ESOP and the use of Trust

An employee share ownership program can be implemented through the direct issuance of shares directly to employees or more indirectly through a trust structure. As can be seen in the diagram, which depicts a typical trust model, employees do not actually receive shares, rather, the trustee holds the shares for and on behalf of the eligible employees in the company.

Implementing an ESOP through a trust mechanism provides numerous benefits for both employees and the company. Firstly, an independent body can provide a more comprehensive and efficient governance of the scheme. From the company’s perspective, a trust also provides a secure and adaptable platform for implementing the ESOP, saving a company time and costs. On the other hand, from an employee perspective, having an independent fiduciary structure, distinct from the company, increases transparency, reduces conflict with the employer and fosters increased confidence in the administration of the program for the benefit of the employees.

With OM Tech, your company will be able to take advantage of the trust structure and realise all of these benefits. OM Tech utilises a unit trust structure, where, as trustee, Watiga Trust Ltd (being a licensed trust company and financial institution regulated by the Monetary Authority of Singapore) holds the equity on behalf of your employees. The underlying shares are unitised, and these units are then issued to the employees. Such units correspond to the underlying shares. This has a number of benefits for your company. For instance, as unit holders, employees will not have the right to vote in a company meeting, thereby mitigating any concerns around ownership and loss of control.

Contact any of our helpful team members to find out more! office@omtech.io

Contributed by Ella Hall for OM Tech