A STAK (Stichting Administratiekantoor / Trust Office Foundation) is an entity that is increasingly used in the Netherlands to organize employee participation. However, that is not the only reason to choose a STAK. Those who set up one can also guarantee anonymity and protect their company against a hostile takeover. In addition, there are advantages in the sense of easy trading of certificates and separation of voting rights and economic rights. The STAK also takes an individual position among shareholders. It is rightly a pretty practical ‘tool’ to facilitate employee participation within your company.
With a STAK you issue certificates to your best employees, which entitles them to the profits in your company. Because there is no transfer of legal ownership of the shares, repetitive visits to the notary are not necessary. This saves you about € 650 with each transfer. Let’s be honest: that’s nice. The term STAK first became meaningful to me when I read about it years ago in the book ‘Everyone shareholder’ by Pascale Nieuwland-Jansen. She writes incredibly beautifully about the quest of companies, including the Deventer consultancy and engineering firm Witteveen en Bosch, to become owned by employees. I received the booklet in 2015 from a good friend, who knew about my struggle with the question of how I could get the employees of my own software development company to participate. My associate and I had already decided when the company was founded to follow the ideas of Ricardo Semler, Eckart Wintzen and others. We chose to work together from a focus on autonomy and participation, in the sense of ‘together we solve it, and we become successful’.
Search for the right employee participation model
Once you’ve come up with something like that, the search for the right participation model starts. In the article Employee Participation and Taxation, written by Falco Houwer of Bruggink & Van der Velden, the author navigates the jungle of possibilities for employees to participate. In doing so, he describes all the advantages of each participation model with the associated risks. This jungle of participation models was the trigger for us to set up Share Council. We have built an online platform that makes the search for – and especially the implementation of – participation models super simple and clear. Personally, I think that only three participation models work well in the Netherlands to really turn an employee into a co-owner. And then we are explicitly not talking about bonuses, profit rights or other ‘salary variants’. These are my favorite models:
- Economic ownership of shares
- Cooperative membership (subject of the next article)
- Depositary receipts of shares via a STAK.
STAK as paterfamilias
This time we zoom in on the STAK. To put it bluntly, a Stichting Administratiekantoor is a way to bring together a group of shareholders and to give them one seat as shareholder in the shareholders’ meeting. The STAK is the one legal entity that has this seat, proverbially. This one person is a kind of paterfamilias to all the “small” shareholders of the company. The paterfamilias literally buys part of the company’s shares, and then sells them to the supporters. However, the moment the foundation sells the shares to its supporters, only the economic right in the form of certificates is sold on – not the legal right that goes with the shares. Anyone who buys shares through the paterfamilias is entitled to a dividend and to the fluctuation in the value of the shares. The paterfamilias ensures that these shares are well represented in the shareholders’ meeting.
Companies choose a STAK for several reasons if they want to organize employee participation (or actually often for any form of ‘smaller’ participation). This includes the following benefits:
- the STAK makes it easy to trade the participation;
- the STAK separates voting rights and economic rights; and
- the STAK has an individual position among the other shareholders for the employee participation group.
Benefit 1: easily tradable
For our software development company (just like for many start-ups) being able to trade the pieces easily was especially important. Depositary receipts of shares can be transferred without a notarial deed, so that everyone can enter and exit your company very easily. This does not only concern employees, but also, for example, investors and the community (such as customers) around your company.
Advantage 2: separation of voting rights and economic rights
Voting rights and economic rights are often separated to ensure that employees can benefit from the economic developments of the company without the entrepreneur being bothered by a large group of opinions at shareholder level. The entrepreneur is often both a shareholder and chairman (the paterfamilias) of the STAK. At our software development company, we were not necessarily in favor of such a construction, because we attach great value to the unvarnished opinion and influence of the employees at shareholder level. At Share Council, too, we want to hear from everyone. At our company, we have therefore included all shares (100%) in the STAK (i.e. not just the part for employee participation), whereby everyone who holds more than 5% of the depositary receipts is automatically included in the board of the STAK and can participate to vote. As a result, this board is in principle the shareholders’ meeting, because the STAK is the only seat that fills the shareholders’ meeting, but at the same time we can trade the items more easily than with a B.V.
Benefit 3: individual position between shareholders
The third advantage of the STAK is that it is actually an individual person with its own shares among the other shareholders. The case below emphasizes the organizational advantage of this.
A company decides to always make 10% of the economic ownership of the shares available to the employees. In that case, the company can opt for participation via the current shareholders or via an entity, such as a STAK. If the company has one shareholder, it can easily make available 10% of the economic ownership of his or her shares without the intervention of the STAK. When a second major shareholder is added, the question arises what should happen with those 10% shares for the employees. Does this newcomer also have to relinquish 10% of the economic ownership of his or her shares, or does he/she not have to participate (this would give an unfair distribution)? When a STAK is placed here, it can actually own 10% of the (numbered) shares, and such a discussion will never exist. Also, this paterfamilias will always be present as a full shareholder among any other shareholders. This keeps the situation as clear as possible.
There are also some drawbacks to the STAK, (also) if you check the literature on it. For the establishment of the STAK you still have to go to the notary. In addition, the question must be answered as to who is allowed to exercise which voting rights and how the decisions about this should be made. Furthermore, from a tax point of view, it is not useful for the STAK to be the owner of shares on which no depositary receipts have been issued. Simply because the STAK then suddenly has assets that must be reported to the tax authorities. Ultimately, as a platform supplier, we found the ‘numbered issuing’ of certificates the most difficult, but we have worked hard to make this possible.
The depositary receipts of a STAK are numbered, just as is the case with shares. Numbering in this case literally means that you become the owner of a few numbered certificates and not ‘just a tuft of 5%’. This is also easier to explain with an example: in 2014 my partner and I set up a software development company with 100 shares. My partner owns shares 1 up to and including 50 and I own shares 51 up to and including 100. If we want to set up a STAK with 10% of the shares, we will each sell 5 shares to the STAK. For example, the STAK then becomes the owner of shares 1 to 5 and shares 51 to 55. Subsequently, the STAK issues certificates with the same numbers. When an employee buys one (1) certificate, it is possible that he literally buys certificate number 4. You can imagine that with large numbers this becomes an administrative headache file. That is why we keep all this neatly automatically in our database. If a company has a STAK with us with one million certificates, then we indeed have one million certificates in our system – each with the owner to whom the certificate has been assigned.
Ultimately, all this makes the STAK not only an interesting instrument from a legal point of view, but also an instrument with practical effect. The structures remain uncluttered and clear. Due to easy tradability and often the small “cheap” denominations, everyone can participate and you are really working on binding and captivating your talent.
My research for this has mainly confirmed my knowledge about the STAK. This way of working is very accessible for the SME of tomorrow, who want to transfer shares to employees and investors quickly – and without too many intermediaries and interference. That is why we support this principle. That is also why I will continue to fight to strengthen this way of sharing. “A fair share for everyone” – it’s getting closer and closer. Would you like to learn more about STAK and how we use STAK? Go to the Share Academy and take a look at the knowledge bank.
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, please contact us. We’re always happy to chat!
Quintus Willemse – Team Hero 🦸♂️and participation specialist
founder Share Council