“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill
The Option Plan
This is a flexible plan that enables small companies to provide equity to principals and key employees. It is best used as a vehicle through which to reward employee performance and to align employee and company goals. It is delivered by a simple and effective option contract and integrates both short and long-term employee incentives.
Advantages:
- Flexible – facilitates virtually any vesting contingency
- Easy to administer
- Tax effective, but not tax driven
- Efficient and effective delivery of after-tax equity benefits
- Administration costs are fully tax deductible to employer
- Funding of realised benefits is fully deductible to employer
- Employees are eligible for Capital Gains Tax discount on gains
- No prospectus obligations
Disadvantages:
- Options granted to employees are difficult (if not impossible) to value
- Options are generally illiquid
- Can be difficult for employees that have no experience in trading options to understand
- Offers little or no tangible benefits to employees because equity is difficult to value and impossible to trade
Replicator Share Company
This is an employee share plan company through which equity can be provided to any or all employees of any sized company. This option has the capacity to offer a large range of investment choices, and is designed to provide employees with the benefits of investment in company shares that replicate the value of the underlying business.
Advantages:
- Flexible – facilitates virtually any vesting contingency
- Can provide a range of investment options
- Offered on a fully- administered basis
- Easy to understand and communicate
- Tax effective, but not tax driven
- Efficient and effective delivery of after-tax equity benefits
- Administration costs are fully tax deductible to employer
- Funding of realised benefits is fully deductible to employer
- Employees are eligible for Capital Gains Tax discount on gains
- Established wrap-around prospectus precedents
Disadvantages:
- Difficult to accurately replicate the value of the business
- Liquidity is uncertain and variable
Public Employee Savings Plan
The most effective savings plan for employees of public sector and not-for-profit organisations. This plan is designed to offer employees the opportunity to access the same equity and investment opportunities that are generally available in private sector employee share plans.
Advantages:
- Flexible – facilitates most vesting contingencies
- Can provide a range of investment options
- Offered on a fully- administered basis
- Tax effective, but not tax driven
- Contributions taxed as salary
- Employees are eligible for Capital Gains Tax discount on gains
Disadvantages:
- Difficult to match equity/income to employee performance
- Liquidity is uncertain
Advanced Options
This option enables employees of any sized company to access equity and a range of investment options. It is designed to align employee performance with corporate goals by rewarding performance with options and shares. Full portability of shares means that employees are encouraged to retain their company shares even when they leave their employer.
Advantages :
- Flexible – facilitates most vesting contingencies
- Easy to administer
- Tax effective, but not tax driven
- Efficient and effective delivery of shares
- Shares can be held indefinitely
- Full portability of benefits for employees
- Administration costs are fully tax deductible to employer
- Funding of realised benefits is fully deductible to employer
- Employees are eligible for Capital Gains Tax discount on gains
- No prospectus obligations
Disadvantages:
- Options granted to employees are difficult (if not impossible) to value
- Options are generally illiquid
- Can be difficult for employees that have no experience in trading options to understand
- Inappropriate for small to medium-sized businesses
- Offers little or no tangible benefits to employees because equity is difficult to value and impossible to trade
Sydney Office:
