Legal Application Of The Equity-based Incentives Dispute

The legal application of equity-based incentives related disputes depends on whether the legal relationship of equity-based incentives belongs to labor relationship or civil and commercial legal relationship.The nature of legal relations determines the application of the law.Through analysing the current situations and the focusing of equity-based incentives disputes,this article found in the judicial practice each court has different understanding of equity-based incentives legal application.As for the qualitative legal relationship of equity-based incentives,some courts think it should be dealt with as a labor dispute,while other courts think it should be dealt with as a civil dispute.The courts’ reason for holding that it should be treated as a civil dispute is that the equity-based incentives is obtained based on the labor relationship with the company.The courts’ reason for holding that it should be treated as a labor dispute is that the target of equity-based incentives has the right to choose whether to sign the equity-based incentives agreement.This behavior is based on the legal status of equal subject.Because the attributes of the legal relation of equity-based incentives has not been defined in China,the ambiguity of its legal relation attributes leads to problems in the application of the law.The legal relation of equity-based incentives spans over the complexity of many legal departments such as The Labor Law and The Company Law,and it is difficult to legally define the equity-based incentives,which also gives rise to a large number of cases and issues that need to be solved urgently.This paper argues that because of the complexity of equity-based incentives disputes,the settlement of equity-based incentives disputes should not be simply and mechanically determined.To analyze the intrinsic quality of the equity-based incentives,we should take the subject,object,and content of the equity-based incentives as the basis to solve the problem of legal application of the dispute of equity-based incentives.This paper first analyzes the causes of judicial qualitative differences in equity-based incentives from the following three aspects: First,the subject of the legal relations of equity-based incentives,that is,the target of equity-based incentives,is complicated.And there are various legal relations between the object of equity-based incentives and the company,such as principal-agent relation,investment relation,labor relation,etc.Each target of equity-based incentives has a different legal relationship with the company,and the multilayer legal relation makes the single legal relation more complicated.Second,the object of the legal relations of equity-based incentives is various.There are many types of equity-based incentives,including stock options,restricted stock/stock options,and stock appreciation rights which lead to the difficulty in determining the nature of equity-based incentives income.Third,the legal content of the legal relations of equity-based incentives,that is,the rights and obligations stipulated in the equity-based incentives agreement are often an important part of the labor obligations in the labor agreement,which are highly related to the labor obligations between employees and the company.In the next place,based on the analysis of the above causes,it provides jurisprudential support for how to solve the dispute of equity-based incentives from two aspects which are the legal relations of the subject and the substantive fairness in the judiciary.Synthetism should be adopted to solve the complicated legal relations between the target and the company which is aiming to find the most suitable legal relations for the application of rules after the comprehensive grasp of the overall.The judges can through the teleological interpretation or apply the legal principle to achieve the substantive fairness of the case.Finally,based on the analysis of the above legal theory,the legal application of equity-based incentives should be improved from two aspects of justice and legislation.For the improvement of judicial rules,it is necessary to conduct a comprehensive study and judgment on the legal relations of equity-based incentives to solve the problem of legal application of equity-based incentives.This paper analyzes the attribute of the legal relations of equity-based incentives based on the analysis of the causes of differences in the application of law which includes the three components of legal relations,namely subject,object,and content.It is the subject of the labor relationship when the equity-based incentives is granted to employee directors,employee supervisors,executives,and employees of the company.It is the object of labor relationship that the stock options exercised,the restricted stock that is effectively a share of a company’s profits,and virtual stock.It is the content of the labor relationship when the main content of the equitybased incentives agreement is the supplement and extension of the labor contract.At the same time,on the premise of determining the nature of the equity-based incentives,it provides the solution ideas to the typical focusing involved in the disputes of equity-based incentives,aiming to provide a solution for the judicial judgment in practice.