The STAK plan is a tax efficient type of ESOP commonly used by Dutch companies. STAK (Stichting administratiekantoor plan) is a trust set up by the company to allow employees to own the so-called depository receipts (DRs). Put simply, DR-holders have financial rights of a shareholder without the decision-making powers.
First, the company transfers the company shares dedicated to the ESOP pool to STAK. Second, the STAK issues DRs to the employees. Formally, DRs are legal documents that give their owner the right to economic benefits linked to a specific number of shares in the company.
Employees typically receive options to buy DRs rather than actual DRs, which means they have to pay exercise price to convert their options to assets. The exercise price should correspond to the fair market value at grant.
The STAK plan is ideal for mid-sized to large Dutch startups but also works for other European companies.
DR holders have economic rights associated with shares but don't have any voting or other shareholder rights. These are held and exercised by STAK represented typically by the company’s founders.
Cap table effects
STAK owns the company shares and, for that reason, appears on the cap table as shareholder. As a result, the existing shareholders are diluted. On the other hand, the DR holders don't appear on the cap table.
Options to DRs aren't liquid assets. Liquidity comes into play when options are exercised and converted into DRs. At that point, the employee becomes entitled to dividends and can sell their DRs on a secondary market.
There’s typically no taxation at grant if the options to DRs are acquired for at least fair market value. On exercise, the difference between the current fair market value and exercise price is usually taxed as employment income. Income from sale of DRs is then taxed as capital gain.
1. About the plan 2. Asset type 3. Best for 4. Employee rights 5. Cap table effects 6. Payout 7. Taxation 8. Implementation steps 9. Pros & cons 10. Something extra
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