Upon successfully fulfilling the vesting conditions, shares need to be delivered to employees. When it comes to the source of these shares, companies have several choices which can include, purchasing shares from the market and/or issuing new shares. Employee Share Plan Trusts provide the flexibility to facilitate and support both approaches. Read on to find out more about Employee Share Plan Trusts and how they work.

What is an employee share plan trust?

An employee share plan trust is a trust set up between the Company and the Trustee for the purpose of acquiring and safekeeping of the Company’s shares, under an employee share plan.

How do I establish a share plan trust and how does it work?

An employee share plan trust is established through the execution of a Trust Deed between a company and a trustee, along with an initial settlement of funds into the trust. The company can further contribute to the trust fund, so that the 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.

Whilst the company establishes the trust and has a degree of indirect control by way of its ability to appoint and remove trustees, the trust is run independently and has the ultimate fiduciary duty to ensure best interests of the underlying beneficiaries (i.e. employees).

What are the benefits of setting up an employee share plan trust?

There are many benefits of having an employee share plan trustee, such as facilitating compliant management solutions for different share plans by performing share acquisition and custody arrangements during the vesting period. In addition, a share plan trustee also provides a vehicle to administer the various performance and/or vesting conditions that apply to Employee Share Purchase Plans, Pre-IPO Stock Option Plans or Restricted Share Plans.

With the benefits derived, the use of employee benefit trust is as well as the ability to allow companies to manage shareholder dilution resulting from the employee share incentive plans, the use of employee share plan trusts have gained significant popularity among Hong Kong listed companies.

Why use an employee share plan trust?

Facilitate a compliant management solution in accordance with Hong Kong Companies Ordinance, Hong Kong Stock Exchange Listing Rules and other regulatory requirements
Minimise shareholder dilution through on market purchase
Mitigate price fluctuation risks via customised share acquisition strategies
Undertake scheme shares acquisition and custody
Manage employee contributions, issuer matching and resulting share purchases
Liaise with independent auditors to conduct share plan audits

Should I appoint an independent trustee for our share plan?

When it comes to remaining compliant with the Hong Kong Companies Ordinance, managing restrictions regarding share purchases, and other regulatory requirements, the role of the independent trustee is important.

Computershare Hong Kong Trustees Limited, an independent legal entity with a Trustee licence in Hong Kong, was established to integrate with Computershare Plan Managers Asia to provide a true one-stop solution for Hong Kong listed issuers.

If you’re looking to set up a share plan trust for your company, Computershare can help you achieve your goals.

We currently manage over 100 employee share plan trusts for Hong Kong listed and pre-IPO companies. With over 10 years’ experience delivering independent trust administration services in Hong Kong, Computershare has the expertise and local knowledge to partner with companies to help them create high performing cultures and drive their businesses forward, with confidence.

Reach out to us today to discover how a share plan trust can benefit your organisation:

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