Brendan Dowling, Managing Director - Jersey, highlights how our employee incentives team were able to maximise cost savings for our global client through a structured share purchase.
Our client
Our client is a global natural resources company with over 90,000 employees and c. US$10 billion EBITDA. We administer an employee share trust for the client and provide the corporate nominee facility for international employees.
Challenge
The client had a significant number of employee share awards due to vest and we worked with them to explore ways in which they could meet their commitment in a cost-effective manner.
Our solution
Having evaluated a number of options, we agreed that we would enter into a structured share purchase whereby we as trustee of the trust purchased the shares over a 30-month period with the aim of ensuring the trust had sufficient shares to satisfy the awards vesting at the end of the award period.
The employee share trust, administered in Jersey, allows the shares that are purchased to be held in trust free of any capital gains tax which is beneficial to a UK plc trying to manage its future share award commitments. An irrevocable trading plan was put in place and the company had the plan approved at board level. Ocorian were not bound by close periods and executed the trading plan in an orderly manner ensuring not to affect the market.
Results
This trading plan was very successful as the price on the date of vesting was £13.45, significantly higher than the weighted average price of £8.42 which the trustees achieved through the trading plan. This led to a cost saving of £142 million for our client.
The treasury department and CFO of the company were very happy with the outcome and have rolled over the program again to now prepare for the next scheduled release.
Listed companies can significantly benefit from proactive management of their employee incentive arrangements and this is just one such example of how a Jersey Employee Share Trust can be beneficial.
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Whether setting up an employee benefit trust, introducing a new plan or transferring existing arrangements, we work with you and your advisers to maximise the effectiveness of your incentive arrangements.
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