Point of View | Pre-preparation of Equity Incentive Plan for Non-listed Company Equity Incentive Series One
Published:
2022-12-18
With the establishment of modern enterprise system, equity incentive has become a very important link in the company's development. In order to retain core talents in key positions, gather energy and enable the enterprise to develop continuously and steadily, controlling shareholders are often willing to release part of their equity through capital increase or equity transfer. However, the company's equity is "rare", equity is "soul", the adjustment of the equity structure is a process that affects the whole body. Therefore, before the company plans to implement the equity incentive plan, it is recommended to conduct a "consultation and self-test" of the company, and steadily advance the equity incentive plan with a better understanding of the company's current situation. Definition of 1. equity incentive Equity incentive refers to the company's employees to give or sell a portion of the company's equity at a discount, so that employees can participate in corporate decision-making, share profits, take risks as shareholders, so as to diligently and conscientiously serve the company's long-term development of an incentive. It is essentially a medium-and long-term incentive policy and the best compensation mechanism to improve the company's competitiveness. From the above definition, we can see that equity incentive is essentially a process of interest exchange and interest binding, the company or the actual controller to the company's equity to exchange the incentive object to the company's long-term stability to pay, successful equity incentive cases often have the characteristics of "self-interest and altruism. 2. what kind of enterprise is suitable for equity incentive Before implementing the equity incentive plan, the company should consider whether it is at the right time to implement the equity incentive from several dimensions, such as its own industry, the company's development stage, the company's development standardization and the company's development goals. Specific can refer to the following aspects: 1. Companies with strong dependence on talents: information technology, high-end equipment, new materials, new energy, energy conservation and environmental protection, biomedicine and other high-tech industries, the Internet, big data and other industries; 2. Standardized and unified chain companies; 3, the development stage: more suitable for companies in the rapid growth, mature period; 4, internal management (clear organizational structure, sound performance appraisal, clear corporate strategy, with a certain valuation basis) more standardized, interested in docking capital market companies. Research and diagnosis of equity incentive in 3. companies 1, refer to Maslow's hierarchy of needs theory to understand the demands of employees. Maslow's hierarchy of needs theory is divided into physiological needs, security needs, social needs, respect needs and self-realization needs. In addition to the basic salary, the equity incentive plan allows employees to enjoy the company's dividends and realize the accumulation of personal wealth. First of all, it can meet the basic physiological needs of employees' lives; secondly, equity incentives can transform employees from workers to participants in the company's operations., Decision makers, itself is also a recognition of the employee's identity, increase their sense of professional belonging, and can meet their safety needs; the status of employees as shareholders is closely tied to the interests of the company, and even those who can participate in related work on behalf of the company will virtually increase the sense of responsibility and mission of employees, which is the embodiment of social needs and respect needs. Through interviews with employees, understanding the real demands of employees can better help the company's decision makers to determine the direction of incentives and incentive measures, whether to improve the salary structure, improve employee benefits or implement equity incentives? Interviews with employees can make incentive programs more targeted and incentive effects. 2, understand the company's equity status. The company's decision makers and controlling shareholders can first judge the current company's shareholding structure by the following questions. In the relevant equity incentive cases I took over, I often found that the controlling shareholders and founders of many companies knew little about the Company Law and equity, and the articles of association were basically the version of the Industrial and Commercial Bureau, which did not fit the company's equity structure. In the framework of human-based limited companies, once disputes arise, imperfections at the institutional and structural levels often expose many drawbacks, and even lead to equity dispute litigation. Therefore, before the formulation of the equity incentive plan, the company's decision makers must first fully understand the company's equity status quo, as well as the future equity structure design, to avoid "impulsive" equity changes in the industrial and commercial bureau to leave "evidence", for the future docking of the capital market or adjust the equity structure to lay hidden dangers. ♦Is the equity between shareholders more even? ♦Does the company have more than three founding shareholders? ♦Do you give a lot of equity to part-time employees? ♦Are there shareholders who provide only one-time resources? ♦Are large equity stakes given to short-term resource commitments? ♦Is there a problem of minority shareholders manipulating the company? ♦Does the company have only major shareholders and no partners? ♦Is there no agreed exit mechanism for venture partners? ♦Do you reserve equity for investors? ♦Is equity reserved for the management team? ♦Is it controlled by an outside investor? ♦Is there a situation of concerted action person in the company? 