Employee Share Ownership Plans

Is an Employee Share Ownership Plan appropriate for your business?

Employee Share Ownership Plan (ESOP) is a generic term used to describe a range of employee equity participation arrangements commonly used in Australia. Employee Share Ownership Plans are used to encourage employees to invest in the business they work in and to more closely align employees performance with company financial and business objectives. Equity participation plans can take the form of shares or options to acquire shares at a point in time in the future.

The benefits to employers of establishing and maintaining an ESOP may include retention of key staff, motivation to improve business performance, encouragement of a closer affinity between the business and its employees and a clear alignment of interests between shareholders and employees.

To decide whether an ESOP is appropriate for your business, a business needs to consider its remuneration strategy.

An ESOP is a long term remuneration strategy. If your business is trying to achieve a result in a relatively short period of time, a short term strategy may be more appropriate. A short term strategy could include annual bonuses linked to business unit performance. ESOP’s and short term strategies do not need to be exclusive.

ESOP Design
ESOP design is critical to the success of any plan. The key design questions that need to be answered include;

• Who should participate in the plan?
• How many shares/options should each participant receive? 
•  What performance or vesting restrictions should be imposed, if any? 
• How often will offers be made? 
• How should the plan be designed to achieve anticipated taxation implications or avoid unintended taxation consequences for the employer or employee?

Lawler Partners can assist you to work through your design options and decide on the most appropriate ESOP for your business.

What are the steps in establishing an effective ESOP?

1. Remuneration strategy and ESOP design.
2. Plan documentation.
3. Approval and compliance - referable to taxation, Corporations Act and Stock Exchange rules (if applicable).
4. Communication to participants and implementation.
5. Ongoing plan management and administration.

Lawler Partners can guide you through your design options and decide on the most appropriate ESOP for your business. There are also legal, tax and other regulatory issues to consider when implementing an ESOP. Lawler Partners along with their business partners have the skills and the precedents to help you in this area.

To discuss how we can assist you please contact Director Kylee Dare: Email Kylee