Employee Stock Purchase Plans in SME

Rasmus Jensen & Mathias René Kristensen

Student thesis: Master thesis

Abstract

The purpose of this master’s thesis is to clarify opportunities and challenges regarding employee stock purchase plans in SMEs’. The theoretical view is amongst other things, based on the principal-agent. The theory is relevant for this master’s thesis because the stakeholders want their employees to make decisions in a greater extent of their interest to maximize the economic value of the company’s activities. Due to the Danish law, there are different opportunities for the tax payment for the employees, according to the chosen employee stock purchase plans in SMEs’. In relation to employee stock purchase plans, there are five methods: Shares, stock options, warrants, convertible bonds and phantom shares. Regarding the recognition and measurement of employee stock purchase plans, it will be considered as share-based payment. There are two types of share-based payment transactions: equity-settled- and cashsettled transactions, in which it must be considered differently regarding recognition in the financial reporting. The Danish Tax Agency have determined a new practice which is, valuation of the unlisted companies at market price, that must be made concerning employee stock purchase plans. It is possible for the company to use different methods in order to calculate a market price of the shares as well as any stock option and warrant granted. Actors of the Danish business community demand less complexity of legislation in order to the valuation of SMEs’. In this master’s thesis an analyzation will process the intention and application in the Danish business community of present legislation, in order to conclude if the legislation of employee stock purchase plans is appropriate for the SMEs’ in Denmark. In addition, there are identified opportunities and challenges which are investigated in the owner’s point of view. Advantages for the owner of the company are retention, greater productivity, attraction, liquidity etc. The challenges are complexity legislation in formality and valuation among others. The master’s thesis concludes that the present legislation in some way, might need changes to become more applicable as intended to SME, including startups, in Denmark. However, employee stock purchase plans assessed to be of great potential and, furthermore, reduce the inequality regarding SMEs’ opportunities to reach the capital market.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2022
Number of pages112