3, understand the company's current financial data. A company's financial data is the most intuitive reflection of a company's current business situation. Whether the company is currently profitable, the company's development plan for the next three years and the analysis of financial data are important factors in judging whether the company implements "real share" incentives or virtual equity incentives. At the same time, the company's implementation of the equity incentive plan involves the issue of "share payment", which also directly affects the company's net profit after deduction, especially for companies that intend to be listed on the capital market, the impact of the calculation of financial costs on net profit cannot be ignored. The company's cash flow situation and the actual distributable profit funds are also important factors for the company and the incentive target to consider repurchase later. Most importantly, the company's net worth will directly determine the pricing of each contribution or share. Therefore, the company should fully understand the financial data of the company before implementing equity incentive, and analyze it from all dimensions, so as to formulate the equity incentive plan more accurately. 4, understand the company's development stage and development goals. Companies are at different stages of development, which are important in identifying the candidates for incentives, the incentive price and the specific incentive model to be implemented, and the risk factors considered in the program are different. If the company has a listing plan or even started within three years, the impact of share payment on the financial data during the reporting period should be considered first, and the connection between the equity incentive plan and the listing plan should be considered. At the same time, more attention should be paid to compliance and tax issues. If a company is still in the growth stage and has a large demand for capital and performance, the equity incentive model should focus more on the growth of the company, the choice of incentive target should also be the core management and business backbone who contribute more to the company. The equity incentive plan is not a formalized, procedural and overnight work, but a gradual process. Therefore, the founders or decision makers of the company who are interested in equity incentive may as well conduct a full investigation and diagnosis of the company first. After the preparatory work, combined with the experience of lawyers or other intermediary agencies, tailor a set of equity incentive scheme for the company.
With the establishment of modern enterprise system, equity incentive has become a very important link in the company's development. In order to retain core talents in key positions, gather energy and enable the enterprise to develop continuously and steadily, controlling shareholders are often willing to release part of their equity through capital increase or equity transfer. However, the company's equity is "rare", equity is "soul", the adjustment of the equity structure is a process that affects the whole body. Therefore, before the company plans to implement the equity incentive plan, it is recommended to conduct a "consultation and self-test" of the company, and steadily advance the equity incentive plan with a better understanding of the company's current situation.
Definition of 1. equity incentive
Equity incentive refers to the company's employees to give or sell a portion of the company's equity at a discount, so that employees can participate in corporate decision-making, share profits, take risks as shareholders, so as to diligently and conscientiously serve the company's long-term development of an incentive. It is essentially a medium-and long-term incentive policy and the best compensation mechanism to improve the company's competitiveness.
From the above definition, we can see that equity incentive is essentially a process of interest exchange and interest binding, the company or the actual controller to the company's equity to exchange the incentive object to the company's long-term stability to pay, successful equity incentive cases often have the characteristics of "self-interest and altruism.
2. what kind of enterprise is suitable for equity incentive
Before implementing the equity incentive plan, the company should consider whether it is at the right time to implement the equity incentive from several dimensions, such as its own industry, the company's development stage, the company's development standardization and the company's development goals. Specific can refer to the following aspects:
1. Companies with strong dependence on talents: information technology, high-end equipment, new materials, new energy, energy conservation and environmental protection, biomedicine and other high-tech industries, the Internet, big data and other industries;
2. Standardized and unified chain companies;
3, the development stage: more suitable for companies in the rapid growth, mature period;
4, internal management (clear organizational structure, sound performance appraisal, clear corporate strategy, with a certain valuation basis) more standardized, interested in docking capital market companies.
Research and diagnosis of equity incentive in 3. companies
1, refer to Maslow's hierarchy of needs theory to understand the demands of employees.
