Employee Share Ownership

A win-win for your company and employees

The term ‘employee share ownership’ refers to all schemes in which your employees can be included, directly or indirectly, in the shareholding structure of your company.
 

The benefits of employee share ownership

There are different approaches to such an arrangement: from the mere tax optimisation of the employee remuneration (through the implementation of a share option plan) to the transfer of (all or part of) the company’s shares to your employees. 

By holding shares in your company (or share options), your employees will have a direct financial interest in your company’s results. This is possible through dividends in addition to their ordinary remuneration or through capital gains when they sell their shares. 

If the share plan allows, your employees can also play a more active role in the company’s governance. For example, with the appointment of representatives to administrative bodies, veto rights for certain decisions, etc.). 

The introduction of an employee share ownership scheme boosts employee motivation and loyalty to the company, which is an important factor in the current war for talent. It will also improve the company’s non-financial analysis parameters (ESG-score). 

The importance of well-timed preparation and implementation

Employee share ownership is a win-win for both your employees and your company, but proper preparation is essential. After all, its implementation has a significant impact on your company’s future, its governance and your financial strategy. The objectives pursued and the proposed structure must be carefully considered by management before any announcement is made to your employees.

The right communication at the right time is key to the success of employee share ownership. If the project is announced too early and then takes too long to materialise, your employees’ interest in it, and, even worse, their confidence in your company’s management, is likely to wane. The communication must also be complete and accurate, so that the employees concerned understand the ins and outs of the project and, if necessary, sign up to it with full knowledge of the facts. 

The concept of employee share ownership covers as many realities as the companies that implement it. Each plan will be designed to meet the company’s specific needs and the objectives it aims to achieve with its implementation. 

Do you still have questions about employee share ownership for your company? Keen to know how we can help you in designing a customised scheme?

Your own share ownership scheme in nine questions

Nine questions summarise the essential elements that must be defined when designing a scheme.

  1. Is it a one-shot or recurring transaction?
  2. Do you choose immediate or deferred acquisition of shares?
  3. What is the percentage of shares reserved for employees?
  4. Which rights apply with employees’ shares?
  5. Is it direct acquisition or through a separate acquisition structure? 
  6. What is the level of financial investment required by your employees?
  7. What are the conditions for acquiring shareholder status?
  8. What are the conditions for retaining shareholder status?
  9. How do you organise transferability of shares?