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Entrepreneur who want to encourage their employees and have them share in the future value development of the company has several options for achieving that goal. They can, for example, grant employees a cash bonus (on the basis of the employment or management agreement) or allow them to participate in the company by means of shares, depositary receipts for shares, or options on shares or depositary receipts. The disadvantage of participation as a shareholder is that employees therefore also have the associated shareholder rights, including voting rights, the right to attend meetings, and the right to receive information. As a result, although employees will usually not acquire a controlling interest in the company, they will, for example, be able to complicate the shareholders’ decision-making process (in particular decision-making outside a meeting) and will be entitled to more information than the company generally wishes to give them. These objections do not apply in the case of a cash bonus or the granting of options for depositary receipts or shares (as long as the latter have not yet been exercised and no shares have yet been acquired).

The most common ways to enable employees to participate in a company will be briefly explained below.

Non-voting shares

A company can choose to issue non-voting shares to its employees. On the one hand, non-voting shares do not give the right to vote at the general meeting. On the other, apart from voting rights, they entail all meeting rights and certain approval rights (for example Section 2:216(8) BW) and veto rights (for example Section 2:231(4) BW) that affect their (profit) position. Because of these meeting rights, using non-voting shares will not always be an obvious step to take. Take, for example, an employer that wishes to allow dozens of employees to participate but which does not wish to involve all these employees in the meeting; or the situation in which one or more employees can be expected to complicate the shareholders’ decision-making process (after all, a decision cannot be taken outside a meeting without the consent of all those entitled to attend the meeting, see Section 2:238(1) BW). This can be avoided, however, by creating an intermediate holding company that holds the shares in question and in which the employees hold shares. Non-voting shares are therefore only recommended in cases where the influence of these employees at shareholders’ meetings is not undesirable.

Depositary receipts for shares

A company can also choose to issue non-voting shares to a trust office foundation [stichting administratiekantoor] (a “STAK”). The STAK issues depositary receipts for these shares simultaneously or immediately afterwards. The employees to whom depositary receipts are issued (or who receive depositary receipts from the STAK or one or more of the other holders of depositary receipts) only acquire an economic interest in the underlying shares. The STAK, which holds the shares in question for the account of the holders of the depositary receipts, is legally entitled to the shares and can exercise the associated control rights (and other shareholder rights). The entrepreneur is often himself the director of the STAK.

This remuneration variant is particularly common in the Netherlands because of the separation that it involves between economic and legal rights, despite the introduction of non-voting shares with the introduction of the Flex BV.

One of the disadvantages is that the issuing of depositary receipts for shares is a typically Dutch legal concept, about which foreign investors often know little or nothing. Another disadvantage is that, although the trust conditions may restrict or even exclude the transferability of depositary receipts, a restriction that goes beyond the restriction on the transferability of the underlying shares may have disadvantages from the tax point of view.

Share options

A company can also choose to grant options on shares. When certain milestones are achieved, the manager in question then receives a certain number of shares. The advantage of this is that – as long as the options have not yet been exercised – the shareholder has no voting or meeting rights. Options are often used internationally. These usually concern options on shares in order to benefit from a possible sale (the option is exercised before the exit).


If you want to know more about employee participation in a company, then please contact Marie-Louise Kneepkens. You can of course also contact one of the other lawyers in our Mergers & Acquisitions team.