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What voting rights do non-voting shareholders have?

A common question that entrepreneurs/inventors have when incorporating is how to structure the business. The options for structuring a business can be overwhelming, especially when it come...

Overview of Employee Stock Option Plan

Overview of Employee Stock Option Plan   What is this document? The purpose of an Employee Stock Option Plan (ESOP) is to enable the corporation to grant stock options to its directors, ...

What legal rights do I have where an employer promised shares but did not deliver?

Trust is a big part of any deal, and  a situation where you’ve been hired and promised shares but never received any is a major breach of that trust. But does that trust translate into so...

Issuing dates of employee stock option plans

To avoid confusion, stipulate the date the agreement is to take effect into the agreement. It should also be indicated that this is the date that will be used to determine the price of the stock optio...

Reporting Requirements of Employee Stock Option Plans for Banks

If a bank has an automatic exercise of options program, they may be able to evade the insider reporting requirements (section 91 of the Securities Act) in respect to the sale of common shares of the B...

Stipulating classes of shares under Employee Stock Option Plans

In the company's articles, explicitly provide which class of shares is to be issued under the Employee Stock Option Plan (ESOP). Also, ensure that redemption rules for all classes of shares are clea...

Required consideration for an ESOP

When issuing an ESOP, ensure that the proper consideration (money, property, or past services) is received and recorded. Even if the ESOP is issued on the basis of a loan provision, consideration must...

Mandatory ESOPs

Ensure employees have sufficient knowledge about a mandatory Employee Stock Option Plans (ESOP). If the ESOP becomes mandatory, ensure that employees are given sufficient notice and are well aware o...

Drag-along Provisions Allow for Future Flexibility

If there is a bona fide takeover bid from a third party, a majority of the shareholders can agree to the take-over on behalf of all shareholders due to the drag-along provisions. These provisions requ...

Paying with Shares: The Employee’s Perspective

Introduction What makes a stock option plan or agreement attractive to an employee? The short answer is - the opportunity to make money!   There are three basic ways for an employee to m...

Paying With Shares: The Employer’s Perspective

Introduction Your startup is thriving but you still have more goodwill than cash, and you need to retain your talent. You can’t afford to raise their pay - what can you do? Many companies in th...

The Purpose of a Stock Option Plan

Stock options are often issued as a part of a company’s incentive program to the company’s and its subsidiaries’ key persons who are working on the company’s projects. The purpose of the stock...

Option Plan Incentives Tied Directly to New Corporate Objectives – Cash Payments Eliminated for Directors

The Board of Calico Resources set new corporate objectives and revised its executive compensation policy to align with those objectives. As part of the new compensation plan, cash payments to director...

Using Stock Options as Currency – The “Cashless Exercise”

One of the most common strategies employed by start-up companies to leverage their limited cash resources and still have the financial resources to compete in the marketplace is to offer key employees...

Drag-along Provisions: How, When, Why

Drag-along provisions are clauses in a stock option plan or some other form of agreement which grant investors and shareholders the right to compel the founders and other stockholders to vote in favor...

Adjustment Clause in a Stock Option Plan Allows Flexibility for Future Change

Triton Emission Solutions appointed a new director and Chairman of the Board. His compensation included a stock option plan. The options were exercisable at $.50 per share.The stock option plan provid...

Stock Option Plans Can Help Motivate and Retain Key Employees

SSH Communications launched a new stock option plan to give their employees incentives to work harder and stay longer with the company. The assumption is that the employee option holder will want to d...

Utilities of a Reverse Stock Split

A reverse stock split reduces the number of shares that a company has and is intended to increase the per-share trading place. This can be used to increase the value that each share has, minimize the ...

Tips and Tricks: How to Compensate a New Team Member in Equity

Start-up companies often struggle with the valuation calculation, and how to determine the number of shares to issue to a new team member. A good place to start when thinking about this are the Kha...

Cashing in on Cashless Exercise of ESOP’s

One of the best ways to increase stockholder value is to make each employee a stockholder, and get each employee to "think like a stockholder". This has motivated many companies to offer broad based e...

Can ESOP’s Help Improve the Financial Position of the Middle Class?

According to this article, from 2000 to 2012 productivity went up about 25%, but wages increased only about 7%. Where is the wealth going? Most US citizens do not realize that most federal tax incenti...

Employee Stock Ownership Plan Characteristics

If you’re trying to decide between compensation strategies, “cash is king”.  However, for both early stage companies where cash may not be readily available, and also to later stage companies i...

Sleep Train ESOP Terminated after Takeover by Mattress Firm

Under Sleep Train's ESOP, employees acquired 26% of the shares of the company. Sleep Train had contributed funds out of its profits to purchase shares for employees under the ESOP, the intention being...

Some B Corps are using ESOP’s to Unite Stakeholders’ Interests

This article argues that maximizing shareholder returns is not the best way to run a sustainable for-profit corporation. The author points to several "B Corporations", or benefit corporations which do...

Reverse Stock Split Impacts Company ESOP

The reverse stock split is intended to increase the per-share trading price, in order to satisfy the $1 minimum bid price requirement for continued listing on the NASDAQ Capital Market. As a result of...
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