Equity Incentive Plans and the Capital Account
01
Q: For foreign individuals who wish to make a foreign exchange registration to participate in an equity incentive plan，what are the domestic residency requirements under the Notice of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration of Domestic Individuals’ Participation in Equity Incentive Plans of Overseas Listed Companies (SAFE Document [2012] No. 7)?
A: According to SAFE Document No. 7，domestic individuals who have at least one year of continuous residence in the People’s Republic of China (excluding diplomats of foreign countries and representatives of international organizations stationed in China) may register to participate. The term “domestic individuals” refers to directors，supervisors，senior managers and other employees of domestic companies that meet the requirements of the Regulation of the People’s Republic of China on Foreign Exchange Administration ( the Regulation)，including Chinese citizens (this includes citizens of Hong Kong，Macao and Taiwan) and foreign individuals as per Article 52 of the Regulation.
02
Q: An enterprise wants to entrust a Beijing-based company as its domestic agency for its equity incentive plan，but no one at that Beijing company is participating in the equity incentive plan. Is this company qualified to act as an agency?
A: No. According to Document No. 7，a domestic agency must be a company that takes part in the equity incentive plan.
03
Q: Three domestic companies in different parts of China participate in the equity incentive plan of the same enterprise，which is listed overseas. One of those companies is based in Shanghai and it took the lead in completing its registration in that city. Is it necessary for the other two companies，which are based elsewhere，to complete their registration with local authorities in their own areas?
A: As stipulated in Document No.7，multiple domestic companies in different regions participating in the equity incentive plan of the same overseas listed enterprise can entrust one of the participants to act as an agent for a unified registration. Therefore，if the Shanghai-based participant has already completed its registration，there is no need for the other two to register separately.
04
Q: For individuals participating in the equity incentive plan，after their repatriated funds are transferred from the domestic special foreign exchange account of the domestic agency to the corresponding individual foreign exchange savings account，is the settlement of the funds into renminbi subject to the quota limit of US$50,000 per person per year?
A: Yes. Such settlements are considered part of the US$50,000 quota limit.
05
Q: May foreigners who have an employment relationship with a domestic company participate in an equity incentive plan?
A: Based on the definitions as stated in Document No. 7，the term “domestic individuals” refers to directors，supervisors，senior managers and other employees of domestic companies that meet the requirements of the Regulation of the People’s Republic of China on Foreign Exchange Administration (hereinafter referred to as the Regulation)，Article 52，including both Chinese citizens (Hong Kong，Macao and Taiw