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Trust office foundation (STAK)

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Employee participation plan

Employee participation through a trust office foundation (STAK)

With the current – rapidly changing labour market, letting employees participate via a trust office foundation, or in Dutch STAK (Stichting Administratiekantoor), has gained considerable popularity in recent years. The trust office foundation is an ideal structure to allow existing staff to join as shareholders without losing voting rights on the shares. Allowing employees to participate as shareholders generally increases commitment and motivation, as it makes staff co-owners of the company. This is a very nice way to let your key staff benefit from the value growth of your company on the one hand, and to keep them committed to your company for a long time on the other. Truly a win-win situation. We find that more and more companies are choosing to set up a STAK for this reason.

Setting up a trust office foundation (STAK) in 6 steps
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Setting up a trust office foundation (STAK) in 6 steps

Setting up a STAK has a number of stages, which we explain further on this page. In the step-by-step plan below, we explain how to set up a STAK for employees in 6 steps.

Employee participation plan

Step 1: Meet and discuss structure of the STAK

When you want to set up a trust office foundation (STAK), it is important to carefully map out the objectives of the STAK. The last thing you want is for the formation of the STAK to cause internal unrest because employees disagree, for example, about who is eligible and who can acquire what percentage. It is also a good idea to think in advance about the main conditions you want to attach to the STAK. Think about things like:

Consider, for example; minimum number of years in service, only employees with management positions or only employees with permanent contracts, only current or future key personnel.

Do you want the employees to buy the shares at a market rate, or do you want to give a discount to this market price?

It is generally not possible for all employees to pay for the investment from their own resources or finance it externally. For this, see also step 3 to sharply reduce the price of certificates by restructuring.

It is often agreed with an employee that if he or she chooses to make use of the STAK that he or she then also commits to your company for any number of years. Such a period is also called a lock-up period. If an employee terminates his or her contract during this lock-up period without a solid reason, a penalty clause and a forced sale of his or her certificates will apply.

It is wise to think about this in advance whether you will distribute the STAK certificates once or whether you want to start making the STAK available to new employees as well. In the former case, you can choose to make the STAK available only to current colleagues and there will only be a redistribution of shares when one of the STAK shareholders leaves and his or her share certificates become available. In the latter case, you can bind new employees early on by offering them the prospect of a concrete shareholding. You can determine whether you want to 1) sell additional shares to the STAK in the future in the event of new entrants so that the existing STAK members retain their share percentage, 2) dilute the STAK holders jointly when a new shareholder joins or 3) a combination of both whereby several parties are diluted.

Step 1 - Meet and discuss structure of the STAK
Step 2 - Discuss global conditions with the intended joining employee(s)
Employee participation plan

Step 2: Discuss global conditions with the intended joining employee(s)

Once you have determined to whom you want to make a concrete offer, what percentage of shares you want to offer to the relevant employee and under what overall condition, you will engage with the relevant employee(s) to discuss this proposal. If you ask several employees, there will be a chance (in conjunction with the conditions) that not everyone has the ambition to acquire shares. This may be because of objections to the lock-up period or the financial risk involved, for example. Here, you should be aware that employees may also drop out. In general, our experience is that this is received very positively by employees, and they see it as an honour to start participating in the company.

Employee participation plan

Step 3: Determination of (renewed) financial structure

Depending on how the STAK (Stichting Administratiekantoor) structure is set up, it is advisable to also explore the possibility of reviewing the financial structure within the company. For example, it may be an interesting option to raise bank financing from within your company to take some liquidity out of the company and reduce the share value. This makes it more attractive for employees because the amount they pay for the certificates/shares becomes lower. Match Plan’s financing specialists will work with you to discuss the best option for your situation.

Step 3 - Determination of (renewed) financial structure
Step 4 - Valuation of the company
Employee participation plan

Step 4: Valuation of the company

To determine the value of shares, a valuation of your company needs to take place. Within Match Plan, we have a number of sworn Registered Valuators who specialise in the valuation of companies for this purpose. Having an independent valuation carried out is not only advisable to arrive at an accurate and independently determined value, you will also prevent a one-to-one discussion between you and the employees to be joined.

Employee participation plan

Step 5: Drawing up and signing contracts

Once the valuation has been carried out and discussed with the relevant employees, it is time for the contract phase. In this phase, the trust office foundation (STAK) is set up, the contracts are drawn up which include the value of the shares and the other agreements such as, for example, a ”lock-up period” (period that the employee has to remain in service at least) and rules regarding the entry of new entrants and retirement. This is laid down in so-called ”terms of administration”. Match Plan’s legal and financing specialists will discuss with you the best option for your situation.

Step 5 - Drawing up and signing contracts
Step 6 - Transfer of shares
Employee participation plan

Step 6: Transfer of shares

This is the final step in the journey, signing the various agreements and toasting together to a successful future.

Trust office foundation (STAK)

The main advantages of employee participation through an STAK

To bind valuable employees within the company to the company by making them shareholders and sharing in its successes. This also ensures continuity within the company. As the legal ownership of the certificates lies with the trust office foundation (STAK) board, the shares cannot be taken with them when leaving employment.

Share certificates within the STAK can be transferred without the intervention of the notary, saving money and time.

Basically, the same rules apply to a STAK as a foundation. But since no profit is made in a STAK, there is no need to pay taxes or prepare annual accounts.

The share certificate holders within the STAK are not publicly registered with the Chamber of Commerce.

The voting rights over the shares lie with the STAK board and not with the depositary receipt holders. Thus, you sell shares but remain ”in control” of the voting rights within your company.

Main advantages of employee participation through an STAK
3 tips on setting up a trust office foundation (STAK)
Trust office foundation (STAK)

3 tips on setting up a STAK

To avoid discussion points relating to, for example; valuation, financing, interest, individual share percentage, repayment obligations and possible future entrants, it is wise to outline these clearly at the beginning of the process. This will prevent (unpleasant) discussions during the remainder of the process.

It is important to estimate the feasibility of the financing in advance. This will prevent employee disappointment if the financing turns out not to be feasible in practice. For instance, you can choose to lend money yourself via a private loan to your employees and/or ask the employees for a contribution of their own. It is also a good idea to think about the repayment structure early on.

Setting up a STAK professionally requires specialism. For instance, the value of the shares needs to be determined, legal contracts need to be drawn up and possibly financing needs to be raised. In addition, employees will have the necessary questions that you often cannot immediately answer yourself either. An acquisition advisor acts as an independent specialist in this process and guides you through the entire process. This ensures that the STAK is set up professionally and streamlined without any surprises afterwards.

Trust office foundation (STAK)

More information on setting up a STAK for your company?

Match Plan is an independent takeover consultant and assists companies through the entire process of setting up a STAK. We will guide you through all the above-mentioned steps. Would you like more information about setting up a professional STAK for your company? Our colleagues Leon Koorevaar and Niels Ansems will assist you during the entire process. Schedule a free consultation here.

More information on setting up a STAK for your company
Leon Koorevaar - Match Plan

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