Employee stock ownership plans | In Principle

Employee stock ownership plans (ESOPs) allow a select group of employees (usually management) to take an equity stake in the employer by purchasing shares at a nominal value or a value determined in the programme. These plans are implemented over a period of several years, and a condition for offering shares is the company’s achievement of certain financial targets specified in the plan.

Participation in ESOPs may also be offered to employees of Polish companies by members of foreign groups whose shares are listed on a foreign stock market.

However, it should be borne in mind that if a foreign entity offers shares to Polish employees, there is still an obligation to enter the shares in the registry maintained by the Polish Financial Supervision Authority (KNF) after allocation of the shares.

This obligation is set forth in Art. 10 of Poland’s Public Offerings Act. Meanwhile, at the EU level, the Prospectus Regulation (2017/1129) exempts a company from the obligation to prepare a prospectus if it conducts an offering restricted to employees. At a minimum, the information document accompanying such an offering should contain information on the number and type of securities and the rationale and details of the offering or allotment.

The Public Offerings Act also mandates that the information document be prepared in Polish.

Entry of shares in the registry

Employee shares must be entered in the share registry. These records are public, and are kept in electronic form. To register new shares, the company must obtain access to the application from KNF.

The shares should be entered in the registry within 14 days after allocation. Thus, the company must request KNF for access to the application early enough to meet this deadline.

If a public offering of shares is conducted on a rolling basis, entries in the registry may be made within 14 days from the date of allotment or transfer of shares, i.e. the last day of the time interval (of no longer than 6 months) specified by the company issuing the shares.

For their own part, employees who acquire shares in a foreign company need to become acquainted with the relevant rules on taxation of dividends and capital gains on the sale of shares, also bearing in mind the relevant tax treaties.

Grzegorz Wojnar, Capital Markets and Financial Institutions practice, Wardyński & Partners