To attract and retain key executives in the company, employer can use company shares / options as incentives to encourage loyalty and commitment of core members, which commonly known as ‘Employee Benefit Scheme’. An Employee Benefit Trust (EBT) can be setup anytime (usually recommended established before listing or funding event) in holding shares / share options of the company. When the granted awards (i.e. the shares / share options) are vested, relevant employees would be entitled to receive the awards, exercise it and could receive cash after exercise.
In an EBT structure, the Executive is the settlor and/or beneficiary under the trust. While employees can be included in the scheme as beneficiaries. The establishment of the EBT is a simple and straightforward process, which normally entails the Trustee and the Executive executing a customised trust instrument. Formation can typically be completed in a short period of time.
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