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An Equity Incentive Plan helps companies reward and retain valuable employees by offering them ownership stakes through shares, options, or other equity-based benefits. These plans are common among NZ businesses looking to attract top talent while managing cash flow, especially in high-growth sectors and startups.

Under New Zealand securities law, these plans must comply with Financial Markets Conduct Act requirements, though many qualify for employee share scheme exemptions. A well-structured plan sets clear rules about vesting periods, exercise prices, and what happens when employees leave - giving both the company and staff certainty about their equity arrangements.

Set up an Equity Incentive Plan when your company needs to attract and keep key talent without stretching the cash budget. This works especially well for NZ startups and growth companies competing for skilled employees against larger, better-funded competitors.

The timing is right when your business is preparing for significant growth, planning a capital raise, or needs to align employee interests with company success. Fast-growing tech firms often implement these plans early to compete for developers and engineers, while established companies use them to retain senior executives through important business phases like expansion or IPO preparation.

• Stock Options: The most common type, giving employees the right to buy company shares at a set price after a vesting period
• Restricted Share Units (RSUs): Grants actual shares that vest over time, popular with larger NZ companies
• Performance Rights: Equity awards tied to specific company or individual performance targets
• Share Appreciation Rights: Employees receive the increase in share value without buying actual shares
• Employee Share Purchase Plans: Lets staff buy company shares at a discount through regular salary deductions

• Board of Directors: Approves and oversees the Equity Incentive Plan, sets overall allocation limits and terms
• Company Management: Administers the plan day-to-day, recommends grants, and monitors compliance
• Eligible Employees: Receive and exercise equity awards under the plan's terms and conditions
• Legal Counsel: Drafts plan documents, ensures compliance with NZ securities laws and FMA requirements
• HR Department: Manages communication, tracks vesting schedules, and handles employee queries

• Company Details: Gather current share structure, valuation, and total equity pool size for incentives
• Eligibility Rules: Define which employees qualify and any performance conditions or service requirements
• Vesting Schedule: Determine timeframes and conditions for when equity rights become exercisable
• Award Types: Choose between options, RSUs, or other equity instruments that suit your goals
• Tax Implications: Review NZ tax treatment for both the company and participants
• Board Approval: Prepare documentation for board resolution and shareholder consent if needed

• Plan Purpose: Clear statement of objectives and scope of the equity incentive scheme
• Eligibility Criteria: Detailed rules on who can participate and under what conditions
• Award Terms: Specific provisions for grant size, price, vesting schedule, and exercise conditions
• Administration: Powers and duties of the board or committee managing the plan
• Termination Rules: What happens to awards when employment ends for various reasons
• Amendment Rights: Company's ability to modify plan terms and participant protections
• FMA Compliance: Required disclosures and exemption conditions under NZ securities laws

An Equity Incentive Plan differs significantly from a Simple Agreement for Future Equity (SAFE) in several key aspects, though both involve company equity. While an Equity Incentive Plan creates a comprehensive framework for ongoing employee equity compensation, a SAFE is primarily used for early-stage investment funding.

• Purpose and Timing: Equity Incentive Plans are long-term programs for employee motivation and retention, while SAFEs provide immediate funding with future equity conversion rights
• Legal Structure: Plans establish rules for multiple participants over time, whereas SAFEs are individual agreements with specific investors
• Regulatory Requirements: Plans must comply with NZ employee share scheme rules, while SAFEs fall under investment funding regulations
• Implementation: Plans require board approval and ongoing administration; SAFEs are one-off agreements that automatically convert upon triggering events