Finding a suitable equity incentive structure for companies can be very daunting and overwhelming for business leaders. There are several reasons, including all the different tax rules, the various alternative incentive structures, uncertainty about which terms to choose, the risk of making mistakes, the high costs and time involved, etc.🤯 🤯
The reason there is no single recipe for a structure that works for everyone is that the desired effect, cost, risk and tax considerations need to be considered in the context of each specific case. As a result, we see many companies spending a lot of effort trying to understand this before they end up with a high legal bill. Unfortunately, without always taking into account all the necessary business development considerations.
The point is that there is a straightforward approach that can be used to arrive at an optimal structure for each company. You don't have to reinvent the wheel every time, but you should make some important choices in the process. After working on this issue with several companies and lawyers, Unlisted has developed and refined a methodology that helps clients achieve the optimal structure for each company.
Employee share incentives are often a key contributor to the success of companies. It can help recruit, motivate and retain talent. For some, it can help create a more meaningful workday, create an "us" culture, and research shows that employees can experience an effect of increased belief in the company. There is a reason why mature ecosystems have refined these structures over time and have extensive use of equity incentive programs. Silicon Valley, for example, is a prime example of this.
Unlisted wants to take this successful recipe to Norway and has brought models pioneered in "Silicon Valley" to Norway and adapted it to Norwegian conditions and rules.
Through the carefully selected process, we carry out a mapping and clarification of expectations, among other things. Then we optimize a structure based on the desired effect, tax, cost and risk for both the company and the employees. It is also important to take into account several and often unexpected eventualities.
Going through such a process can avoid the consequences of not doing a proper assessment. Those consequences can include creating a structure that does not suit employees, one that creates frustration, one that is not practicable either because of the high cost, high taxation at the wrong time or too much risk for employees. It may also have negative consequences for companies, which may incur unnecessary costs, additional social security contributions and liquidity problems or a high risk of ending up with passive owners.
The optimized process developed by Unlisted takes these elements into account in combination with best practices. It allows companies to put in place a good and customized structure in a very cost-effective and time-saving way.
In addition to helping companies put in place an optimal structure, Unlisted has developed a software to easily implement and manage various incentive schemes. The software helps management with time-consuming administrative processes, offers dashboards with a full overview of ownership, dilution effects, documentation etc. At the same time, the software provides employees with a motivation dashboard and full insight into their agreements. Lawyers claim that in addition to providing a full overview, the software can save up to 10% of the CEO/CFO's time when used in growth companies. We will cover more details about the software in a separate blog post.
Unlisted takes into account both the profitability, accounting and legal aspects of such a process. We work with lawyers for document delivery and software validation.
If your company is considering introducing some form of share incentives, or would like better insight and easier management of existing agreements and ownership in general, get in touch for a no-obligation chat.