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LEGAL INSIGHT

It can be said that the issuance of bonus shares and preferred shares has become one of the popular employee reward policies of US and UK enterprises. These enterprises will accordingly take away part of their profits to establish a bonus share fund, then acquire a certain amount of shares on the market and resell them to their employees at a cheaper price[1]. In Vietnam, the regulations on the issuance of preferred shares for employees has emerged in the late 20th century and early 21st century. In recent years, this policy has been adopted by many Vietnamese enterprises as one of effective strategies for the employee attraction and retention, which becomes a driving force behind the employees’ responsibility and productivity in the company.

On the other hand, from the legal perspective, one of the biggest challenges for current Vietnamese legislators is how regulations on the issuance of preferred shares for employees are applied consistently and smoothly under a transparent and clear legal framework. The lack of a mechanism to control preferred shares has been posing potential risks to enterprises, both in terms of legal and internal risks.

Certain contents in this legal insight is as follows: 

ESOP OVERVIEW

APPLICABLE LAW ON ESOP SHARES

PRACTICE CONTEXT OF ESOP MARKET

POTENTIAL RISKS OF ESOP SHARES ISSUANCE

CONCLUSION

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