Employee share schemes have not been as widely used in Malta as they have in some of our European neighbours. However, in general, companies use employee share schemes to attract, retain and reward talent by offering their employees a share in the success they help to create in the company. They provide a form of cash free reward and/or remuneration for employers as well as align the interests of employees with those of the company's shareholders to enhance performance and the company's success.
2. Type of Scheme
-share loans: company provides loans (which may or may not be interest free) to the employee to purchase shares at market value;
-performance linked shares: company grants the employee shares once specific targets have been met;
-options: company grants the employee the option to purchase shares at a future date and at a pre-determined value; and
-phantom shares: company provides a cash payment to the employee which mirrors the company's share price and/or dividend.
Each type of scheme will vary in terms of complexity, cost, and tax implications and it is therefore important that the company is clear in what it wants and the best method to achieve it. A company will need to look into its own particular circumstances (its future plans, expected growth etc.) as well those of the market in which it operates (availability and competitiveness of talent pool).
5. Availability of Shares and/or Dilution
Employee share schemes can be used to attract, retain and reward talent. Due to their nature, complexity and potential longevity it is important that the scheme is well thought out and tailored for the ambitions of the company. With the growth of the Maltese market and an increased and more competitive talent pool, the use of such schemes in Malta may be set to grow.
Article 110 of the Companies Act (Cap. 386) excludes these types of loans for acquisition of shares from the scope of financial assistance provided that certain conditions are met.