Andy Hutt and Albert Homarwijaya, Share Scheme Specialists, highlight some practical benefits of employee share trust.
An employee share trust (EST) is a common structure that employers (both listed and unlisted) use to manage the sale restrictions and forfeiture conditions that are often associated with their share-based incentive programs. However this is not the only practical benefit that an EST can deliver.
Contributing to an EST to enable the EST to purchase or subscribe for shares, can allow the employer to manage its costs and share capital position by having the trust acquire shares over a period of time before transferring them to employees. The EST can also “recycle” forfeited shares for future grants, avoiding potentially complicated buy-back requirements.
The potential benefits of using an EST include:
Typically, an EST would operate as follows:
Below is an example structure of an employee share trust: