The Study On Equity Incentive In Limited Liability Company

Equity incentive is that a company awards specific employees the company’s stocks, equity or equity related rights, to enable employees to be owner of the company or to participate in profit distribution, which therefore promotes long-term development of both employees and the company. Equity incentive mechanism is one of the important practice of human capital theory. It helps to make full use of the internal human resources of the company, thus supporting the company to stably go further. With human capital investment gradually play a key role in economic development, the application of equity incentive mechanism has become more and more common. To effectively carry out the equity incentive cannot do without the guidance and protection of the legal system. But for a long time, attention to limited liability companies’ implementation of equity incentive has not been attached adequately. The educational circles also take an economical perspective to discuss the equity incentive issue, whose main object emphasis on Limited by Share Ltd and listing Corporation. As a result,the research findings can hardly be applied by limited liability companies.In such situation, limited liability companies have difficulties to carry out equity incentive plans, which given rise to a lot of disputes.Therefore, this paper takes limited liability company equity incentive as the research object, trying to analyze its basic theory, system status and practice from the perspective of law, to summarize the existing legal problems caused by limited 2 liability companies’ practice of equity incentive. Then comparing our current law system with other national related system, to explore the effective settlement way. In order to make the research to reach a certain depth, this paper adopts historical analysis method, combining with comparative analysis, legal analysis, empirical analysis way, to explore all aspects of the limited liability companies’ equity incentive.The main contents are as followed:The first chapter, "equity incentive theory overview". This part starts with the connotation of equity incentive, where the incentive subject, incentive object, incentive target and incentive effects are analyzed. This paper holds that equity incentive is a company to award specific employees to obtain the company’s stocks, equity or equity related rights, by how employees are qualified as the owner or to participate in the company’s profit distribution, which eventually promotes long-term development of both employees and the company. Then the basic theory of equity incentive is introduced to figure out the emergence and development of the equity incentive mechanism. The last part refers to the application issue of equity incentive mechanism, including implementation premise, the main mode, which set the stage for the following parts.The second chapter, " law system analysis on the equity incentive of the limited liability company". This chapter is divided into two parts to discuss the system related to the equity incentive of limited liability companies in our country. First is the evolution and development of related law system, which was built on the Limited by Share Ltd’s equity incentive practice, that has not made much progress. Second, by analyzing the status of equity incentive system of limited liability company from theoretical perspective, conclusions are drawn that there is a lack of system concerning about non-state-owned limited liability companies’ equity incentive, and limited liability companies are facing constraints created by existing legal provisions, which include the number of incentive object, the incentive object source as well as the incentive mode.The third chapter, "the empirical analysis of the equity incentive of the limited liability company. Problems are classified according to the collected cases, and three of which are selected to be discussed combining with the judicial decision and related legal details. First is the nature of bonus right dispute mainly caused by equity incentive. A conclusion is put forward that bonus right due to virtue equity incentive be treated as a labor dispute; while real equity incentive the ownership dispute. The second one is the identical problem of parties to equity incentive contract. By evaluating the practice, it’s pointed out that the company, shareholders and employees be identified as the parties to the contract is a better choice. The third one is the problem of limited liability company’s buying back its own shares. According to the present law, it’s unsure that if limited liability companies can take the initiative to repurchase of shares resulting from the equity incentive disputes. Judicial decisions and the "company law" theory explain this problem differently, which lead to a deviation between theory and practice.The fourth chapter, "the solution to equity incentive problem of the limited liability company". By introducing the effect human capital investment has made to equity incentive, and present law system, suggestions are put forward to perfect the legal system of human capital investment. Then it’s suggested to improve the existing system of employee stock ownership, explicit the ESOP Association’s status, clean up the contradictory regulations and promote to unified legislative. The last part discusses that limited liability company should be allowed to buy back its own shares under certain circumstances. According to introduction of relevant legal system of other countries, the paper holds that it’s a legislative trend to permit limited liability company’s repurchase of shares. From the current situation, it’s advisable to form a unified judicial practice guidance first, then turning the practice guidance into regulations of "company law".