Given the ongoing competition for talent in the People’s Republic of China (PRC), the ability to offer share‑based awards has become an important tool for employers seeking to attract and retain employees in the market.
For non‑Chinese companies, the primary challenge is compliance with requirements imposed by the State Administration of Foreign Exchange (“SAFE”). While the registration process was historically burdensome and time‑consuming following its introduction in 2007, it has become more efficient over time. Many local SAFE offices are now familiar with employee share plans, and approvals can often be obtained within weeks, absent complicating factors.
That said, preparing a SAFE registration can still take several months, and ongoing compliance obligations remain. In addition, SAFE requirements continue to evolve, as both Central SAFE and local offices periodically revise documentation and information requests. As a result, SAFE registration is generally recommended only where there is a meaningful PRC employee population or anticipated headcount growth.
How to Prepare
Before proceeding, companies should carefully weigh the administrative burden and cost of completing and maintaining a SAFE registration against the benefits of offering share‑based awards in the PRC. While Circular 7 has made the process easier, the ongoing resource commitment should not be underestimated.
Read our white paper on China SAFE requirements for share‑based awards for a practical overview of the registration process and ongoing obligations to develop a risk‑managed strategy for your company and its participants.
