New Regulations on Equity Incentives for Employees of Listed Companies

March 31, 2006 | BY

clpstaff &clp articles

Listed companies can apply for implementation of equity incentive measures and establish a comprehensive incentive and regulatory scheme. Listed companies may use its own shares as the subject matter of long-term incentives (including restricted shares and stock options) offered to its directors, supervisors, senior management personnel and other staff and workers. This Measures establish detailed regulations regarding incentive modes, incentive targets, source of shares, incentive amount, grant price and grant period etc.

By Lester Ross and Kenneth Zhou, Wilmer Cutler Pickering Hale & Dorr LLP, Beijing

TheMeasures for the Administration of the Equity Incentives of Listed Companies (Trial Implementation) (上市公司股权激励管理办法) (Measures) promulgated by the China Securities Regulatory Commission (the CSRC), effective from January 1 2006, are a significant advancement in the regulation of employee incentives and stock options in China. The Measures systematically provide for the first time detailed requirements for granting shares to employees, disclosure standards, pricing mechanisms and other fundamental procedures for the implementation of stock option and stock-based incentive schemes for listed company employees.

Evolution of employee incentives regulation

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