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June 13, 2012

New PRC Regulations May Streamline Use Of Equity Incentive Plans By Local Affiliates Of Foreign-Listed Companies

Summary: Multinational companies with operations in China may wish to offer employees of their PRC-based entities equity incentive packages that are in line with what they offer employees in other jurisdictions. Likewise, China-based companies that are publicly listed elsewhere may wish to do the same. However, the implementation of such plans with respect to PRC residents, and related currency conversion, is strictly regulated by China’s State Administration of Foreign Exchange (“SAFE”). Recently, however, new regulations have been issued by SAFE in an effort to clarify and broaden the implementation of equity incentive plans relating to foreign listed companies. Multinational companies and China-based companies that are publicly listed elsewhere, and have implemented, or may consider implementing, equity incentive plans with respect to PRC-based personnel, should be aware of these regulations.