ENJOY IT – 21 Steps to a Succession and Exit Plan. Download your free copy.

How to implement an Employee Share Ownership Plan (ESOP) within your Mid-Market Business


How to implement an Employee Share Ownership Plan (ESOP) within your Mid-Market Business

By , March 11, 2020
implementing employee share ownership plan – Succession Plus

Based on feedback from our clients over the last 10 years, the primary outcome is to establish an Employee Share Ownership Plan (ESOP) that:

Implementation normally occurs over a three-month period after Succession Plus conducts an initial and complete business review (Business Insights Report) to ensure the program is the most appropriate solution and incorporates the various optional features within the ESOP to best suit your needs.

Whilst the technical aspects can be handled quite quickly and the legal documentation is not too complicated, a typical implementation timetable is as follows:

Succession Plus ESOP Implementation Table

Implementation Process Timetable

The academic research is quite clear, Employee Share Ownership Plans work – but they are even more effective when they are accompanied by employee engagement programs such as Ownership Mindset: educating employees on what it means to become an owner, how they can contribute and engage and provide a better understanding of what it means to become an employee-owner.

A detailed implementation breakdown is below:

Stage One – Business Insights Report

Our Business Insights Report is a comprehensive report which contains:
• A business structure review;
• Details of Capital Gains Tax issues on exit;
• Financial analysis – including trend analysis, breakeven and safety limit, cash flow, credit access and detailed industry benchmarking;
• Non-financial analysis of key operational aspects and risks;
• A detailed valuation report and methodology;
• A sales readiness and attractiveness index; and
• Any issues raised by the due diligence review and any opportunities highlighted.

The report will then be presented through a face-to-face workshop with participants of your choice.

Stage Two – Establishing the ESOP

Stage two involves:
• Setting up a tailored Peak Performance Trust Deed or an appropriate alternative vehicle tailored for your business
• Arranging an Agreement between the parties (between the Company/ Shareholders, the Trust and employees)
• Producing an Employer and Employee Handbook (manual) that shows how the ESOP works and contains forms and documents required to operate the ESOP
• The delivery of an educational seminar for staff; and
• Support service during implementation – attending to phone/email queries

Stage Three – Ongoing Services

Ongoing services are available following the creation and implementation of the Peak Performance Trust or alternate vehicle and are important to ensure the ongoing success of the plan.

These services include:

• Ongoing Maintenance – unit registry, changes to employee/employer details
• Annual Review and Report – updated valuation, calculation of bonus dividend/profit share
• Annual Statement to Members – including valuation of units
• The ongoing revision of changes in legislation and updating of trust deed/ documents as required
• Advice/Queries as required throughout the year
• Online access to our ESOP management platform

Ready to embark on introducing an ESOP into your mid-market business? Get in touch with us today to engage an expert business adviser.

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.