TheBigShort
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Shares in a private company won't earn a dividend. They will almost certainly be restricted in who they can sell the shares to. A minority shareholding in a private company is worth very little.
I don't think so, but I'm open to correction.So the KEEP scheme is not of much use then?
I don't think so, but I'm open to correction.
I'm no expert in the matter but we can only sell shares back to the company. Otherwise someone could leave and sell shares to a direct competitor which could damage the business.You said that there are restrictions on sale of shares in private companies and that dividends are not paid. I'm sure how there could be restrictions on sale of shares, but taking your word for it, how is the KEEP program of any benefit? Obviously being taxed at CGT 33% instead of PAYE, PRSI, USC is clear - but if there are restrictions on who the shares can be sold to, then it somewhat diminishes the tax advantage. Btw, I've never heard of such a restriction in an open market economy, but perhaps I am not that knowledgeable about company law.
I'm no expert in the matter but we can only sell shares back to the company. Otherwise someone could leave and sell shares to a direct competitor which could damage the business.
We also don't pay dividends or any income based on share ownership; if you don't work here you don't get an income.
What if they were the owners of a competing company? They could have access to detailed accounts, customer details etc. It could give them a big commercial advantage and as long as they were not a director there would be no legal reason not to damage the company.If someone were to buy a stake in your company, it would surely be more advantageous to them to protect that interest rather than damage it.
What if they were the owners of a competing company? They could have access to detailed accounts, customer details etc. It could give them a big commercial advantage and as long as they were not a director there would be no legal reason not to damage the company.
What if they were just interested in a short term return and wanted to bleed the company of its reserves, damaging the job security of the employees?
Small businesses don't have a legal team. They can't afford the cost of putting in that structure in place. They are often just about keeping their head above water. A disruptive shareholder could be disastrous.
Isn't the intent to KEEP the employee in the small company. Allowing them to take the shares with them would be no incentive to stay.
[broken link removed] provides some information on KEEP.and compares KEEP with other share schemes.
“Share-based remuneration can play an important role in rewarding key employees at all stages of a business’s development and it can significantly reduce fixed labour costs and free up business cash-flow.
In summary, gains arising to a key employee on the exercise of qualifying share options under the KEEP incentive will be exempt from income tax, USC and employee PRSI contributions. This is the key advantage of KEEP: it means that if the company share price has increased in value between the time of grant and exercise of the qualifying share option the uplift in value is received tax-free by the key employee. Under current rules, the value of the gain is subject to income tax, USC and employee PRSI contributions, with a potential combined liability of 52%.
Under the KEEP incentive, the employee will only pay Capital Gains Tax at the current rate of 33% on the ultimate sale of the company shares.
The value of shares acquired by key employees under the KEEP incentive will also be exempt from employer PRSI contributions, in accordance with the current regime applying to share-based reward.”
SME's aren't publicly traded companies. Who decides what the shares are worth?[broken link removed] provides some information on KEEP.and compares KEEP with other share schemes.
“Share-based remuneration can play an important role in rewarding key employees at all stages of a business’s development and it can significantly reduce fixed labour costs and free up business cash-flow.
In summary, gains arising to a key employee on the exercise of qualifying share options under the KEEP incentive will be exempt from income tax, USC and employee PRSI contributions. This is the key advantage of KEEP: it means that if the company share price has increased in value between the time of grant and exercise of the qualifying share option the uplift in value is received tax-free by the key employee. Under current rules, the value of the gain is subject to income tax, USC and employee PRSI contributions, with a potential combined liability of 52%.
Under the KEEP incentive, the employee will only pay Capital Gains Tax at the current rate of 33% on the ultimate sale of the company shares.
The value of shares acquired by key employees under the KEEP incentive will also be exempt from employer PRSI contributions, in accordance with the current regime applying to share-based reward.”
SME's aren't publicly traded companies. Who decides what the shares are worth?
BS, you seem to have very little understanding of how the world works.
A scheme is introduced to help companies retain key staff and you’re wondering why there is no scheme to retain non-key staff
SME's aren't publicly traded companies. Who decides what the shares are worth?
It sounds useful, not sure what is meant as 'key' employee. Ideally, extend it out to all employees in my view. Nothing like having an stake in ownership to appreciate the value of something.
You are jumping the gun Big Short. Details of the scheme will be clarified in the Finance Bill.
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