Employee Stock Plans for Companies Listing on a Domestic Exchange

Since the resumption of domestic inital public offerings (IPOs), increasing numbers of private and foreign-invested companies hope to become share-limited companies and then list on the domestic A-share market. In a large number of these companies, for historical reasons, employees' shareholding structure does not comply with current regulations. Given that the A-share market requires all shares to be freely tradable, these flawed shareholding structures frequently lead to disputes and other problems. These shareholding structures must therefore be corrected prior to any IPO. Additionally, some companies, in consideration of their long-term development, also wish to create employee stock ownership plans prior to their IPOs. Currently, one of the following three methods is usually used to arrange such plans.