To further enhance the equity compliance management capabilities of gaming and internet companies, and to strengthen industry practice exchanges and experience sharing, on May 21st, Guangzhou Gaming Industry Association and Beijing Longan (Guangzhou) Law Firm jointly organized the “Gaming Company Equity: A Series of Salons – Phase 1”. This event focused on the theme of “Equity Incentives and One-person Companies”, and featured expert insights from Lawyer Wu Rangjun, a senior partner at Longan Guangzhou and deputy director of the management committee, as well as Lawyer Zhang Jing, a senior partner at Longan Guangzhou, director of the Company Law Committee, and deputy head of the tax-related business department. Many professionals from the gaming and internet industries attended this event.
Lawyer Wu Rangjun
Senior Partner at Longan Guangzhou and Deputy Director of the Management Committee
Head of Game Law at Longan Guangzhou
At the beginning of the event, Lawyer Wu Rangjun delivered an opening speech. He pointed out that the gaming industry is currently in a critical transition phase where compliance requirements are tightened and talent competition intensifies. Equity compliance capabilities have become a key factor limiting the development of companies. This salon event aims to create a pure and professional industry exchange platform, providing practical compliance advice to help gaming and internet companies grow steadily.
Theme Sharing
Design of Equity Incentives for Gaming R&D Projects
Lawyer Zhang Jing
Senior Partner at Longan Guangzhou
In the first half of the event, Lawyer Zhang Jing shared insights on “The Basic Logic and Practical Design of Equity Incentives”. As a senior partner at Longan Guangzhou, Zhang Jing has long been involved in legal services related to equity design, equity incentives, equity investment and financing, equity mergers and reorganizations, tax planning, capital operations, and listing. She has extensive experience in designing corporate equity structures.
Lawyer Zhang pointed out that in an era where human capital value becomes increasingly important, relying solely on salary is no longer sufficient to satisfy the sense of belonging and identity of core employees. Therefore, equity incentives are not just a distribution tool, but also a means of reforming organizational structures. Then, through several real cases, Lawyer Zhang revealed common pitfalls in equity incentives. It is necessary to avoid “equal distribution” and “formalism” in distribution, and also pay attention to tax compliance, entry and exit mechanisms in equity incentives.
How to design a practical equity incentive plan? Lawyer Zhang suggested that it should be designed based on five key dimensions of the company. These five dimensions include financial diagnosis, performance management, risk prevention, tax planning, and capital market connection. In addition, considering the high investment in gaming R&D projects, high uncertainty in success rates, and the tendency toward equal distribution, Lawyer Zhang also shared a special mechanism. A separate project company can be established as the incentive entity, linking incentives directly to the investment and profits of individual projects, thereby improving the precision and effectiveness of equity incentives.
“The ‘limited’ illusion of one-person companies” – Gaming Companies
How a CEO can avoid losing all his personal assets
Lawyer Wu Rangjun
Senior Partner at Longan Guangzhou and Deputy Director of the Management Committee
Head of Game Law at Longan Guangzhou
In the second half of the event, Lawyer Wu Rangjun shared insights on one-person companies. Lawyer Wu has been engaged in gaming industry legal services for over ten years and has a deep understanding of the characteristics and business logic of the gaming industry.
Starting with Article 23 of the Company Law of the People’s Republic of China, which reverses the burden of proof for one-person companies, Lawyer Wu pointed out that the annual audit report is a key piece of evidence in litigation. In practice, many business owners believe that a audit report is sufficient to prove financial independence. However, judicial opinions are not consistent: some cases believe that a compliant audit report can prove this; but many cases indicate that the audit report only shows proper accounting practices and cannot prove actual financial independence. If there are unclear financial transactions or contradictions, the report may not be accepted. At the same time, Lawyer Wu emphasized that most subsequent audit reports are not accepted by the court, as they violate the legal annual audit obligations and cannot truly reflect the company’s financial situation at that time.
How a one-person shareholder can effectively “save himself”, Lawyer Wu pointed out that providing only salary, social security, and other materials unrelated to financial independence cannot prove this. A more reasonable way to prove this is to submit the company’s annual audit report, financial policies, capital verification reports, and internal regulations that reflect proper financial practices. Additionally, one can apply for a special audit or request a judicial audit from the court to prove that there is no confusion in financial matters.
Lawyer Wu also analyzed several judicial issues related to one-person companies, including the responsibility division between former and current shareholders after changes, whether multiple one-person companies can be traced back, and whether married companies are equivalent to one-person companies.
In terms of compliance recommendations, Lawyer Wu suggested that one-person companies do not have special advantages and should be chosen carefully. For existing one-person companies, shareholders should regulate financial management strictly, keep all original documents related to financial transactions, conduct annual audits, and properly store audit reports to avoid financial confusion.
It is reported that this event was the first in the “Gaming Company Equity: A Series of Salons”. In the future, the Longan Guangzhou Longan Equity Team will continue to provide legal services related to equity financing, control disputes, and shareholder conflicts, offering comprehensive legal services for gaming companies from establishment to listing.
This salon event focused on common challenges in the gaming and internet industries, providing high-quality legal advice in a professional and practical manner. It demonstrated Longan Guangzhou’s expertise and experience in related legal services.
In the future, Longan Guangzhou will continue to focus on compliance issues in the gaming and internet industries, develop high-quality salon events, and provide high-quality, practical legal solutions. It will continue to strengthen its role in related legal services, empowering companies and helping them grow steadily.