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EFES NEWSLETTER - NOVEMBER 2020

  How to create an ESOP plan

For employee share ownership in SMEs, the ESOP is the simplest and most effective plan in the world.

Here's how to do it:

1. You are the main shareholder of XYZ Company and you want to sell your shares.

2. You create a "Foundation (or a trust) for Employee Share Ownership and Pensions at Company XYZ".

3. You sell your shares to the foundation. For the payment, you make credit to the foundation (or help it to obtain credit or other financing).

4. The following year, as every year, XYZ company makes a profit. This used to be taxed. But not anymore. The company calculates and pays the foundation a pension contribution equivalent to the profit before employee shareholding. From then on, the profit has disappeared. No profit, no tax.

5. The foundation receives the annual pension contribution. It is a non-profit organisation, so it is not taxed on its income. No tax there either.

6. The foundation creates an individual account for each employee. This registers each employee's rights to receive shares in Company XYZ when he or she leaves the company (usually at retirement age).

7. In addition, the foundation organises a system for employee shareholders to vote on items on the agenda of the annual meeting of shareholders of company XYZ.

8. Each year, the foundation receives the supplementary pension contribution of the employees who are members of the plan. This contribution is first used to repay the credit originally received to purchase the shares.

9. Then, the free shares are added each year in the form of "entitlements" to each employee's individual account, using a simple distribution key (often pro rata to wages).

10. Thus employees exercise their rights as shareholders and own the shares, except that they can only dispose of (sell) them when they leave the company. They are highly motivated to make everything work for the best. In fact, it has been observed that companies with ESOP plans work better than others.

An ESOP plan is as simple as that.

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Press review
We have a selection of 27 remarkable articles in 9 countries in October 2020: Austria, Denmark, Germany, France, India, Italy, Spain, UK, USA.
Austria: Sucessful developement for the new Employee Ownership Foundation at Oberbank.
Denmark: Confac is an employee-owned company in Denmark. New legislation to promote employee share ownership in small companies.
Germany: CDU wants to go much further in promoting employee share ownership in Germany.
France: Michel Bon invites to come out of the crisis through employee share ownership, by converting public debt into company shares. 20.000€ for each employee shareholders at Carbone-Savoie. New space for workers cooperatives.
India: New ESOP management tool.
Italy: European ESOP model.
Spain: Recent legislation about sociedades laborales and participative enterprises could be changed again.
UK: Several new companies under the control of Employee Ownership Trusts. How Employee Ownership Trusts work. Employee ownership for SMEs in the UK.
USA: Study about pandemic in the workplace: Employee-owned companies are superior at retaining jobs and  pay, and protecting employee health. Reell Manufacturing is a splendid example of ESOP company, with subsidiaries in The Netherlands and in Germany.

The full press review is available on:
              http://www.efesonline.org/PRESS REVIEW/2020/October.htm 

 


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   With best regards

 

 
 

Marc Mathieu
Secretary General
EFES - EUROPEAN FEDERATION OF EMPLOYEE SHARE OWNERSHIP
FEAS - FEDERATION EUROPEENNE DE L'ACTIONNARIAT SALARIE
Avenue Voltaire 135, B-1030 Brussels
Tel: +32 (0)2 242 64 30 - Fax: +32 (0)2 791 96 00
E-mail: efes@efesonline.org
Web site: www.efesonline.org
EFES' objective is to act as the umbrella organization of employee owners, companies and all persons, trade unions, experts, researchers, institutions looking to promote employee share ownership and participation in Europe.