There are no specific regulations in the Cypriot legal system regarding employee ownership or profit-sharing schemes. Cyprus Companies Law, Cap. 113, provides that private companies limited by shares are restricted to 50 shareholders at any given time, this limit excludes current or past employees.
An employer can gift shares in their business to their employers or they can set up a share acquisition scheme to allow employees to acquire a stake in the business they work for or another company within the group.
The agreement or share acquisition scheme will determine the rights and restrictions which apply. There may flexibility to impose additional performance targets and conditions.
Shares offered to employee shareholders may be of any type and may carry a range of rights, including rights to dividends.
Depending on the tax bracket that the employees remuneration falls within, the right to receive dividends may provide tax benefits.
The share acquisition scheme will usually be made subject to restrictions, including leaver provisions so that the employee forfeits their shares when they leave the business.
Although an employee cannot be forced to dispose of their shares at an undervalue, the employer may well wish to set provisions which determine the disposal value when an employee leaves the company.
Employee shareholders maintain the rights provided by the Termination of Employment relating to the right to receive notice and compensation for unfair dismissal and right to receive payment from the Redundancy Fund. However, with regards to to the right to receive a redundancy payment from the Redundancy Fund, where the employee is a shareholder of a private company and is employed by this company otherwise than under a contract of employment or under such circumstances from which an employer employee relationship may be derived, the redundancy payment is calculated on a different basis. In such cases, the payment will be an amount equal to one percent of the employee`s weekly wage multiplied by 52 and by the number of years of employment.
How can we help?
The above is a brief outline of what share acquisition / option scheme is and some of the reasons for its implementing such a scheme. Before implementation it is vital to consider all the many variables. We can provide advice on the matters which should be considered and draft all necessary documents.
The above should be used as a source of general information only. It is not intended to give a definitive statement of the law.
If you have a query or wish to receive further information, please contact us using [email protected]