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Thinking of Implementing ESOPs?
Thinking of Implementing ESOPs?
This is what you are probably wanting answers for
Many companies are giving ESOPs,
should I also be doing it?
This is one of the factors, peer pressure, that influence the decision. However, the more important drivers are willingness to dilute shareholding, readiness to sustain the Plan over a long run, possibility of providing liquidity to the shares, do the employees see same value in becoming shareholder as the other shareholders.
Is this the right time?
ESOPs can be implemented anytime whether you are a startup or a growth stage or a steady state, established company. It is ideal to time the roll out prior to some major Capital raising events such placement of Equity with a PE/ VC or strategic investor or before the IPO- before a market driven price discovery happens. In the absence of such events, ESOPs can also be rolled out when there is some visibility of providing liquidity to employees.
What are the pros and cons?
Some of the visible advantages of implementing ESOPs are retention, performance linked rewards, (usually) market pays for the gains and not the company, facilitates shared vision as shareholders. ESOPs however, can work to the disadvantage, if not implemented professionally, seen to be subjective and not objective, lack of transparency.
What does it take?
Is it necessary to dilute my ownership for giving ESOPs? Some of the key decisions points on which the Promoters need to have views are – what are my objectives? Whom should we cover? What is my dilution appetite? How will I provide liquidity to the Options?
Is it necessary to dilute my
ownership for giving ESOPs?
Not necessarily. If you have constraints in dilution, you can consider the alternative of Phantom stock options or similar cash settled instrument.
How do I go about it?
It is advisable to seek professional guidance while formally launching the initiative. ESOPs involve engagement of several functions such as HR, Legal, Finance and Corporate (Shareholders / Investors). It is critical to engage professionals with knowledge of all the implications. Write to us or call us to know more about how we can help.
Our single window
bundled solution for
all your ESOP needs
Our single window
bundled solution for
all your ESOP needs
Documentation – Administration – Compliance
We have curated a new bundled approach service line, wherein our specialist team of CAs, CPAs and CEPs, will provide innovative and unique solutions for Equity Based Compensation Plans, while targeting the needs of Start-Ups and Unlisted companies as well as providing solutions for global companies.
ESOP best Practices,
Trends and analysis
ESOP best Practices,
Trends and analysis
In the new era and decade from 2021, it is also time to look at the best practices and patterns adopted in the Year 2020 across different industries in India. We conducted our Annual Survey (specifically covering unlisted and private companies) to understand and analyse the trends in the ESOP Practices in India. The key findings of this Survey are bases of structuring, designing and implementing an one stop Equity Compensation strategies that provide great satisfaction for both the Management and employees.
Communicating ESOPs
Communicating ESOPs
Communication is very important for the success of an ESOP Plan. Effective on-going communication is required to explain something as complicated as an ESOP. For an ESOP Plan to work, employees need to understand the instrument, its limitations, and the situations in which it will be beneficial. Facilitating that understanding can take some effort when your employees are not from a financial or business background. Employees need to know how the company is doing else, they may make impressions based on the grapevine.
Companies can communicate through banners, fliers, townhall meetings, Plan handbooks, FAQs. Send reminders, alerts about vesting, end of the exercise period, potential lapsing of Options. Periodical communication on the financial performance of the company and the value of the Options based on the latest independent valuation is also essential. It is also important to communicate the Value they leave on the table if they were to leave with unvested or unexercised Options.
Planning liquidity for your ESOPs?
Planning liquidity for your ESOPs?
Here’s how we can help
Event Planning
Analyze Liquidity Scenario
and Finalisation
Real-time Dashboard for
Employees and Company
Employee Communication
and Tracking
Liquidity Exercise
and Fund Allocation
Payout and Event
Closure
Testimonials
“We had a great experience with ESOP ezee. They’re very collaborative and supportive: they provided all the information we needed and answered all of our questions. They made sure we were able to design an ESOP that aligned with our needs and culture.”
Gautam Kshatriya
Co-Founder, CEO