Key points and agreement of equity incentive scheme design
I. Definition of rights
Equity incentive needs to first clarify the nature and restrictions of incentive equity, and effectively prevent potential risks while ensuring the incentive effect. Equity is the cornerstone of the company. Once there is a dispute, it is serious enough to shake the foundation of the company.
Second, rights are mature.
Compared with cash reward, equity incentive can save the company's cash expenditure, and has a long-term mechanism: the company's interests and employees will establish a long-term relationship from now on, and the growth of the company's performance will also have future returns to employees. Based on this sense of belonging, employees are more motivated to make outstanding achievements.
Third, the right to grant.
The granting of virtual equity comes from the income corresponding to shareholders' equity, and it only needs the company, shareholders and incentive objects to sign a tripartite agreement to specify the proportion of dividend rights granted to incentive objects and the calculation method of dividends in each period.
Fourth, the assessment mechanism.
After the incentive equity is granted, there must be a matching assessment mechanism to avoid passive slack and waiting for dividends. The assessment mechanism may be different according to different positions, and the calculation details are many. It does not need to be explained in detail in the equity incentive agreement, but the target responsibility letter signed by the company and the incentive object is used as an additional document of the equity incentive agreement.
Verb (short for verb) loses its right.
The main purpose of equity incentive is to maintain the stability of the company's core members and achieve the company's business objectives. The existence of incentive equity is consistent with the function of the incentive object, but there are differences on this point, and the company's business objectives cannot be achieved, so the equity incentive should be terminated.
After the loss of incentive equity, it is necessary to deal with the aftermath:
Ordinary equity incentive is essentially a conditional equity transfer, which is repurchased at the subscription price of the incentive object according to the mandatory repurchase clause agreed in the transfer agreement, so as to avoid the resignation employees from continuing to hold the equity of the company and affecting the normal operation and management of the company; At the same time, the incentive object cooperates to complete the changes of industrial and commercial registration items such as the revision of the company's articles of association and the cancellation of the equity certificate. If it is only handled within the company, it does not have the publicity effect against the third party.
Virtual equity incentive is essentially a tripartite agreement between the incentive object and the company and major shareholders, and its effectiveness is limited to the inside. Once the condition of loss of rights in the agreement is triggered, the current dividend can be directly stopped and unilaterally terminated according to the notification method agreed in the agreement; Dividends already paid are recognition of the company's past contributions to employees and should not be recovered.
Mixed equity incentive is essentially the transition from virtual equity incentive to common equity incentive, which has not been completed in industrial and commercial registration, and the signed internal agreement is binding on the company. Therefore, after signing the corresponding dissolution agreement with the incentive object, the company will return the subscription consideration paid by the incentive object and stop paying dividends.
Proportion of intransitive verb rights
The granting proportion of incentive equity should consider the current needs of the company, reserve the space for the company's development, and pay attention to the incentive cost.
Ordinary equity incentives do not require the company to pay, and even cash inflows can be obtained. The seemingly low-cost incentive method is actually paying for the future value of the company.
Although the virtual equity incentive does not directly consume ordinary equity, after the implementation of the incentive, the mode, proportion and exercise conditions of the first phase will have a benchmarking effect on the subsequent incentives.
What should we pay attention to in equity incentive?
First, we should avoid acclimatization.
Not acclimatized means that as a boss, the design scheme must be that you can control everything. What if it is? As Zheng Fei's boss? Then the design scheme is mainly based on dividends, which can be cashed at the end of the year. If so? Ma Yun-style entrepreneur? Incentive policies are mainly based on value-added rights.
Second, can the mechanism flow be realized?
This is the biggest difference between the equity incentive system and the salary system. The salary policy is formulated by the human resources department. In the process of compiling, he did not seek the opinions of other departments, or rarely considered the business model and other issues. However, the equity incentive system is led by the board of directors, which is the highest strategic decision-making department of the company. When making plans and policies, we will fully consider the company's business model, marketing strategy, research and development, production, after-sales and so on.
Design Points of Five Equity Incentive Schemes
First, it depends on whether the company is qualified to engage in equity incentives.
