Business Succession and Employees
Having a good buy-sell agreement or insurance trust agreement is only one way of putting into place a properly structured business succession arrangement.
The uptake of employee share schemes in Australia is very low, and there is no commercial reason to keep it that way. Employee share schemes align the interests of the employees and shareholders and also increase the participating employees’ overall remuneration package, often serving as “golden handcuffs”.
It is a relatively simple matter to ensure an employee share scheme does not breach the provisions of Division 7A of the ITAA 1936. It is also fairly straightforward matter to ensure that Section 19 of the Fringe Benefits Tax Assessment Act can be of benefit due to the operation of the “otherwise deductible” rule.
Where the number of employees is less than half a dozen or so, employee share schemes tend to be less popular, and an employment agreement which includes put and call options for share issue and repurchase tends to be more popular. Call us for details.