Issuance of financial instruments

ESOP


ESOP: Employee Stock Option Program 
An offer for sale of securities to directors or employees 

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Types of ESOP
An offer of securities to directors or employees can be done through the following three options:
  • ESOP – Common Stock
  • ESOP - Warrant
  • Convertible Debenture : CD
Types of ESOP
An offer of securities to directors or employees can be done through the following three options:
  • ESOP – Common Stock
  • ESOP - Warrant
  • Convertible Debenture : CD
Director or Employees
Directors or Employees refer to:
  • Board members of the company or its subsidiary who issues and offers ESOP
  • Employees who agree to work for the company who issues and offers ESOP or for its subsidiary under an employment e.g. receiving salary, wages, or other forms of compensation

Benefits of ESOP

Company
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Create work motivation by building a sense of ownership in the company or by providing returns for the performance of the work
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Effectively increase business productivity and profits 
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Ensure sustainable business growth
Shareholders
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Enjoy long-term and consistent returns while the business grows

The differences between ESOP and EJIP

 ESOPEJIP
Approval to commence the program The board of directors must propose the program to the shareholders' meeting for approval according to the conditions set out by the SEC The board of directors can approve the program except in case there are directors participating in the program where the approval from the shareholders' meeting is required
Forms of returns Shares or warrants
Capital gain and dividends (if any) 
Contribution by the company for the purchase of company’s shares
Capital gains and dividends (if any)
Impacts on shareholdersPossibility of the dilution effect      No dilution effect.
There  may be a negative impact on the company's profits but this can be offset in the long run with the improved performance which will result in more stable share prices.
 Offering period       As specified in the program 
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Taxation

  • According to Section 39 of the Revenue Code, ESOP participants are deemed to have received assessable income, which must be included in the annual personal income tax calculation
  • ESOP participants are taxed if there are capital gains from a difference between the exercise price and the market price (calculated on the average price in the month the shares are acquired) 
Key Procedures
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Disclose the resolution immediately or no later than 9 a.m. of the following business day (Capital Increase Report Form F53-4)

Disclose the resolution immediately or no later than 9 a.m. of the following business day (Capital Increase Report Form F53-4)

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  • Send notice of shareholders’ meeting at least 14 days in advance before the meeting date.
  • For a general case:

           veto  from shareholders is no more than 10% of the total votes of shareholders attending the meeting and eligible to vote 

  • For special cases:

           1. veto from shareholders is no more than  5% of the total votes of shareholders attending the meeting and eligible to vote 

           2. In case of concentrated allocation, each allocation to shareholder must be  approved by votes of  ≥ 3/4 of the total votes of shareholders attending the meeting and eligible  to vote and  veto from shareholders is no  more than  5% of the total votes of shareholders 
 attending  the meeting and eligible to vote. It also needs to be approved by the Renumeration Committee.

  • Send notice of shareholders’ meeting at least 14 days in advance before the meeting date.
  • For a general case:

           veto  from shareholders is no more than 10% of the total votes of shareholders
          attending the meeting and eligible to vote 

  • For special cases:

           1. veto from shareholders is no more than  5% of the total votes of shareholders attending
                the meeting and eligible to vote 

           2. In case of concentrated allocation, each allocation to shareholder must be  approved
                 by votes of  ≥ 3/4 of the total votes of shareholders attending the meeting and eligible 
                to vote and  veto from shareholders is no  more than  5% of the total votes of shareholders 
                attending  the meeting and eligible to vote. It also needs to be approved
                by the Renumeration Committee.

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Register change of capital ≤ 14 days since the date on which the shareholders’ meeting passes the resolution

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  • Submit Form 53-5 to the SET ≤ 14 days since the date of closure of the offer for sale 
  • Submit Form 81-1 along with a checklist to the SEC ≤ 15 days since the date of closure of the offer for sale
  • Report the exercise results to the SET ≤ 14 days since the date of closure of the offer for sale 
  • Submit Form 81-1 to report the exercise results within 15 days since the expiration of each exercise or the end of each month
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≤ 30 days since the date of closure of the offer for sale 

≤ 30 days since the date of closure of the offer for sale 

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≤ 2 days since the date the SET announces for the shares to be listed 

≤ 2 days since the date the SET announces for the shares to be listed 

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≤ 30 days  of every six calendar months 

≤ 30 days  of every six calendar months 

Related Regulations
  • Public Company Limited Act, B.E. 2535 (1992)
  • Notification of the Capital Market Supervisory Board No. TorJor. 32/2551 Re: Offer for Sale of Newly-issued Securities to Directors or Employees
  • Notification of The Stock Exchange of Thailand Re: Rules, Conditions and Procedures Governing the Listing of Ordinary or Preferred Shares Issued for Capital Increase B.E. 2558 (2015)
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Characteristics of an ESOP program
A general case refers to one of the following:

  • Offer ≤ 5% of the total number of shares on the date the ESOP is approved by shareholders
  • Offer > 5% of the total number of shares on the date the ESOP is approved by shareholders, with an offering price no more than 10% below the market price

Special case 
Offer  > 5% of the paid-up capital as of the date the ESOP is approved by shareholders, with an offering price that is more than 10% below the market

Concentrated allocation
An allocation to any one person more than 5% of the approved number of shares

Effects on existing shareholders
Issuing an ESOP has a dilution effect on existing shareholders due to capital increase

Effects on existing shareholders
Issuing an ESOP has a dilution effect on existing shareholders due to capital increase

Offer period
The securities must be offered until completion within  1 year after the program is approved by shareholders and the term of warrants cannot be longer than 5 years. 

Approval conditions

Approval conditions

There is no need to submit an application for an offer for sale of newly issued shares under ESOP  to the SEC but the company must meet the following requirements:

  • It must comply with the ESOP rules
  • It must obtain approval from the shareholders' meeting and the offer of securities must be completed within one year after the date of approval
  • It must submit a checklist to the SEC with the report of the sale results within 15 days
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Considering the impacts on financial statement 

Considering by using Share-Based Payments (TFRS2: Share-Based Payment) under the Thai Financial Reporting Standard, 2nd Edition.

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ESOP issued by a life insurance company

If the issuer is a life insurance company, the ESOP covers the company's licensed life insurance agents.