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Director Profit Sharing Agreement for Hong Kong

Director Profit Sharing Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that establishes the terms and conditions under which a director participates in the company's profits. The document outlines the calculation methodology, payment terms, and conditions for profit sharing while ensuring compliance with Hong Kong's Companies Ordinance and relevant regulatory requirements. It includes specific provisions for profit determination, payment schedules, performance metrics, and termination conditions, while addressing tax implications and corporate governance requirements under Hong Kong jurisdiction.

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Director Profit Sharing Agreement

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What is a Director Profit Sharing Agreement?

A Director Profit Sharing Agreement is essential for companies operating in Hong Kong that wish to align director interests with company performance through profit-based compensation. This document is typically used when companies want to incentivize directors beyond fixed remuneration, particularly in growth-focused businesses or professional services firms. The agreement must comply with Hong Kong's Companies Ordinance, securities regulations (if applicable), and tax laws while providing clear mechanisms for calculating and distributing profit shares. It serves as a key governance document that helps attract and retain high-performing directors while protecting both the company's and shareholders' interests through well-defined terms and conditions.

What sections should be included in a Director Profit Sharing Agreement?

1. Parties: Identifies the company and the director entering into the agreement

2. Background: Sets out the context of the agreement, director's role, and purpose of the profit sharing arrangement

3. Definitions: Defines key terms used throughout the agreement, including 'Profit', 'Financial Year', 'Performance Metrics', etc.

4. Appointment and Term: Confirms the director's appointment and duration of the profit sharing arrangement

5. Calculation of Profit Share: Details the method and basis for calculating the director's profit share

6. Payment Terms: Specifies timing, method, and conditions for profit share payments

7. Director's Duties and Obligations: Outlines the director's responsibilities and performance expectations

8. Company's Obligations: Details the company's responsibilities regarding profit calculation, payment, and information sharing

9. Accounting and Records: Specifies requirements for maintaining and accessing financial records

10. Confidentiality: Protects sensitive information shared during the course of the agreement

11. Termination: Sets out circumstances and procedures for ending the profit sharing arrangement

12. General Provisions: Standard clauses covering notices, amendments, governing law, etc.

What sections are optional to include in a Director Profit Sharing Agreement?

1. Non-Competition: Restricts director's involvement in competing businesses - include when protecting company's competitive position is crucial

2. Intellectual Property: Addresses ownership of IP created during directorship - important for technology or creative industries

3. Good Leaver/Bad Leaver Provisions: Defines treatment of profit share upon different types of departure - useful for retention

4. Clawback Provisions: Allows recovery of paid profit share under specific circumstances - important for regulated industries or risk management

5. Dispute Resolution: Specifies arbitration or mediation procedures - include when parties prefer alternative dispute resolution

6. Tax Provisions: Addresses tax treatment and responsibilities - important when complex tax implications exist

7. Change of Control: Handles profit sharing arrangements in case of company sale/merger - relevant for companies considering exit

8. Force Majeure: Addresses unexpected events affecting profit calculation - important in volatile industries

What schedules should be included in a Director Profit Sharing Agreement?

1. Schedule 1 - Profit Calculation Formula: Detailed methodology and formulas for calculating applicable profit and share percentage

2. Schedule 2 - Performance Metrics: Specific KPIs or targets that affect profit share calculation

3. Schedule 3 - Payment Schedule: Timing and structure of profit share payments including any advance payments

4. Schedule 4 - Excluded Items: List of items excluded from profit calculations

5. Schedule 5 - Accounting Principles: Specific accounting treatments and principles to be applied

6. Appendix A - Board Resolution: Copy of board resolution approving the profit sharing arrangement

7. Appendix B - Confidentiality Agreement: Detailed confidentiality terms if separate from main agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Hong Kong

Document Type

Confirmation Letter

Sector

Sales

Cost

Free to use
Relevant legal definitions




































Clauses

































Relevant Industries

Financial Services

Technology

Professional Services

Real Estate

Manufacturing

Retail

Healthcare

Mining and Resources

Construction

Hospitality

Media and Entertainment

Telecommunications

Investment Management

Private Equity

Venture Capital

Relevant Teams

Legal

Human Resources

Finance

Company Secretarial

Compliance

Board of Directors

Executive Committee

Compensation Committee

Corporate Governance

Tax

Relevant Roles

Director

Executive Director

Non-Executive Director

Managing Director

Chief Executive Officer

Chief Financial Officer

Company Secretary

General Counsel

Head of Human Resources

Board Chairman

Vice President

Regional Director

Country Manager

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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