We assist South African businesses with the design, structuring, documentation and implementation of employee share ownership schemes.
Caveat Legal’s employee share ownership scheme lawyers in South Africa advise companies on the design, structuring, documentation and implementation of employee share ownership schemes, including share trusts, different share classes, phantom share schemes and B-BBEE-related structures. Employee share ownership schemes are typically used to incentivise employees over a longer period of time, encourage staff retention and support a company’s broad-based black economic empowerment profile.
“With employee share ownership schemes, there is no one-size-fits-all. Each scheme should be tailored to meet the specific needs of the business concerned“
- Sarah Lawrence
Different Approaches
Because issuing ordinary shares directly to employees can create unforeseen complications, different approaches to employee share schemes have been developed. These include issuing shares of a different class (such as non-voting shares), establishing an employee share trust, or the creation of a phantom share scheme.
The majority of schemes allow for the shares to vest incrementally over a period of time, thus encouraging employees to cultivate longer working relationships with the company. Many schemes also restrict transferability of the employee shares, at least for a minimum period of time.
Tax Considerations
Tax considerations play a major role in decisions about employee share scheme structure. The tax consequences of a particular structure, both in the hands of the employees and in the hands of the company, must be fully understood before an approach can be selected.
Get Advice
Our team of experienced corporate lawyers and tax advisors are available to advise on the most appropriate employee share incentive scheme for your company, and to draft the documents necessary to establish and administer the scheme.
FAQs
Frequently asked questions on Administrative Law
An employee share ownership scheme is a program designed to grant employees ownership interests in the company, typically in the form of shares. These schemes are beneficial as they incentivize employees over the long term, encourage staff retention, and can enhance the company’s broad-based black economic empowerment (B-BBEE) profile.
Various approaches to employee share schemes exist, including issuing shares of a different class (such as non-voting shares), establishing an employee share trust, or creating a phantom share scheme. Each type has its advantages and can be tailored to meet the specific needs of the business.
Most employee share ownership schemes allow shares to vest incrementally over time, encouraging employees to maintain long-term relationships with the company. Additionally, many schemes impose restrictions on the transferability of shares, usually for a minimum period, to further promote employee retention.
Tax considerations are crucial when structuring an employee share ownership scheme. It is essential to understand the tax implications for both the employees and the company. Our team of corporate lawyers and tax advisors can provide guidance on the most tax-efficient structure for your scheme.
Caveat Legal can assist your company with all aspects of establishing an employee share ownership scheme. Our experienced corporate lawyers and tax advisors will help you select the most appropriate scheme, draft the necessary documents, and ensure the scheme is administered effectively. Contact us via our contact form to get started.
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FAQs
Frequently asked questions on Fintech & Cryptocurrency Law
There is no blockchain-specific law in operation in South Africa, but depending on the field/sector within which the technology is deployed, the regulations relevant to that sector will apply.
- Financial Intelligence Centre Act, 2001 (FICA);
- Financial Advisory and Intermediary Services Act, 2002 (FAIS); and
- Conduct of Financial Institutions (COFI) Bill (expected to come into effect in 2023)
This refers to taxes levied on gains made in cryptocurrency transactions. The South African Revenue Services (SARS) currently taxes individuals on their cryptocurrency investments in the form of capital gains tax. We expect further developments in this area in the short-term in respect of reforms to the application of the foreign exchange controls on the export and import of cryptocurrency to and from South Africa. There is also an indication of possible impending investment-related taxes on cryptocurrency funds.
Fintech (from the terms “financial” and “technology”) covers the latest technological innovations in particularly the financial services sector including blockchain, cryptocurrency, insurtech, regtech, P2P, open banking, crowdfunding, mobile money etc. Fintech law requires an up-to-date knowledge of the rapidly changing law impacting this sector across a wide-range of regulatory frameworks and an understanding of the applicable technology. Due to the rapid pace of innovation in this sector, some fintech areas are unregulated or due to be regulated soon and therefore a general understanding of best practices and other jurisdictional approaches is also required with a pragmatic approach to advice.
Fintech products, services and partnerships require a multi-disciplinary team to advise on the applicable law:
- Regulation of financial services and products
- Regulation of payment services, lending and banking
- Anti-money laundering laws
- Companies Act (particularly relating to “public offers”).
- Investment funds regulations
- Insurance law
- Pension Funds
- Tax and Exchange Control
- Data protection and data privacy
Furthermore, we note that the law on tax of cryptocurrency is evolving. In South Africa, cryptocurrency is treated as both income (taxed on the revenue account as “gross income”) or taxed as capital gains tax depending on whether a receipt is revenue or capital in nature. Taxpayers are also entitled to claim expenses associated with crypto assets accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade. Base cost adjustments can also be made if the receipt is treated as CGT.
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