What Is a Restricted Stock?
Restricted stock means that a listed company grants a certain number of shares of the company to the incentive object in accordance with predetermined conditions. The incentive object can only sell restricted stock if it meets the conditions specified in the equity incentive plan during its working life or performance target. Benefit.
Restricted stock
- Most foreign companies grant incentives to a certain number of shares free of charge or after charging a nominal fee. In China,
- Foreign plans are implemented according to different requirements and backgrounds of incentive companies
- The current period of grant of restricted stock, if it is a capital increase grant, according to the grant date
- In accordance with the relevant provisions of the Personal Income Tax Law and its implementing regulations,
- Which of these two benefits will be greater for management and employees depends on how well the listed company's stock prices perform. If the company's stock price rises above a pricing level, option holders can earn more than restricted stock holders. For example:
- A listed company gave a management a 10,000 stock option at an exercise price of 30 yuan per share. One of his colleagues received 3,500 restricted shares. After 5 years, the stock option holder may exercise all the options to buy stock, and his colleague will be able to sell all restricted stock. If the stock price rises to 60 yuan five years later, the stock option holder will receive 300,000 yuan in pre-tax income, and his colleague will receive 210,000 yuan in pre-tax income by selling the stock. If the stock price drops to 15 yuan after 5 years, the equity will not be worthy of execution, and those who hold restricted stock will receive a pretax income of 52500 yuan by selling the stock. Comparing pre-tax income, it can be seen that changes in the stock market price directly determine the returns of the two.
- Restricted stock
- It can be seen that the prerequisite for the establishment of the above example is that the number of stock options and restricted stocks granted by listed companies to management and employees is very different, and the number of stock options is much higher than restricted stocks. This is also the actual situation abroad. . China's "Measures for the Administration of Equity Incentives for Listed Companies" does not limit the total number of target stocks designed to implement incentives using these two methods, but only sets a 10% limit. There are still some loopholes. The grant price can be set by the listed company itself, so for some private enterprises and state-owned enterprises without managers, there is a huge moral hazard.