“THE OPTION PRICE IS SET AT THE OUTSET AND CAN INCLUDE A DISCOUNT OF UP TO 25%, THUS MAKING THE DEAL MORE ATTRACTIVE.”
On the financial institution point, you need to secure the services of a savings carrier to hold participants’ savings for the duration of the plan. Most Irish banks and building societies are authorised to provide this service. With the necessarily preliminaries established, the plan then unfolds as follows: The employee agrees to have a fixed amount of their net salary from each pay cheque moved to a qualified savings account for the duration of the plan. In tandem with this, the company assigns options to the participant, based on the amount the participant has committed to save. The option price is set at the outset and can include a discount of up to 25%, thus making the deal more attractive, in that this would offset any potential loss in the event of the share price falling over time and adds to the profit if the share price increases. At the end of the agreed period – whether three or five years – the participant can use the accumulated savings to exercise some or all of the options available to them or they can choose to have their savings returned as a lump sum.
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