In an employee share participation plan, a company sets forth the rules under which it grants shares to all or some of its employees (for example, senior employees).
Unlike an option-based compensation plan, the employee directly receives shares and thus becomes a shareholder, after he or she has paid the purchase price. The latter is generally lower than the value of the shares.
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 actual grant of shares to individual employees pursuant to the plan can be done using different legal instruments. The use of a share agreement as provided for here emphasizes that the undertakings of the company and the employee are reciprocal: on the one hand, the company undertakes to transfer a certain number of shares to the employee (usually on preferential terms), on the other hand, the employee undertakes to pay the price of the shares in accordance with the agreed terms. Also, the share agreement may stipulate that the shares will be blocked for a certain period of time, which allows for retention of the employee and certain tax benefits.
Create clever contracts today
Discover our contract library with over 100 smart templates in English, German and French.