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Employee Participation Plan: Shares

Key points and English template

Use an Employee Participation Plan with Shares if...

… you would like your key persons to become shareholders of your company and to align the incentive structure with your company’s long term success

Key Points included in an Employee Participation Plan with Shares:

Who is eligible to participate in the employee participation plan and forfeiture provisions
Overall and individual grant limits
Rules for evaluating the shares and price to be paid by the participants to purchase the shares
Transfer restrictions and blocking periods
What happens with the shares when a plan participant leaves the company or when a change of control occurs
Details of the tax and social security treatment of the granted shares

What is an Employee Participation Plan with Shares?

In an employee share participation plan, a company sets forth the rules under which it grants shares to its employees and board members.

The goal of the plan is broadly to incentivize key persons to stay with the company and perform by allowing them to participate in its financial success.

The rules set forth in the plan substantially determine the value of the shares. Because the shares are generally treated as part of the salary for tax and social insurance purposes, employers are well-advised to use valuation methods that are recognized by the competent authorities and carefully draft those provisions of the plan that affect the value of the granted shares.