Various forms of staff profit-sharing

Staff profit sharing affords the appropriate tool for the attainment of every kind of corporate goal. In addition to legal and taxation factors, for the choice of a profit-sharing model, considerations of staff policy are also decisive, which is why competent consulting is indispensable.

Indeed, it is possible to devise a profit-sharing scheme in the form of outside capital participation (loans, bonds) or in the form of a full-company participation (corporate stock, limited partners’ or private limited company shares), but, generally, what is also recommended for staff profit-sharing is the use of mezzanine forms of participation as the optimal type of financing instrument, in particular, in the legal form of the special dividend right equity interest and dormant equity interest.

In addition to the well known advantages of mezzanine capital, for the company – treatment as outside capital in tax law terms, balance-sheet treatment as equity capital – this form of participation for staff profit-sharing also suggests itself because, at all events, the entrepreneur only grants its staff limited rights to collaboration and information and so can remain ‘master of the house’. However, because the staff are involved in the company’s success, some very considerable effects will be achieved in terms of the economy of staffing.