VSOP, employee participation
Employee share schemes are an effective tool for motivating key personnel and retaining them in the long term. We advise companies on the introduction and design of virtual share ownership programmes (VSOPs) and other forms of employee share schemes.
Our focus is on legally sound, clear and workable models that serve the interests of both the company and its employees. We provide support with drafting contracts, aligning them with existing ownership structures and taking tax considerations into account.
Why virtual shares are ideal for start-ups:
- recognised by investors
- suitable for staff, managing directors and external parties
- can afford to recruit highly qualified talent
- Retaining and motivating talent
- preserving liquidity
- The granting of virtual shares is tax-neutral
- A notary is not required
- Virtual participants do not have voting rights
- Allocation of „odd“ shares is possible
- The cap table remains „clean“
- reusable contract template
VSOP – Fixed-price contract package:
net EUR 1,400.00 (EUR 1,666.00 gross, including 19% VAT)
- Virtual Share Ownership Programme (VSOP)
- Template Allocation Agreement for the Individual Grant of Virtual Shares
- up to 1 hour of legal advice by telephone
- Draft Shareholders’ Resolution (Adoption of the VSOP)
- Template: Shareholders’ Resolution (individual allocation of virtual shares)
- Optional: clause regarding VSOP for the shareholders’ agreement
Arrange a telephone appointment now, with no obligation:
040 300 39 860
or by email to: grau@gwgl-hamburg.de
Frequently Asked Questions about Virtual Shares (FAQ)
What are virtual shares?
The granting of virtual shares does not make the beneficiary a shareholder; the beneficiary is not entitled to any participation or voting rights at the shareholders’ meeting. The beneficiary is merely comparable to a shareholder in economic terms.
Will the beneficiary become a shareholder?
The granting of virtual shares does not make the beneficiary a shareholder; the beneficiary is not entitled to any participation or voting rights at the shareholders’ meeting. The beneficiary is merely comparable to a shareholder in economic terms.
What is the difference between virtual shares, VSOPs, ESOPs, phantom shares and phantom stocks?
The standardised set of contracts governing the granting of virtual shares is known as a „Virtual Stock Option Programme“ (VSOP).
The virtual shares granted on the basis of the VSOP and an allocation agreement form the basis for theof the beneficiary against the company.
„Employee Share Ownership Plan“ (ESOP) is often used as an umbrella term for employee participation schemes, which may, for example, also include third-party participation. A VSOP is, so to speak, a sub-type of ESOP programmes.
„Phantom shares“ or „phantom stocks“ are simply other terms for „virtual shares“.
How can virtual shares be issued?
Virtual shares may be granted to the beneficiary either (i) individually under a separate agreement or (ii) through a „Virtual Share Option Programme“ (VSOP). The VSOP consists of a set of general rules that apply to all virtual shareholdings of all beneficiaries and the allocation agreement, which governs the individual allocation of the virtual shares to the respective beneficiaries.
Advantages of a VSOP over an individual contract
The granting of virtual shares through a „Virtual Stock Option Programme“ (VSOP) has the advantage over the granting of virtual shares under individual contracts in that generally applicable rules affecting all beneficiaries can be regulated separately from the individual allocation and thus uniformly for all beneficiaries. The individual allocation remains streamlined. This prevents a proliferation of disparate contractual arrangements.
What is the beneficiary entitled to claim from the virtual shares?
Upon the grant of virtual shares, the beneficiary acquires a claim for payment against the company in the event of an exit. The company pays the beneficiary a portion of the proceeds from the sale, the amount of which is based on the number of virtual shares; the specific calculation can be tailored to individual circumstances.
As an additional incentive, provision may be made, when granting virtual shares, that the beneficiary also shares in the company’s profits – provided they are distributed.
How is the value of a virtual share calculated?
Through the virtual shares, the beneficiary acquires a contractual claim for payment against the company in the event of an exit. The amount of the claim varies depending on the contractual terms. Typically, the claim relates to the difference between an initially specified base value and the value of the virtual share at the time of sale; as a result, the beneficiary only participates in the increase in value. If the base value is zero, the beneficiary participates in the full value of the share.
How are the rights attached to virtual shares exercised?
In the event of an exit, the beneficiary asserts their right to payment by submitting a notice of exercise to the company.
What are the advantages of virtual shares?
Virtual shares enable the company to attract talented and qualified specialists and retain them in the long term. The prospect of a share in the proceeds in the event of an exit motivates employees to perform to the best of their ability and fosters team spirit, even without granting them actual shares or shareholder rights.
By issuing virtual shares, talented individuals are involved in the company’s development in a tax-neutral and liquidity-in the company’s development. Shareholders’ voting rights are not affected. There is no need to visit a notary.
As a rule, the beneficiary is not required to make any contribution; Taxes are only payable by the beneficiary when payments are made from the virtual shares.
Who is responsible for issuing virtual shares?
The company’s management is responsible for adopting a „Virtual Stock Option Programme“ (VSOP). The same applies to the individual allocation of virtual shares, unless the virtual shares are intended for a managing director, in which case the shareholders’ meeting is responsible.
Both prior to the adoption of a VSOP and prior to any specific allocation of virtual shares, the approval of the shareholders should always be soughtbe obtained. Often, the articles of association, a shareholders’ agreement, rules of procedure for the management, or the managing directors’ employment contracts, already provide for such a requirementis stipulated.
Arrange a telephone or video call now, with no obligation:
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