BONUS DEFERRAL TRUSTSSeptember 5, 2016
Bashar Bazian, Middle East Head, discusses the benefits of using an Employee Benefit Trust (EBT) to hold and manage shares in line with the Central Bank of Bahrain’s regulation on sound remuneration practices.
THE BENEFITS OF USING AN EMPLOYEE BENEFIT TRUST (EBT) TO HOLD AND MANAGE SHARES
- Shares are held off balance sheet, therefore employees gain comfort knowing that the value accruing for their benefit has been ring-fenced away from the company’s books and potential creditors
- The company can avoid the cost of funding the share plan as shares are purchased upfront or over time to hedge against the potential rise in share price prior to vesting
- Having professional governance in place so that both the company and its employees can take comfort in dealing with a regulated and experienced trustee
- Acts as an employee retention and motivation tool to remain competitive and attract the best employees. Employee interests are aligned with shareholder interests creating a motivated working environment
- The trustee has a duty to act in the best interests of the beneficiaries within the powers of the trust deed and any plan rules. It cannot make decisions that would be detrimental to the best interests of the beneficiaries (employees) e.g. change plan rules retrospectively
- The company has the power to retain some control, for example the power to direct investment or invoke malus or clawback provisions
- The trustee is a single shareholder able to vote or waive their vote in accordance with the company’s recommendation rather than potentially hundreds of employee voters
- Where plan rules don’t enable dividends to be earned on unvested shares, dividends received into the EBT can be used to offset trustee and administration expenses
OUR SERVICES AND TECHNOLOGY
We are experienced in setting up and managing EBTs for the use of Bonus Deferral Trusts. Share Awards is our online system that we use and offer to manage EBTs of this nature.
The system enables us to accurately and effectively manage share-based employee incentive plans. It provides participants with real time 24/7 access to plan information via our highly customisable portal. Plan registration, transactions, reports and AGM voting can all be completed online. Documents can be shared, all activity relating to awards is tracked and participants have the ability to interactively model their financial position and maintain their personal details.
Bashar Bazian, Middle East Head
t: +973 1710 3471
m: +973 3943 3460