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An Equity Incentive Plan lets companies reward key employees with shares, stock options, or other equity-based benefits. Common in Hong Kong's listed companies and startups, these plans help attract talent and align employee interests with company success through share ownership.

Under Hong Kong securities law and listing rules, these plans must specify clear terms about who can participate, how many shares are available, and when rights can be exercised. Companies typically structure them to comply with both Companies Ordinance requirements and Stock Exchange regulations while offering tax advantages to participants.

Companies benefit most from an Equity Incentive Plan when facing talent retention challenges or preparing for growth phases. This tool proves especially valuable for Hong Kong startups competing for skilled professionals against larger firms, or established companies looking to motivate key executives without increasing cash compensation.

The plan works particularly well during pre-IPO preparations, merger discussions, or when expanding into new markets. It helps create a strong ownership culture while offering tax-efficient compensation under Hong Kong's salary tax framework. Many companies implement these plans before major funding rounds to demonstrate aligned interests to potential investors.

• Equity Grant Agreement: Outlines specific terms for individual share awards, commonly used for direct equity grants to employees. This type focuses on immediate share transfers with vesting conditions.
• Restricted Share Unit (RSU) Plans: Promises future share delivery upon meeting time-based or performance conditions, popular among listed companies.
• Stock Option Plans: Gives employees the right to buy shares at a preset price, typically used by growth-stage companies planning IPOs.
• Share Purchase Plans: Allows employees to buy company shares at a discount, often through regular salary deductions under Hong Kong payroll rules.

• Board of Directors: Approves and oversees the plan's implementation, sets overall share pool size, and determines key terms under Hong Kong listing rules.
• HR Department: Manages day-to-day administration, tracks vesting schedules, and coordinates with employees on grant documentation.
• Legal Counsel: Drafts plan documents, ensures compliance with Companies Ordinance and SFC regulations, and reviews individual grant agreements.
• Plan Participants: Typically includes executives, key employees, and sometimes consultants who receive equity benefits subject to vesting conditions.
• Company Secretary: Maintains share registers, handles regulatory filings, and ensures proper documentation of equity transfers.

• Company Details: Gather current share structure, authorized capital, and any existing equity schemes.
• Plan Scope: Define total shares available, eligible participants, and vesting conditions aligned with Hong Kong listing rules.
• Performance Metrics: Outline clear, measurable targets for performance-based vesting if applicable.
• Tax Implications: Document how benefits will be treated under Hong Kong salary tax regulations.
• Board Approval: Prepare board resolutions and shareholder materials for plan adoption.
• Documentation Setup: Use our platform to generate compliant plan documents, grant agreements, and required disclosures.

• Plan Purpose: Clear statement of objectives and scope under Hong Kong Companies Ordinance requirements.
• Eligibility Criteria: Detailed participant qualifications and selection process aligned with listing rules.
• Share Pool: Maximum number of shares available and dilution limits.
• Vesting Terms: Specific conditions, timeframes, and performance metrics for equity release.
• Administration: Board powers, plan committee roles, and decision-making procedures.
• Termination Provisions: Treatment of awards upon employment end or corporate changes.
• Tax Clauses: Obligations and withholding requirements under Hong Kong tax laws.
• Amendment Rights: Procedures for plan modifications and participant consent requirements.

An Equity Incentive Plan differs significantly from a Simple Agreement for Future Equity (SAFE) in several key aspects, though both involve company equity distribution. While both documents are common in Hong Kong's startup ecosystem, they serve distinct purposes and operate under different legal frameworks.

• Primary Purpose: Equity Incentive Plans focus on employee motivation and retention through structured share-based compensation, while SAFEs are investment instruments that convert to equity during future funding rounds.
• Legal Structure: Incentive Plans require board approval and ongoing administration under Companies Ordinance rules, whereas SAFEs are simpler contracts between the company and individual investors.
• Timing: Incentive Plans typically have predetermined vesting schedules, while SAFEs convert to equity only upon triggering events like funding rounds or exits.
• Target Users: Incentive Plans are designed for employees and service providers, while SAFEs are primarily used with external investors and angels.