What is Employee Participation?

3 min read
May 11, 2023 5:34:22 PM

Within the blog post, we'll explore the various avenues Share Council offers for employee participation. This includes methods such as distributing shares, issuing depositary receipts, transferring voting rights, implementing options, and more. Among these, we'll focus on three of Share Council's most commonly utilized forms: depositary receipts, options on depositary receipts, and Economic Ownership Rights, providing a comprehensive understanding of each and their role in the co-ownership process.

Share Council helps you towards setting up employee ownership plans. This is letting employees own the company they work for. Either because the employee participates in the bonus and profit sharing, or becomes a real co-owner. As the business grows, the value grows, and the team grows too.

We at Share Council have developed a platform for employee participation. Employee participation contributes to a strong team that makes an impact and allows you to reward people in the short term for long-term goals. 

Ways of employee participation

There are many ways to become a co-owner of the company you work for. This can be done by distributing the shares. But also, for example, by issuing depositary receipts for shares, perhaps transferring voting rights of a share, implementing options or other promises on (depositary receipts on) shares, only selling the economic property rights or linking bonuses to the company’s value development. There is a wide variety of possibilities. We’re going to talk about Share Council’s three most commonly used forms; depositary receipts, options on depositary receipts and Economic Ownership Rights.

But first: what is a depositary receipt?

To understand what depositary receipts or options on depositary receipts are, it is wise to first know what a depositary receipt is. A depositary receipt is actually a shortening of; depositary receipts of a share of a company. A depositary receipt represents the value of a particular share. It can also even represent the voting rights of a particular share.

Depositary receipts

By means of a depositary receipt on a share, you agree that the holder of the depositary receipt is entitled to the economic benefits arising from the associated share. A certificate is issued by a foundation called a STAK (Trust Foundation or Stichting Administratiekantoor). They make you a co-owner of the company that you work for.

The biggest advantage of a STAK is the trading. Participation can easily be traded, so a visit to the notary is not necessary for every trade. The STAK structure is therefore an attractive way to participate in companies for both employees and investors.

Why should I use options?

Implementing options is relatively cheap and easy. All you need is a contract that clearly describes the price and rules of the option. The risk is very low for employees. If the company value falls, you can choose not to use the options. Then nothing will happen. But the advantage of options comes forward when the value of shares/depositary receipts rises. If the company value goes up and the employees want to buy shares, they can do so for a lower price than the people without options. This saves them a lot of money.

What are Economic Ownership Rights (EORs)?

With Economisch Ownership Rights (EORs), the economic ownership right to a share is waived. This is transferred to someone else, which means that that person is now entitled to the distributions that come in on that share. However, this does not entitle the employee to exercise voting or meeting rights on the share. A major advantage of EORs is their tradability, they can be traded without a notarial deed. A notary is therefore not required for every transaction.

How can our platform help you? 

Share Council’s participation platform ensures that there is no need to think about administration after setting up the structure and selecting the contracts. Everything is arranged and maintained for you in the background. We have a range of payment plans available, so no matter what your budget is or how much time you have to spend on participation, we have a plan that will work for you. To find out more about our plans or create an account book a demo with our product & design manager.