| Tom Bloomfield
A Performance Rights Plan is a common employee equity plan used by companies to incentivise employees to reach specified performance targets and increase retention of high-performing staff. Key features of this employee share plan are described below.
Generally, a Performance Rights Plan is made available by companies to all employees globally.
Under the Plan:
All employee equity plans have certain obligations and conditions under the plan rules. With a Performance Rights Plan, these are commonly:
Vesting – employees must remain employed and meet their performance conditions at the vesting date to allow for the rights to convert into shares.
Dividends and voting privileges - dividend and voting privileges do not apply to the performance rights.
Leavers - For a good leaver (such as terminating employment due to redundancy), rights may be exercised into shares as at their termination date or held until the vesting date, then exercised. For bad leavers (such as an employee resigning or exiting because of misconduct or breach of employment contract), rights are forfeited.
It is important to obtain professional tax advice for any employee equity plan. Broadly, tax points to note under a Performance Rights Plan include:
BoardRoom has a dedicated Employee Equity Plan team that has extensive experience in manging Performance Rights Plans for companies of all sizes. If you would like to learn more about how the Performance Rights Plan or other employee share plans works and how we can help, please feel free to contact us.
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