Calgary ESOP Lawyer

EMPLOYEE SHARE OWNERSHIP PLAN LAWYER

Employee Share Ownership Plans (commonly referred to as an "ESOP") enable a company's employees, who meet specific qualification requirements, to purchase shares in their employer's company, with or without the financial assistance from the company. By providing a company's employees with share equity in their employer, they have an increased level of participation in the future of the company, such that they typically have a heightened commitment to the company's success.

There are both advantages and disadvantages associated with ESOPs, which will be largely dependent on the specifics of the the ESOP and the participants, including:

Potential benefits for the employer / company:

- improvement in the company's financial performance (based on empirical analysis)

- improvement in employee performance

- increase in employee loyalty and commitment

- increased contribution by employees to business development

- strengthening of employee retention

- reduction in labour / management conflicts

- refocusing of remuneration to company growth and dividend potential, therby lessening focus on salary and benefit demands

- source of investment capital

- means for selling shares of existing shareholders

- potential retirement strategy

Potential benefits to ESOP-participant employees:

- increased access to corporate information

- increased opportunity to contribute to the company and its development

- heightened job security

- ability to have a greater influence on company's profitability and value

- reduction in labour / management conflicts

- participation in an investment opportunity that employees have knowledge of and make a contribution to

- access to a tax-deferred or tax-sheltered investment opportunity

- receipt of corporate dividends

Potential disadvantages for the employer / company:

- increased financial disclosure, including to ESOP-participant employees

- ESOP-participant employees will seek increased involvement in the company's affairs and question the actions of the directors and executives

- complexity, cost and time required to design, implement and maintain the ESOP

- requirement to consider minority shareholder rights

- increased employee scrutiny and accountability

Potential disadvantages to ESOP-participant employees:

- never participating in the company's decision-making process, even though there was the initial belief that the ESOP employees ideas would be considered

- failure of the company to advance and/or generate further share value

- investing hard earned money in a high risk venture that does not pay off

- failing to achieving specific vesting requirements

- not being able to sell the shares when you want to cash out

The foregoing only begins to reveal the complexity associated with Employee Share Ownership Plans, and due to such complexity it is important to retain knowledgeable legal counsel with respect to structuring, implementing and advising on ESOPs. So if your looking for legal services with respect to an ESOP, contact Neufeld Legal P.C. at Chris@NeufeldLegal.com or 403-400-4092.