Maslow's hierarchy of needs theory is divided into physiological needs, security needs, social needs, respect needs and self-realization needs. In addition to the basic salary, the equity incentive plan allows employees to enjoy the company's dividends and realize the accumulation of personal wealth. First of all, it can meet the basic physiological needs of employees' lives; secondly, equity incentives can transform employees from workers to participants in the company's operations., Decision makers, itself is also a recognition of the employee's identity, increase their sense of professional belonging, and can meet their safety needs; the status of employees as shareholders is closely tied to the interests of the company, and even those who can participate in related work on behalf of the company will virtually increase the sense of responsibility and mission of employees, which is the embodiment of social needs and respect needs.
Through interviews with employees, understanding the real demands of employees can better help the company's decision makers to determine the direction of incentives and incentive measures, whether to improve the salary structure, improve employee benefits or implement equity incentives? Interviews with employees can make incentive programs more targeted and incentive effects.
2, understand the company's equity status.
The company's decision makers and controlling shareholders can first judge the current company's shareholding structure by the following questions. In the relevant equity incentive cases I took over, I often found that the controlling shareholders and founders of many companies knew little about the Company Law and equity, and the articles of association were basically the version of the Industrial and Commercial Bureau, which did not fit the company's equity structure. In the framework of human-based limited companies, once disputes arise, imperfections at the institutional and structural levels often expose many drawbacks, and even lead to equity dispute litigation. Therefore, before the formulation of the equity incentive plan, the company's decision makers must first fully understand the company's equity status quo, as well as the future equity structure design, to avoid "impulsive" equity changes in the industrial and commercial bureau to leave "evidence", for the future docking of the capital market or adjust the equity structure to lay hidden dangers.
♦Is the equity between shareholders more even?
♦Does the company have more than three founding shareholders?
♦Do you give a lot of equity to part-time employees?
♦Are there shareholders who provide only one-time resources?
♦Are large equity stakes given to short-term resource commitments?
♦Is there a problem of minority shareholders manipulating the company?
♦Does the company have only major shareholders and no partners?
♦Is there no agreed exit mechanism for venture partners?
♦Do you reserve equity for investors?
♦Is equity reserved for the management team?
♦Is it controlled by an outside investor?
♦Is there a situation of concerted action person in the company?
3, understand the company's current financial data.
A company's financial data is the most intuitive reflection of a company's current business situation. Whether the company is currently profitable, the company's development plan for the next three years and the analysis of financial data are important factors in judging whether the company implements "real share" incentives or virtual equity incentives. At the same time, the company's implementation of the equity incentive plan involves the issue of "share payment", which also directly affects the company's net profit after deduction, especially for companies that intend to be listed on the capital market, the impact of the calculation of financial costs on net profit cannot be ignored.
The company's cash flow situation and the actual distributable profit funds are also important factors for the company and the incentive target to consider repurchase later.
Most importantly, the company's net worth will directly determine the pricing of each contribution or share.
Therefore, the company should fully understand the financial data of the company before implementing equity incentive, and analyze it from all dimensions, so as to formulate the equity incentive plan more accurately.
4, understand the company's development stage and development goals.
The company is at different stages of development, which is of great significance in identifying the candidates for the incentive target, the incentive price and the specific incentive model to be implemented, and the risk factors considered in the program are also different. If the company has a listing plan or even started within three years, the impact of share payment on the financial data during the reporting period should be considered first, and the connection between the equity incentive plan and the listing plan should be considered. At the same time, more attention should be paid to compliance and tax issues. If a company is still in the growth stage and has a large demand for capital and performance, the equity incentive model should focus more on the growth of the company, the choice of incentive target should also be the core management and business backbone who contribute more to the company.
The equity incentive plan is not a formalized, procedural and overnight work, but a gradual process. Therefore, the founders or decision makers of the company who are interested in equity incentive may as well conduct a full investigation and diagnosis of the company first. After the preparatory work, combined with the experience of lawyers or other intermediary agencies, tailor a set of equity incentive scheme for the company.
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