Many high-growth startups have an employee share scheme (ESS) to attract, incentivise and retain talented employees. Under an ESS, startup founders can offer their employees shares or options to buy shares in the company. Offering team members shares or options in a startup can also help bridge the gap between their startup salary and an equivalent corporate salary.

LegalVision’s experienced startup lawyers have established employee share schemes and employee share option plans (ESOP) for startups of all sizes. We can assist with:

  • providing advice on setting up an ESS or ESOP;
  • drafting ESS documents, option plans and offer letters;
  • assessing eligibility for startup tax concessions;
  • providing advice on tax treatment of any shares or options; and
  • determining appropriate vesting criteria.

LegalVision’s startup lawyers have assisted thousands of startups and businesses around Australia. Our startup team can establish your ESS and advise you on how to meet your ESS obligations in order to offer ESS interests to employees at a discount.

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5 Things You Need to Know About Employee Share Schemes

  • 1Employee share schemes grant employees benefits such as shares in the company they work for at a discounted price, or an opportunity to purchase shares in their company in the future (also known as a right or option).
  • 2From 1 July 2015, there are new tax laws regarding how employee share schemes, also known as employee share option plans, are taxed. These changes help startups to cost-effectively integrate ESSs into their employment structure and business model.
  • 3A startup must meet certain eligibility criteria for tax concessions, including:
    a) aggregated turnover (company has an aggregated turnover of no more than $50m); b) percentage of shares held (an employee cannot hold a beneficial interest in more than 10% of the shares in the company); and c) residency requirements (the employer company must be an Australian resident for tax purposes).

  • 4Startups who offer their employees the opportunity to participate in an employee share scheme must meet mandatory reporting obligations both to those employees and to the Australian Taxation Office.
  • 5There are several legal and regulatory requirements to consider before implementing an ESS, including disclosure and taxation requirements as well as lodging fundraising documents to ASIC. A startup lawyer can assist with drafting and preparing these documents for you.