Pre-ipo Share Option Plan - Stock Option Agreement - Free Search.
When a company assesses which type of incentive scheme it wishes to adopt, it will have to consider several factors, including the number of grantees; restrictions imposed by the articles or pre-IPO investment agreements; and taxation of such schemes in relevant jurisdictions. Pre-IPO Share Option Schemes. Whether such a waiver is granted is determined on a case-by-case basis depending on factors such as the number of grantees.
Employee Share Option Schemes. Share options are vested on the grantees over a period of time — most of the share option schemes on the market vest over a period of ten years in accordance with Chapter Employee-grantees have to remain in the employ of their company for a certain period of time usually three to four years to have the full amount of share options vested on them, and may be subject to other vesting conditions such as performance hurdles.
If the share price falls below the exercise price, the relevant grantee can choose not to exercise the option and the option will eventually lapse.
Common criticisms of share option schemes include: Share Appreciation Rights Schemes. In Hong Kong, SARs are more commonly seen with H-share issuers 2. The cash amount representing the increase in the share price over the exercise price is given to the employee upon exercise of the right, and no best real money maker wot tier 5 shares are involved.
Conventus Law » Blog Archive » Hong Kong – Employee Incentive Schemes.
SAR schemes share many of the same disadvantages as share options schemes, except that there is no dilution of the existing shares as may occur under the former. A share award pre-ipo share option scheme is a direct award of shares to senior employees.
To date, share award schemes have been adopted by very few companies listed on HKEx 3. Such schemes involve the vesting of fully-paid shares to senior executives either for free or at a discount, but instead of having to exercise options, the shares are awarded directly to the grantee who can sell or keep the shares as he sees fit.
The obvious advantage of share award schemes is that once the shares are vested, the grantee becomes the owner immediately without taking the positive act of exercising an option, with the down-side obviously being the dilution to the company for no tangible pre-ipo share option scheme consideration.
Restricted Stock Unit Schemes. These schemes are typically used in jurisdictions where the tax impact of share option schemes may be substantial. Common conditions for effecting an RSU scheme are that an employee must remain employed at the company and the earnings-per-share of the listed company must reach a certain value.
RSU schemes favour employees who are subject to income tax in some jurisdictions, notably the United States. However RSU schemes are not common among HKEx-listed companies.
RM2 :: Thinking of an IPO - what does that mean for the company's employee share plan?
Companies looking to list in Hong Kong should start thinking about an appropriate employee incentive scheme as early as possible. In light of the new and ever-changing guidance put out by the HKEx, it is important that companies to be listed ensure that they take appropriate advice from their legal advisors when they consider adopting any incentive scheme.
This article was authored by: Enoch Wong, Associate, Skadden. Conventus Law - www.
Jurisdiction - Hong Kong. Hong Kong — Employee Incentive Schemes. BettsPartner, Skadden.
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