Directors’ Resolution to Adopt Share Option Plan

How to generate a Directors’ Resolution to Adopt Share Option Plan

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A Directors’ Resolution to Adopt Share Option Plan is a resolution by the directors of a company to approve the adoption of an Employee Share Option Plan (ESOP).

What is a Directors’ Resolution to Adopt Share Option Plan?

This is a resolution by the directors of a company to approve the adoption of an Employee Share Option Plan (ESOP).

When do you use a Directors’ Resolution to Adopt Share Option Plan?

When a company decides to incentivize its employees by allowing their participation in stock options or share options, it creates an Employee Share Option Plan (ESOP).

Essentially, this is to lay out the terms and conditions under which an employee can get such share options. Also, what such share options will constitute.

The Board of Directors of the company plan (ESOP) first approves and then presents to the shareholders for their approval. The Shareholders of the company then give the final approval to the Plan to be adopted by the company. This approval and adoption by the directors are made effective through a Directors’ Resolution, which is when this document is used.

How to use a Directors’ Resolution to Adopt Share Option Plan?

There are two options:

• • if a meeting of the board of directors is convened to adopt the share option plan, use a Board Minutes to adopt share option plan; or
  • if the board resolution will be passed by way of a written resolution, use a Board Resolution to adopt share option plan.

What to include in the resolution?

• Details of the meeting (if using Minutes);
• Date of passing the resolution;
• Purpose of the share option plan;
• Class of shares to be issued under the plan;
• Eligible grantees;
• Maximum number of shares issuable upon exercise of all options; and
• Validity of the share option plan.

Can ESOPs be issued to consultants?

No. Employee stock options (ESOPs) are employee incentives that are aimed at incentivizing employees. It cannot be granted to consultants.

Notes on signing

• The Minutes of a General Meeting to Adopt Share Option Plan should be signed by the chairperson of the meeting.
• The Written Resolution to Adopt Share Option Plan should be signed by all the directors.

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About Author

Mike Evans

Mike Evans is a Fellow of the Institute of Chartered Accountants in England and Wales with over 30 years of expertise. Mike trained with Deloitte in London before moving to Hong Kong with PwC and making Partner in 1998, later Managing Director with TeamMate Asia Pacific, and eventually COO for Wolters Kluwer Financial Services Asia Pacific. With decades of experience in company incorporation, corporate structuring, and business performance, Mike now holds multiple directorships across companies in the fields of legaltech, corporate services, and company secretarial.

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