- Employee Incentives - Uniquely Structured
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Employee Incentive Schemes have become an important feature in packaging remuneration for directors and key staff especially for listed public companies. It is a method of providing employees with opportunities for equity participation. This enables senior managers to share in the wealth created by the team of key personnel as an incentive for loyalty and performance. If properly structured, important taxation and corporate law concessions and benefits can accrue to employees.
Morris Landau and Benny Yuen have been involved in the structure and documentation of Employee Incentive Schemes for numerous companies of various sizes.
In addition to structuring Employee Incentive Schemes which are generally adopted by companies, we were instructed by one particular public company client who briefed us to prepare a uniquely structured Employee Incentive Scheme with the following important features:
- Employee options were issued on the achievement of different milestones to be reached for particular employee participants.
- A facility is available for the exercise of employee options to be financed by loans from the company which may be full recourse or non-recourse, interest free or subject to interest, with or without security, including a lien.
- The shares issued on the exercise of employee options that were financed by the company would be held by an independent escrow holder. The escrow holder would have very definite instructions on how to deal with the shares in a number of important prescribed situations.
- Shareholder approval was obtained to buy back the shares under the Employee Incentive Scheme in defined circumstances.
- Important tax incentives and possible pitfalls were addressed.
- Corporations Act provisions and ASIC Class Orders dealing with circumstances in which a prospectus would not be required were considered.
- We assisted in briefing independent consultants to assist in defining reasonable remuneration for senior employees.
- The public company availed itself of this motivational tool for its staff and has developed a dedicated and highly motivated team in the company's transition from a small "Penny Dreadful" to moving towards becoming a meaningful and exciting enterprise on ASX.
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