New Rules on Overseas Companies’ Equity Incentive Plans

By on July 26, 2012

by Lawrence Hu and May Lu

Stock option plans, stock appreciation rights plans, performance shares, phantom and restricted shares and other equity incentive plans may apply for registration under China’s State Administration of Foreign Exchange (SAFE).  In February 2012, SAFE issued a Notice on Administration of Foreign Exchange Used for Domestic Individuals’ Participation in Equity Incentive Plans for Companies Listed Overseas (known as Circular 7), which replaces the previous Circular 78.  Because there are tax advantages to employees if an equity incentive plan is registered through SAFE, Chinese employers considering or currently sponsoring equity programs should consider SAFE registration under this new guidance.

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