In this regard, the New Third Board has no regulations on listed companies. At this time, we should refer to the regulations of the CSRC on listed companies. Specifically, if the audit report of a listed company in the last year is issued with a negative opinion, or cannot express an opinion, or is punished by the CSRC in the last year, the company cannot engage in equity incentives. Therefore, the company must pay attention to the fact that the audit report should not be patched and should try to avoid being punished.
Second, performance settings.
The core purpose of equity incentive is to bind the interests of employees and controlling shareholders or major shareholders together, so as to realize the binding of company performance and individual performance, otherwise equity incentive will deviate from its original intention. Therefore, one of the signs of equity incentive effect is to see whether there are performance settings.
Third, we should consider the number and reservation of equity incentives.
For this problem, the relevant regulations of listed companies make it very clear that the total number of equity incentives cannot exceed 10% of the company's total share capital, and a single incentive object cannot exceed 1% of the total share capital. Generally, listed companies are relatively large, with a large amount of 10% shares. Generally speaking, there are few listed companies with equity incentive plans exceeding 5%.
Fourth, we should consider whether the object of equity incentive is qualified.
At present, there is no such regulation in the New Third Board, but the regulation for listed companies is that directors, supervisors, senior managers, core technical business personnel and other employees that the company thinks should be encouraged can get equity incentives, but independent directors should not be included. Companies listed on the New Third Board can issue additional shares with reference to the design of the New Third Board, that is, implement equity incentives for directors, supervisors, senior managers and core personnel.
In principle, shareholders or actual controllers cannot be the object of incentives, because equity incentives are designed to make the interests of employees and major shareholders tend to be consistent. If you encourage the actual controller, it will lose its due significance.
Fifth, we should consider whether to use options or stocks to stimulate.
Before an enterprise belongs to a limited liability company or goes public, it can be directly encouraged by stocks. Especially when the company did not introduce PE, there was no market price for shares and no share payment was needed. At that time, it was not a listed company, and it did not need the supervision of accountants. Under normal circumstances, shares can be directly used as equity incentives or held as agents.
13 design points of equity incentive scheme
There are many problems to be considered when designing the equity incentive scheme. Will you consider these issues before designing the scheme? It's hard to say, but after considering these problems, at least you will get a direction.
First, we should consider the development stage of enterprises and the stage of capital market.
If the enterprise has been listed, it is appropriate to use stock options or restricted stocks to engage in equity incentives. In the early days, stocks were generally distributed directly to the team. At this time, the distribution must be cautious, because if it is divided, it will not be collected. The early development and changes of the company will be even greater, and the members of the entrepreneurial team will go in and out frequently. Once the equity is given, it will be more troublesome for people to leave. What to do with later people needs careful consideration.
Second, it depends on whether the company is qualified to engage in equity incentives.
In this regard, the New Third Board has no regulations on listed companies. At this time, we should refer to the regulations of the CSRC on listed companies. Specifically, if the audit report of a listed company in the last year is issued with a negative opinion, or cannot express an opinion, or is punished by the CSRC in the last year, the company cannot engage in equity incentives. Therefore, the company must pay attention to the fact that the audit report should not be patched and should try to avoid being punished.
Third, we should consider whether the object of equity incentive is qualified.
At present, there is no such regulation in the New Third Board, but the regulation for listed companies is that directors, supervisors, senior managers, core technical business personnel and other employees that the company thinks should be encouraged can get equity incentives, but independent directors should not be included. Companies listed on the New Third Board can issue additional shares with reference to the design of the New Third Board, that is, implement equity incentives for directors, supervisors, senior managers and core personnel.
In principle, shareholders or actual controllers cannot be the object of incentives, because equity incentives are designed to make the interests of employees and major shareholders tend to be consistent. If you encourage the actual controller, it will lose its due significance.
Fourth, we should consider whether to use options or stocks to stimulate.
Before an enterprise belongs to a limited liability company or goes public, it can be directly encouraged by stocks. Especially when the company did not introduce PE, there was no market price for shares and no share payment was needed. At that time, it was not a listed company, and it did not need the supervision of accountants. Under normal circumstances, shares can be directly used as equity incentives or held as agents.
