Giving shares to employees through offshore company - solution

jakonda

Active Member
Hello offshore guys,

Question: I am wondering which offshore structure I can use if I want to give away shares of my company to new/future employees.
In summary: A company [X] wants to give its employees a stake/share in the company, but it is very complicated and costly to do it in the country where my business entity is setup (continental EU).

Story: The side project I have “bootstrapped” and stared few months ago, showed interesting growth potential but at the same time it will require more people to join me on the board (I want to pay my future partners/co-workers with the shares of the company [X]). On the long term I want to have a CEO and a fully operational independent business so I can focus on other ventures.

The problem is that in my home country where company [X] is currently registered there isn’t any legal framework for so called “employee stock options programs” or anything similar. Besides that, giving employees any shares can be negatively impacted because of the implemented national tax laws (income tax), not to mention, that the process of giving employees any shares in the company is terribly complicated as well.

I realized that government consider giving/selling shares of the company as an income and if you do not pay income tax, you can be fined for a tax evasion. I am currently planning to give away 10-20% of the company to employees and look for a framework how to do it.

Idea: I was thinking to setup an offshore entity [Y] in Seychelles. Issue [Z] amount of shares (I think I will have the least hustle and bustle with accountants in Seychelles), then register some IP (intellectual property) assets on my offshore entity’s name. Afterwards offshore company [Y] will “re-capitalize” main company [X] with the IP assets and substantially become owner of it. As soon as I manage "to close" the ownership relationship I can then easily give away shares of company [Y] which trough this "bypass" represent the shares of the main company [X] and make employees a shareholders and business partners.

Now, I am asking you guys are there any other better idea/solution for this particular case? Should the structure be more complicated, including more layers (maybe a Trust company in between)?

Note: Closing company [X] and moving everything to offshore; Start everything form the beginning is not an option for me at the moment.

Thanks for your contribution and have happy summer !
 

Martin Everson

Offshore Consultant
Business Angel
The problem is that in my home country where company [X] is currently registered there isn’t any legal framework for so called “employee stock options programs” or anything similar. Besides that, giving employees any shares can be negatively impacted because of the implemented national tax laws (income tax), not to mention, that the process of giving employees any shares in the company is terribly complicated as well.
What home country is this you are referring to?

Assuming the company has a bank account in a CRS country what difference would a Seychelles company, trust, foundations etc make? You could look for a bearer share company on some south pacific atol and operate with no bank account I suppose.

Otherwise I would be interested in the country that sounds very aggressive in treatment of share ownership ns2
 

jakonda

Active Member
"You could look for a bearer share company on some south pacific atol and operate with no bank account I suppose."

Sounds interesting I found this "A Bearer Share Corporation is a corporation that is owned by whoever is in material possession of shares. Bearer shares are negotiable without endorsement and transferred by delivery. Accordingly, no record of ownership is maintained."

... are we on the same page Martin?
 

Martin Everson

Offshore Consultant
Business Angel
Yes that is correct.

However, bearer share companies are all but blacklisted by banks due to potential for concealing true ownership. Forget about trying to find a decent bank for such company in 2019 also.
 

mange38

New Member
@jakonda perhaps you can open a UK LTD with the d.o.o. as a subsidiary. This is how Infobip works.

Due to the EU Parent-Subsidiary Directive, there should be no withholding tax.
 
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