The Work for Equity for Innovative Startups, SRL, and SPA is a remuneration and incentive tool for employees, directors, and external collaborators of a company. It is an incentive plan that allows you to reward your work with shares or shares of the company.
With the work for equity plan, a company can pay part of the compensation by assigning quotas (or shares) of the company. In this way, the company reduces the financial burden to obtain the professional skills necessary for its business. Furthermore, the incentive plan favors a greater work commitment of the service providers and the alignment of their interests with that of the shareholders. The supplier, in fact, will be interested in increasing the company and, consequently, the value of the shares held.
The quotas (or shares) can be assigned immediately or gradually, making the assignment conditional on the maintenance of the relationship with the company for a specific period of time, in English vesting. This allows to retain and motivate the company’s collaborators. In particular, the beneficiaries must work with the company for a certain period of time to obtain the assignment of the promised shares.
There is no real work for an equity contract. A company can choose to pay any worker or collaborator with quotas, generally indicating this in the contract with which it regulates the employment relationship. However, the plan must be implemented at the corporate level, obtaining the approval of all shareholders and implementing a series of necessary obligations. Only once these steps have been completed can the shares be validly assigned to the individual beneficiaries.
When using work for equity plan
The work for equity plan can be used by both Spa and Sal, as long as the Sols are SMEs or innovative startups. However, it is not possible to use this tool for simplified Sols (or Sols).
The work for equity plan is specially designed for innovative startups and SMEs. In this case, in fact, as regards the taxation of the work for equity, a favorable tax and contribution regime is applied. In particular, for start-ups, the income deriving from the assignment of shares, quotas or other participatory financial instruments is not taxable for tax and contribution purposes. On the other hand, the ordinary regime applies in the event that dividends are distributed or in the event of the sale of the instrument.
The beneficiaries of the work for equity plan are mainly the external collaborators of the company (e.g. contractors, professionals, consultants with VAT numbers), employees, and administrators. The beneficiaries can therefore only be natural persons. For example, the first suppliers of a startup or the consultant who draws up the business plan are the typical subjects who agree to be paid with shares of the new company rather than with the ordinary cash compensation.
How plan, deliberations, assignment, and vesting work
To implement work for equity incentive plan, the shareholders’ meeting (or shareholders) must approve the plan and proceed with the consequent corporate resolutions. To do this, you need to contact a notary. Through our service, we will guide you in all the necessary formalities.
First, the company must create a pool of shares or stakes to be allocated to the plan. To do this, the company must have available reserves recorded in the balance sheet for a value equal to the share of the share capital to be allocated to work for equity. If there are no reserves available or the existing ones are insufficient, members can make a capital contribution for the same amount.
The next step is the allocation of allowances to the beneficiaries with an assignment letter. With this letter, the company communicates to each beneficiary the characteristics of the plan and the conditions for the transfer of the share. The allocation of shares can be immediate or deferred. In the latter case, the beneficiary gradually accrues the right to transfer over a period of time called vesting.
The company individually determines the duration of the vesting with the beneficiaries. In the event of termination of the relationship before the expiry of the vesting, the beneficiary is entitled only to a part of the quota, which depends on the duration of the relationship and is calculated with the following formula: (offer quota/vesting period in months) * months of duration of the relationship.
Furthermore, if vesting is foreseen, it is also possible to foresee a minimum period of duration of the relationship (or cliff). In this way, if the relationship ends before the cliff, the beneficiary will lose all the right to the share.
For example, the company can provide for a vesting period of 20 months for the assignment of 2% of the shares to a collaborator. If the employee terminates the relationship after 10 months, he is entitled only to a part of the quota, in proportion to the period that has elapsed. In this case, the share would be 1%. If a 12-month cliff is foreseen, however, the collaborator is not entitled to any fee.
What does the work for equity settlement model contain?
Our work for equity plan meets all legal requirements. The main clauses concern:
- Beneficiaries of the plan: to identify the categories of recipients of the incentive plan among employees, directors and collaborators of the company
- Vesting: to transfer the share to the beneficiary only after a certain period of time
- Bad leaver: to ensure that the beneficiary loses the right to the allocation of the share in the event of termination of the relationship for serious reasons
- Limits on transfer: to prohibit the beneficiary from transferring the allocated quota for a specific period of time
- Expenses: to choose who will pay the expenses and costs related to the transfer of the share
- Company data: the company name containing the name of the company, the registered office, details on the corporate bodies, etc.
- The portion allocated to work for equity: to specify the percentage of share capital to be allocated to work for equity
Once you have downloaded your document, we will guide you step by step to complete all the necessary subsequent tasks.
Information you need
All parts data are required to complete the document. If you don’t know where to find this information we will help you during the guided interview.
Remember that our interview does not generate a simple facsimile of work for equity for innovative startups, SRL and SPA. Based on your answers, the system automatically draws up a customized contract model for your exact needs, guaranteeing its legal correctness.
The document can be modified in all its parts without time limits. Don’t worry so if you don’t have all the information available during the interview, you can always enter it later.
- Employee incentive plan
- Work for equity contract or work for equity contract model
- Equity incentive plan
- Long-term incentive plan
- Stock incentive plan