During the course of your employment, your employer may invite you to participate in an employee share scheme. An employee share scheme provides an employee with the opportunity to buy shares in the company which they work for. Whilst presented as a fantastic opportunity, there are a number of key issues which need to be sufficiently addressed in any employee share scheme.

Some of these key issues include:

  • What happens when the employee resigns or their employment is terminated?
  • When can the employee sell or access those shares?
  • How can the employee’s shares be sold?
  • What happens to the employees shares if the owners of the business change, or if the business is sold?

Employee share schemes have several benefits in that they can be financially profitable to employees where the company performs successfully and may also have tax benefits. However, there are several drawbacks to employee share schemes which must be considered, including those listed above.

It is important that any employee presented with the opportunity to take up shares in their employer’s business first seeks independent legal advice to understand these risks, and ensure that the opportunity awarded suits the personal and financial circumstances. All employee share schemes and arrangements differ, and the terms and conditions of each scheme may not represent the employee’s best interests.

For employers, it is important to offer an employee share scheme or arrangement to employees that offers flexibility, protects the interests of the business and mitigates risks. There are a number of creative ways employers can structure an employee share scheme or arrangement. Employers must consider the tax effectiveness of each structure and their ongoing reporting obligations to the employee and the ATO. Our lawyers have assisted small to medium sized businesses, and large Australian private organisations prepare and negotiate employee share arrangements with their staff members, ensuring that each arrangement achieves the employers legal and commercial objectives.

Talk to one of our expert lawyers today.