When Australian companies establish an Employee Share Plan (ESP), the trustee is often viewed as a compliance necessity, someone to tick the legal and regulatory boxes under the Corporations Act and ASIC guidance, while bearing the important responsibilities of holding plan shares on trust for the employees, acting according to the deed and plan rules.
However, the reality is that a trustee’s role goes far beyond meeting statutory obligations and merely managing the shares for the employees. A well-chosen trustee can help companies strengthen governance, enhance employee engagement, and ensure that share plans genuinely achieve their intended outcomes.
In this guide, we will explain the crucial role a trustee plays in an established employee share plan, their main responsibilities and, most importantly, the five unique benefits they can add to the plan.
What Is the Fundamental Role of a Trustee in an Employee Share Plan?
An employee share plan often requires a trustee to act as a fiduciary to manage the shares in the company on behalf of the employees. Their responsibilities include record keeping, transferring shares to employees, managing dividends, and handling loan repayments associated with the trust, ensuring the proper handling and distribution of shares to participating employees.
A trustee is particularly integral to the Employee Share Option Plans (ESOPs). As one of the most common types of ESPs set up through a trust fund structure, ESOPs grant employees options to acquire shares in the company over time at a fixed price. However, these options cannot be exercised until they vest, meaning employees must perform well, reach specific achievements, or meet certain conditions to earn the shares. Before the vesting process is completed, the trustee would hold the legal ownership of these shares on their behalf.
5 Value-Adding Roles a Trustee Plays
Beyond meeting regulatory requirements and executing the deed, a capable trustee can add significant value to the employee share plan by actively improving its day-to-day performance and long-term outcomes. The right partner not only strengthens governance but also reduces friction for the cooperation between HR and finance departments, helping employees experience ownership as clear, fair, and reliable.
Here, we outline five ways a trustee adds value beyond compliance in an employee share plan for your business.
1. Enhancing Employee Trust and Confidence
Employees are more likely to embrace a share plan when they know an independent trustee safeguards their interests. The trustee’s impartial role ensures that:
- Shares are held securely on their behalf.
- Allocations are managed transparently.
- Employees have confidence that their entitlements are protected, even if the company undergoes structural changes.
- Employee entitlements are managed without conflict of interest during major events, company sales, or M&A.
This independent review builds credibility and encourages greater employee participation.
2. Improving Governance and Oversight
Strong corporate governance is at the heart of every successful share plan. Trustees provide an extra layer of accountability by:
- Monitoring the use of shares within the trust.
- Ensuring allocations follow the company’s share plan rules.
- Acting as a safeguard against errors or misuse of trust assets.
- Maintaining auditable records mapped to board/committee approvals and plan rules, supporting Australian external audit and ASIC expectations.
This oversight not only keeps companies compliant but also strengthens their reputation with regulators, investors, and employees.
3. Streamlining Administration
Managing an employee share plan can be complex, tracking allocations, handling surplus shares, managing vesting conditions, addressing forfeitures, and processing employee exits. Setting up the share plans under a trust helps reduce the administrative burden by:
- Centralising record keeping of shares held in trust.
- Coordinating with registries and the company’s finance and co-sec teams.
- Handling the transfer or sale of shares efficiently.
For the Company, this frees up valuable time to focus on strategy rather than paperwork.
4. Supporting Tax and Legal Efficiency
Trustees play a practical role in helping companies navigate the tax and legal landscape. While they don’t provide financial or tax advice, they can:
- Ensure that trust structures align with ATO requirements.
- Manage distributions or dividends in a way that minimises risk.
- Provide accurate reporting to both the company and participants.
- Handle documentation and prepare the necessary annual statements required for tax-deferred share plans.
This reduces the risk of costly mistakes and helps ensure that share plan benefits are delivered smoothly.
5. Building Long-Term Shareholder Culture
A trustee isn’t just an administrator; they’re a partner in shaping the company’s culture of ownership. By ensuring the plan is run transparently and fairly, they help:
- Reinforce the link between employee contribution and company performance.
- Encourage employees to think like shareholders.
- Drive engagement and retention by making ownership meaningful, not just procedural.
- Coordinate Australia-specific communications, such as grant/vesting reminders, dividend notices and simple Employee Share Scheme (ESS) FAQs, to sustain engagement beyond grant day.
- Manage the share block and facilitate the proxy voting rights.
Over time, this contributes to stronger alignment between employees and the company’s long-term goals, as the trustee reinforces the idea of active ownership and deepens the sense of alignment with the company’s long-term strategy.
Conclusion
In Australia, compliance may be the baseline requirement for trustees, but the real value lies in what they deliver beyond that. From building employee confidence to strengthening governance and efficiency, a trustee can transform an employee share plan from a regulatory obligation into a powerful tool for engagement and growth.
For companies, choosing the right trustee isn’t just about meeting ASIC or Corporations Act requirements; it’s about finding a partner who can help unlock the full potential of employee ownership.
Choose Pillar Custodial as your trustee partner and experience the Pillar difference, where compliance is just the beginning and unlocking the true power of your employee share plan is our promise. Reach out to let us help you turn obligation into opportunity.
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