A Study On Legal Problems Of Phantom Stock

Phantom stock, compared with the real market stock, it’s a type of visual stock that is issued by the company according to employees’position, working experience and performance etc. This new incentive, whose related rights and obligations is voluntarily agreed between employees and the company, brings profits to stock holders in terms of share dividends stock appreciation. With distinctive characteristics, phantom stock mainly features in the virtualization of stock form, the specificity of holders, the unity of power, the voluntariness of capital contribution, stimulate employees both materially and spiritually. Derives from stock options, phantom stock share a same theoretical basis. While because of the imperfections of our legal system, the source of the stock and the poor effectiveness of capital markets pull out of series of problems. Similarly, traditional stock options also emerges lots of problems in the implementation process. However, phantom stock reasonably solves the aboves problems, which is why this system is adopted and favored gradually by some high-tech firms. By adopting the system of issuing virtual stocks, enterprise can not only motivate employees, maintain the core talented employees, but also achieve a sustainable growth of company performance.As it’s known to all, market economy is also a another kind of legalized economy, the implementation of it needs to be guaranteed by a sound legal system. Although our country has revised Corporation Law, Securities Act for several times and the stock holder safeguard mechanism is also improved correspondingly, phantom stock system causes many legal questions in spite of the win-win target that employees and the company has achieved. as the product of the special historical period, it is still limited to political, economical and cultural conditions. So as to say, the untransparency of stock distribution, barbarism of registration and management, non-rationality of counter-purchase, lack of operability in the exercise of shareholders’earnings, the debate of whether phantom stock could be transferred, inherited or voted, etc. All these questions are remained to be solved by the adopting companies and security laws and regulations. Under the condition of the new regulation and perfection of the old, we need to probe into the actual problems that exist in the process of phantom stock run from the perspective of law, and figure out these under the exsiting legislation system. At the same time, to further standardize the happening of the virtual shares and repurchase program through the indirect way of employee stock holding committee to exercise the shareholder’s assets of usufruct and voting rights, allow employee to transfer its shares in special circumstances, and ensure the inheritability of the virtual property value. Therefore, it is a effective way to reach the maximum function.