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ESOP/VSOP: Why the size of the shares is not that important

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ESOP/VSOP: Why the size of the shares is not that important

Easy Esop experts: Kolja Czudnochowski and Dr. Christopher Hahn Collage: Dominik Schmitt with photo from ESOP Direkt

How is the value of my employee shareholding determined? One might initially think that it is due to the size of the investment, i.e. the number of shares, and the selling price of the company. However, there is a third factor that ultimately determines whether and how much a beneficiary will receive in the event of an exit.

About the “Easy ESOP” authors:

The authors Kolja Czudnochowski and Christopher Hahn deal with the entrepreneurial, corporate law and tax law opportunities and challenges of employee participation. They have in common with ESOP Direct also founded a company that supports startups and SMEs in their implementation. On Gründerszene they regularly explain various aspects of ESOPs and VSOPs.

Kolya Chudnokhovsky is a (serial) entrepreneur, angel investor and co-founder of ESOP-Direkt. Concepts for fair and economically attractive incentives for employees were close to his heart early on. When introducing our own participation programs, he observed that inadequate advice, a lack of transparency and serious errors in the implementation of participation programs were no exception. At ESOP-Direkt he is responsible for the further development of the project and its offerings and is in close contact with startups and SMEs.

Dr. Christopher Hahn is a founding partner of trustberg, lawyer, business angel and co-founder of ESOP-Direkt. As a lawyer, he focuses on corporate law, M&A and venture capital. Christopher Hahn has been an expert in the field of employee participation for several years and, among other things, wrote the standard work “Virtual Employee Participation” for Springer Gabler. At ESOP-Direkt he is responsible for corporate development and the design of the investment programs.

For modern companies, employee share ownership in the form of ESOP or VSOP is an effective means of attracting, retaining and motivating talented and experienced employees. This is primarily done by making them “co-shareholders” in order to achieve common goals: maximizing the company’s value for a possible sale – or striving to maximize profits for a possible profit distribution.

So far so good. Ideally, if an exit occurs, everyone involved will be happy. In reality, however, the joy usually varies in intensity because, despite an objectively successful sale, not all employees necessarily receive the same amount. What’s behind it?

The base price is crucial

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