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• SAFE funds transferred from the individual’s foreign exchange savings account
• SAFE funds obtained from the unified foreign exchange purchase by domestic agencies
• Principal and income repatriated by individuals after selling shares under the share incentive plan
• Dividend funds repatriated and,
• Any other income approved by the local SAFE authority.

Below are the types of funds can be transferred out of the account:

• Overseas payment of funds required for participation in the share incentive plan
• Settlement of foreign exchange repatriation funds or,
• Transfer of funds to personal foreign exchange savings accounts and,
• Any other expenditures approved by the local SAFE authority.

To find out more about SAFE Circular 7 and ongoing requirements visit this page.

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Some companies may be worried about any potential dilutive impact on shareholders if the employee share plan applies newly issued shares. Companies with Share Option or Share Award plans that utilise newly issued shares may be subject to stricter compliance requirements under the Hong Kong Listing Rules. Based on the latest Chapter 17 amendments, the mandate limit for all schemes combined, must not exceed 10% of the shares on issue. This limit can be reset after three years from shareholders' approval of the scheme.

With the Chapter 17 amendments effective since 1 January 2023, an increasing number of companies plan to use existing shares to meet their needs for share option plans. This is usually facilitated through an employee share plan trust arrangement.

Companies may consider using a trust arrangement to allow the flexibility of a shared resource under their Share Option or Share Award scheme, or simply to utilise existing shares where the disclosure and compliance requirements under Chapter 17 amendments are comparatively reduced.

Computershare Hong Kong Trustees Limited (CTL) is an independent legal entity with a Trustee licence in Hong Kong. It was established to integrate with Computershare Plan Managers Asia and provide a true one-stop solution for Hong Kong-listed issuers. Through this one-stop solution, companies can delegate day-to-day administrative and management tasks to us. We have expertise in administration and management of stock options, vesting periods, exercise conditions, and distribution of shares. We can handle the logistics, compliance, and record-keeping, relieving your company of the associated administrative burden.

To learn more about employee share plan trusts, click here.

If you're ready to set up a trust arrangement, please contact our team today.

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Based on our experience, here is what we have seen across the market:

1. Companies in the early stages of development, especially in high-growth industries such as I.T., high-tech and biomedicine will be reliant on the creative value of employees to drive the establishment, development, and maturity of their corporate business model. In these high growth industries, SOS are more common as they help to retain and motivate employees and ensure employee contributions are closely linked to the growth of the company.
2. Companies in the post-IPO stage, will most likely have a mature and stable business model, therefore it is more common to see these companies choosing Restricted Stock Units (RSU) due to their relatively stable returns. However, if for some reason any market fluctuations occur or the stock price is undervalued, your company may consider returning to SOS to balance financial costs.
3. Mature companies with a sizeable employee population will typically implement executive share plans, as well as a share plan for their broader employee base. The Employee Share Purchase Plan (ESPP) is an emerging incentive tool that is growing in popularity across Asia. It encourages employee ownership and is often used as a key retention tool.

To design the most appropriate and effective share plan, companies should work with an accredited, professional share plan provider to design, implement, and manage their ESOP. For more information, reach out to our team today.

An Employee Share Ownership Plan (ESOP) is a supplementary form of corporate compensation that provides additional benefits to employees through financial instruments such as Share Options Schemes (SOS). An ESOP can help unlock an effectiveness that traditional salary reward mechanisms do not offer, by utilising various financial instruments in the capital markets to amplify the benefits.

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One of the key differences between these two types of schemes is the point in time that participants can access their shares. With a share option scheme, participants can access their shares after exercising them once vesting conditions are met, and for those in a share award scheme, participants should wait until vesting has occurred prior to gaining access.

When it comes to overarching benefits, Share Award Schemes often serve as the most appealing share incentive tool for attracting and retaining employees. Whereas Share Option Schemes can be a more cost-effective approach for companies, reducing administration costs and not requiring immediate cash flow.

The table below provides a summary of the key differences and considerations.

If you would like more information about either of these share schemes, please reach out to our team.

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Established through the execution of a Trust Deed between a company and an independent trustee, a trust arrangement requires an initial settlement of funds into the trust to occur. The company can further contribute to the trust, so that the independent trustee can acquire the company's shares on market to satisfy future vestings of share awards granted to employees (i.e. beneficiaries). Alternatively, the company may also issue new shares to be held by the Trust during the vesting period.

Why use an employee share plan trust?

For more information, read our article — Understanding employee share plan trusts.

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A 10b5‐1 plan is a written plan for trading securities that is designed in accordance with Rule 10b5‐1 of the Securities Exchange Act of 1934 (the “Exchange Act”) in US, which allows insiders of a listed company to sell a pre-determined number of shares at a pre-determined time in accordance with insider trading laws.

In the trading plan, the price, trading amount, and sales dates must be specified in advance and determined by a formula or metrics. When making the sale plan, the seller must not have access to any material non-public information, e.g. during window-open period.

The following are a few key benefits of having a 10b5-1 plan:

An affirmative defense to insider trading allegations for persons trading pursuant to the plan

More opportunities for insiders to sell their shares, especially during a blackout period and greater certainty in planning the transactions

Potentially less negative news associated with insider sales

Less burden on legal counsel or compliance officers who would otherwise have to make subjective determinations about the availability or possession of material non‐public information each time an insider seeks to buy or sell shares

For more information, reach out to our team today.

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