Where can a micro company best get cost-effective help w/ setting up employee share scheme?

concreteRick

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Does anyone have recommendations for where to get help with setting up a small company employee share scheme, e.g. KEEPs or RSUs?

I work for, and am a part owner of, a micro business (4 people in total, developing and selling an off the shelf mostly-exported s/w product). The plan is to sell the company within the next 12 to 18 months. But before that, in the next month or two it’s required to set an employee share scheme for the two employees who currently have no shares. So this is ultra-small scale. The company might be termed a ‘lean startup’.

Googling suggests that the people who profess to have expertise in this area are named Goodbody, PwC, KMPG, Deloitte, and so on. They all likely have huge overheads and expensive cars to run. They look super-costly to deal with. I’m guessing there will be many very good people among them, but they cannot afford to spend time with micro companies.

Revenue.ie has good pages about the different share scheme types and their tax implications, but none of the business document templates that are publicly available seem to address this area to provide a starting point.

It’s difficult to consider dealing with anyone without having prior knowledge about their experience, expertise and costs in this particular area.

To quote @T McGibney in another post in this forum:
“I would always advise against choosing a professional service provider at random or from a directory. If at all possible, get recommendations from friends, family and colleagues. If all else fails, and you don’t have any recommendations to hand, find out as much as you can about the firms concerned, including (but not limited to) their websites. Then make your selection after talking to 1 or 2 of them.”

If anyone is a micro company that has gone down this road, or knows one, it would be wonderful to learn from your/their experience.

Alternatively, recommendations for other forums to ask for help would great too. (Checking the www sites of the various small business associations does not give confidence that joining-up (quite high fees in some cases) would result in effective help in this area.)

Many thanks,
Rick
 
You are right to avoid the Big 4 firms of accountants.

But you might get somewhere with the next tier.

Grant Thornton
BDO
Mazars

Brendan
 
I'm not sure if they can help with this but we use [broken link removed]and find them excellent.
 
I looked at doing this while a similar size and was told by other business owners that share option schemes etc were too complex/costly for small companies to setup. Whether that is still true or not I cannot comment on. However we just issued staff regular shares (different class with no voting rights, drag-along/tag-along clauses etc), which is much easier/cheaper to do. Is this an option for you?

It will mostly come down to the current value of the company and the impact of that on the employees' tax situation I imagine, but if you plan to sell the company in such a short timeframe it could be cheaper and quicker to just issue regular shares at as low a value as you can justify and increase their salary to cover the tax they need to pay? The cost might work out the same or less than setting up KEEP/RSUs and save you a lot of time. It would have the added benefit that when it comes time to sell the company, the structure will be nice and simple for the buyer to perform due diligence on.
 
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You are right to avoid the Big 4 firms of accountants.

But you might get somewhere with the next tier.

Grant Thornton
BDO
Mazars

Brendan
Not cheap either.

This may be a case where the company isn't big enough to justify the cost of setting up such a scheme for its staff.
 
Thanks everyone for your helpful comments. I'm super grateful and appreciative.

@Zenith63
I looked at doing this while a similar size and was told by other business owners that share option schemes etc were too complex/costly for small companies to setup.

@Steven Barrett
This may be a case where the company isn't big enough to justify the cost of setting up such a scheme for its staff.

My impression is that both of the above are (still) true. So far I've received informal cost estimates
in the range EUR 5,000 to EUR 10,000 for accountancy fees and unmentioned extra EUR 1000s for solicitor
fees for implementing a share scheme--i.e. these appear to be the entry costs for the most micro, micro
company. There's also an impression of untold, hidden costs for finishing the job.

Coming from the world of software development, where everyone, including direct competitors, is accustomed
to freely providing each other with problem solving help, it's difficult to see that such a commonplace
and relatively simple endeavour as setting up a share scheme for a micro company should have such an
expensive entry point.

While there is theoretically an infinite number of special circumstances which could be provided for in
a share scheme agreement, e.g. a shareholder leaves the company before the vesting date or event, or dies,
or becomes mentally incapacitated, or causes the death of another shareholder, or kills their cat, or
embezzles money or goods from the company, or is found to be fond of eating stuffed mice, or slips on a
pavement, or is working with a false name, or fiat money becomes worthless, or the sun fails arise in the
East, and so on and on, extending to an agreement longer than War and Peace, a practical agreement can
only address a set of realistically-common circumstances.

A practical agreement will almost wholly comprise boiler plate text. The parties to the agreement may
change some of the boilerplate text subject to mutual agreement. After that point it's probably a good
idea to ask an accountant and/or solicitor to review the agreement.

There's no doubt accountants and solicitors can and do provide real value in many situations. (Several
provide helpful info in this forum.) However the entry price for setting up a share scheme for a micro
company, along with inability of the customer to know whether the service provider has actually done it
before, is not one of them IMO. It seems an example of economic rent seeking directly opposed to the
efficient operation of an economy. This could be said of some software companies too :-(.

I know this is very far from being one of the big social or economic issues of the day.
By now it's obvious I'm ignorant and prone to drawing wildly illogical conclusions.

I'll keep looking for a less costly route, ideally involving less condescension than heretofore. The
reality may be that there are indeed very few small companies that have implemented KEEP or other share
schemes. revenue.ie and citizensinformation.ie both provide good basic info.

For anyone interested, the main revenue.ie documentation is here:


It's very good. But it does not include templates for share agreements.

Many thanks again.

Rick
~
 
OP is, I think, confusing two essentially different tasks - issuing shares in a tax efficient way and regulating affairs between shareholders.

KEEP is designed to get shares into the hands of employees in a tax efficient way by postponing the tax on the employee until disposal.

If the company is a lean startup (with a tiny net worth) then there is no big tax liability to postpone. Just issue the shares for a tiny value (in essence as a bonus) and pay the employee's tax on the bonus. Job done.

A Shareholders Agreement is designed to govern the relationship between shareholders. Bear in mind that the Companies Act already does a reasonable job of this - if your perception is that you have no protection without a Shareholders Agreement, that is just not true.

If OP is unwilling to pay for professional advice (and he clearly is) then he should approach it like a software engineer.

Address the big-risk problems and ignore the small-risk ones, on the basis that the small-risk problems may never arise. Extending the software analogy, if the product does well, you will have the budget to fix all those small problems on the 2nd (or the 22nd) release.

You can address the big-risk problems by writing out the answers to just a few questions

1) What it someone dies
2) What if someone leaves on good terms.
3) What if someone leaves on bad terms
4) In each of those situations, can they (or their next of kin) insist that we have to buy their shares back?
5) If so, how is that price determined?
6) In each of those situation, can we insist on buying their shares back from them or their next of kin?
7) If so, how is that price determined?

A 'simple' shareholder agreement is pretty close to being a no-win proposition for most professional advisers.

The companies that stay small and low-value will never turn into problems and disputes. Nor will they turn into profitable clients. = LOSE

The companies that become valuable will become fertile ground for dispute (because, you know,.... ....people) and at that stage the low-budget shareholder agreement will come back to bite the legal adviser. =LOSE.
 
I totally agree with all your points here the fee estimates are probably market rate. I would even say that the legal fees are a bit on the low side. There are many problems with employee share schemes in Ireland and this includes advisers not familiar with the area, wholly unsuitable tax plans (mainly the clog & KEEP) and complex provisions. In the U.K. in 2012 the Nuttal Review looked and the area in large detail and make recommendations that were implemented. KEEP was meant to encourage share schemes in micro companies but it is far too complicated.
 
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