Collaboration of Baker McKenzie and Captin helps startups and SMEs during and after Corona crisis
Employee participation, the granting of shares to employees, enables startups and SMEs to retain employees during this time of economic downturn, and to rebuild the company collectively. Baker McKenzie and financial services provider Captin have therefore entered into a partnership to help these companies implement employee participation plans.
According to Techleap, an organization that works to support startups, currently only 15% to 20% of Dutch tech companies have implemented their own share option scheme: a percentage that is significantly higher in, for example, the US. Due to the Corona crisis however, it is now more important than ever for companies to give their employees a stake in the company. Share and option plans offer excellent opportunities to do so. After all, entrepreneurial employees who think like shareholders, and who are passionate and ambitious in the performance of their jobs, are of crucial importance for company performance. In addition to increasing involvement, the introduction of employee participation plans may currently even enable employees to enjoy a lower taxation on the benefit, partly because the share value has fallen sharply.
“A reduction of the share value is of course incredibly stressful for both the company and the employee, but it also presents an opportunity. By offering employees free shares or shares at a discount, wage tax and social security premiums are now payable on a relatively low amount. At the same time, the potential upside is significant," says Don-Tobias Jol, partner at Baker McKenzie. “Once the economy picks back up after the crisis, the value increase should normally be taxed relatively low, under the so-called 'box 3' tax scheme. Moreover, innovative start-ups can currently benefit from a favorable Dutch tax scheme for their employees that participate in a company option plan. But most importantly, employee participation ensures that employers and employees really work together to enable companies to flourish anew.”
Baker McKenzie and Captin both have significant experience with employee participation plans, each party based on its own expertise in this field. They previously observed a great demand in the market for standardized employee participation plans, especially among startups and small and medium-sized enterprises (SMEs).
The current collaboration between both parties is quite unique. Joost Roosen, managing director at Captin, notes: “Our customers informed us that they would like to implement standard share or option plans for their employees. A plan that is both 'best in class' and can be offered cost-efficiently. We discussed this proposition with Baker McKenzie, and agreed on a joint vision on how to meet that need. We have found an ideal partner in Baker McKenzie, as they are able to design standardized plans of a high legal quality, based on our comprehensive suite of products.”
For clients serviced under the new partnership, Captin will establish an online environment that provides employees with a complete overview of their share or option position, as well as the possibility to sell or exercise these instruments. Baker McKenzie for its part ensures that the plan documentation complies with all relevant Dutch tax and employment law rules. In addition, the law firm designs the plan documentation to fit Captin's online platform perfectly.