Why introduce an Employee Share Trust?

Below is a list of 20 reasons why companies and their advisers should consider the introduction of an employee share trust arrangement.

Please note that none of these reasons are mutually exclusive of each other. The company can choose to operate an employee share trust for all, or any combination of these reasons.

  1. To create a market for the shares in the absence of a recognised stock exchange.

  2. To support the operation of employee share scheme arrangements.

  3. To avoid dilution by recycling existing shares for employee share schemes.

  4. To secure the capital gains tax treatment on the sale of the shares.

  5. To enable shareholders to diversify their investment portfolio.

  6. To hedge on the purchase of shares when share prices are low.

  7. To warehouse shares in a secure and safe environment.

  8. To budget for the cost of share purchases for employee share schemes.

  9. To cap the initial outlay required to fund phantom liabilities.

  10. To support long-term incentive arrangements.

  11. To create a market for subsidiary company shares.

  12. To facilitate a management buy-out.

  13. To assist in succession planning where a proprietor is planning to retire.

  14. To buy-out dissident shareholders.

  15. To enable outside investors to withdraw their investment.

  16. To enable the personal representative of an estate to dispose of shares.

  17. To allow flexibility in share pricing for sales.

  18. To operate a share market offshore with a view to achieving tax-efficiencies.

  19. To operate a share scheme as part of a pension arrangement.

  20. To give employees security that their scheme shares are ring-fenced for employees.