option pool, or ask the company that has not reserved option pool to reserve it, otherwise the original shares will be diluted after financing. Therefore, the company can set up a shareholding platform, and set aside a part of the equity to be held by the shareholding platform. As a option pool, this is a plus item for the company to attract financing.

The advantages of using the shareholding platform for equity incentive are obvious. Whether it is necessary to use the shareholding platform, whether to choose limited partnership or other forms, and how to balance the interests between the company and employees need to be discussed from many aspects.

Edited on 09-22

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