Fifth, we should consider the number and reservation of equity incentives.
For this problem, the relevant regulations of listed companies make it very clear that the total number of equity incentives cannot exceed 10% of the company's total share capital, and a single incentive object cannot exceed 1% of the total share capital. Generally, listed companies are relatively large, with a large amount of 10% shares. Generally speaking, there are few listed companies with equity incentive plans exceeding 5%. This involves a question of balance. The more incentive shares are issued, the more share payments will be made, which will have a great impact on the company's profits, and the earnings per share (EPS) will drop sharply.
Sixth, we should consider whether to let employees hold shares directly or through the shareholding platform.
At present, the shareholding platform of the companies listed on the New Third Board cannot participate in the fixed increase (for details, please refer to Lecture 8, "Learning and Discussion on the New Rules of the Shareholding Platform"), and the employee shareholding platform cannot participate in the fixed increase. At present, it is not feasible for the shareholding platform to participate in the fixed-income design. Of course, some people in the market are calling for the employee stock ownership platform policy to be relaxed.
Seventh, we should consider the source and realization of stocks.
For the source of stocks, the New Third Board does not stipulate that the source of stocks of the New Third Board is nothing more than additional issuance or transfer.
Eighth, the pricing and lock-in period of equity incentive.
Equity incentives are for incentives, and those who take incentives must benefit. If the stock now has a fair price, intuitively speaking, the stock price of equity incentive is a discount on the fair price, which is the logic of restricted stock. If the stock is 10 now, I will give you a 50% discount and let you buy it for 5 yuan. This difference is the inducement. The restricted stock price used by listed companies for equity incentive is clearly stipulated, that is, the closing price of 1 trading day before the announcement of the draft incentive plan or the average closing price of the previous 20 days (60, 120 is optional in the new regulations in brackets) is higher, and then the maximum discount is 50%. According to the new regulations, you can also set prices in other ways, but issuers and brokers should make special explanations on rationality.
Ninth, the difference between employee stock ownership plan and equity incentive.
What is the difference between equity incentive and employee stock ownership plan? The equity incentive and employee stock ownership plan we are talking about here refers to the narrow concept, which corresponds to the provisions of the Measures for the Administration of Equity Incentive of Listed Companies and the Guiding Opinions on the Pilot Implementation of Employee Stock Ownership Plan of Listed Companies issued by the CSRC.
Tenth, the tax issue. Equity incentives must ultimately cash in equity income, which will definitely involve tax payment.
Therefore, when we design equity incentive, we must consider the tax issue of the incentive object. 1. Personal income tax. 2. Tax rate of limited partnership enterprises. 3. Tax rate of limited company.
Eleventh, performance settings.
The core purpose of equity incentive is to bind the interests of employees and controlling shareholders or major shareholders together, so as to realize the binding of company performance and individual performance, otherwise equity incentive will deviate from its original intention. Therefore, one of the signs of equity incentive effect is to see whether there are performance settings.
Twelfth, does the equity incentive plan need administrative permission?
According to the Company Law, the equity incentive is approved by the company's shareholders' meeting or shareholders' meeting. At present, the equity incentive and employee stock ownership plan of listed companies do not need the approval of the CSRC. At present, there are no specific guidelines for the equity incentive and employee stock ownership plan of the New Third Board. After the board of directors announced the equity incentive and employee stock ownership plan and issued a notice to convene a general meeting of shareholders, the plan is now reviewed after the share transfer. If the share transfer is deemed necessary, an inquiry will be issued. During the reply to the inquiry, the process of convening the shareholders' meeting shall be suspended, and the notice of the shareholders' meeting shall not be issued until the transfer of shares meets the inquiry and the issuance plan is revised.
Thirteenth, the matters needing attention in the design of equity incentive scheme under the current system of the New Third Board.
In the case that the detailed rules for equity incentives of the New Third Board have not yet been promulgated, the following issues should be considered in implementing equity incentives:
1. Does the option scheme work?
2. Can repurchase be operated?
3. How to hold shares?