A share award gives shares or a right to shares, usually for no payment — which removes the exercise-cost problem that stops departing option holders from ever realising anything. It also changes the tax point: the benefit generally arises when the shares vest or restrictions lift, not on a later exercise the employee controls.
Employee Share Ownership Plan
Restricted share awards and performance shares
A share award gives shares or a right to shares, usually for no payment — which removes the exercise-cost problem that stops departing option holders from ever realising anything. It also changes the tax point: the benefit generally arises when the shares vest or restrictions lift, not on a later exercise the employee controls.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], UEN [UEN] |
| Plan name | [NAME] Share Ownership Plan [YEAR] |
| Adopted by members on | [DATE] |
| Award type | [Restricted share award / Restricted share unit / Performance share] |
| Pool | [NUMBER] shares, being [PERCENTAGE] fully diluted |
| Administrator | [The Board / the Remuneration Committee] |
| Consideration payable by the participant | [Nil / S$ ______ per share] |
| Standard vesting | [3] years, [cliff / in equal annual instalments] |
| Settlement | [Newly issued shares / Existing shares held by a trust] |
| Tax point | Generally on vesting or removal of restrictions — see the notes |
1. Structure
| Instrument | What the participant gets | When taxed | Suits |
|---|---|---|---|
| Restricted share award | Shares issued now, subject to forfeiture and transfer restrictions until vesting | Generally when restrictions lift | Senior hires where immediate shareholder status matters |
| Restricted share unit | A right to receive shares on vesting; no shares until then | Generally on vesting or delivery | Broad-based plans; simpler administration |
| Performance share | A right to shares conditional on performance conditions being met | Generally on vesting | Executive incentives tied to outcomes |
| Option (covered by the separate scheme rules) | A right to buy shares at a price | Generally on exercise, subject to the deemed exercise rule | Early-stage companies where the share price should grow |
1.1The choice between an option and an award is not merely tax. An award has value even if the share price does not rise, which makes it a retention instrument; an option only has value on growth, which makes it an incentive instrument. Decide which the company is trying to do.
2. Grant
2.1The Committee may grant Awards to employees of the Company and its subsidiaries, and to [directors / consultants] it determines, at its discretion.
2.2Each Award shall be evidenced by an Award Letter stating the number of Shares, the vesting schedule, any performance condition, the treatment on leaving, and any consideration payable.
2.3An Award takes effect on acceptance in writing within [30] days.
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
The recurring failure of option schemes in private companies is that leavers cannot fund the exercise price for shares with no market, so options earned over years simply lapse. An award granted for no consideration removes that entirely. Where retention rather than upside incentive is the goal, an award is usually the better instrument.
With an option, the employee generally controls when tax arises by choosing when to exercise. With an award, the benefit generally arises when the shares vest or restrictions lift, whether or not the employee wants it to. That is a real difference and participants should understand it before accepting.
A participant taxed on vesting may hold shares they cannot sell and owe tax they must fund from salary. Rule 8.2 flags the options: sell-to-cover on an exit, a cash payment alongside vesting, or timing vesting with liquidity events. Ignoring it produces a benefit the employee experiences as a bill.
Issuing restricted shares upfront makes the participant a shareholder immediately, with voting and dividend questions to settle, and adds them to the member count. Units defer all of that until delivery and are simpler to administer for a broad-based plan. Choose deliberately — Rule 3.4 and 3.5 handle each.
Where restricted shares are issued, whether the participant votes them and receives dividends before vesting are real questions with real consequences — particularly on voting, where a broad plan can fragment control. Rule 3.4 requires both to be specified rather than left to argument.
Compulsory transfer and clawback are enforceable in principle but a provision forfeiting long-vested shares for a minor breach invites a penalty argument and, practically, a dispute the company may not want. Confine the triggers to termination for cause, serious covenant breach, fraud and material misstatement.
Suspending vesting during maternity, paternity, shared parental or medical leave disadvantages employees on protected grounds and will be difficult to defend once the Workplace Fairness Act commences. Rule 3.3 keeps it running.
Forfeiting all unvested awards on redundancy, where the employee did nothing wrong and served most of a vesting period, is harsh and is the treatment most likely to generate resentment among the people who remain. Pro-rating for time served costs little and is visible internally.
A participant receiving shares who has not acceded to the shareholders’ agreement is not bound by transfer restrictions, drag-along or information provisions. Execute the adherence before issue, not as a follow-up that never closes.
Shares issued on vesting require a board resolution, entry in the register, a return of allotment within fourteen days and a certificate. Where shares come from a trust or an existing holder, a stamped transfer is needed instead. Companies treat vesting as automatic and skip the corporate steps.
A private company is limited to fifty members, excluding employees and former employees who acquired shares while employed and continue to hold them. Issuing restricted shares upfront to a broad population brings that limit closer than a unit plan would.
While the deemed exercise rule is an option concept, a departing non-citizen with unvested awards still requires the position to be worked through in tax clearance, and the employer must withhold pending the directive. Identify equity holdings at the point of resignation, not on the last day.
Award gains form part of employment income reporting and must be included in the annual submission with the appropriate appendix. The award register is the source; a plan run informally cannot produce it and the gap surfaces at year end.
Participants confuse awards with options, overestimate value, and rarely anticipate the tax point. A one-page summary with the award letter — what vests when, what happens if they leave, when tax arises and roughly how much — does more for retention than the award itself.
Reflects Singapore law and practice current as of {{DATE OF USE}}. The tax treatment of share awards, valuation and reporting requirements, and the interaction with tax clearance all change — have the plan reviewed by a corporate lawyer and a tax adviser before adoption, and confirm the treatment of any unusual structure.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.