Considering Employee Partnerships in a Private Company: What Are the Pros and Cons?

Hi Friends,

We are a Private Limited company with over 50 employees (50% Exec and above and the balance is support staff like peons and drivers, etc.) spread over four locations in India. Many of our employees have served the company for long periods through its thick and thin.

Lately, we are contemplating making our employees partners in the company. This is both in view of recognition of their services and also to infuse new energies into operations. The ultimate aim is to allot them equity when we hit the jackpot and get into a JV with a suitable partner. Since presently we do not have shares being a private outfit, what are the views on making them partners in a closely held company?

I know there are many connected issues, and the topic will have many angles to consider. I invite the comments of all to raise all possible issues so that we can arrive at some solid conclusions.

Thanks all. This is a great place to hang out and learn fresh perspectives.

Keep Smiling,
Kumar Kant

Hi,

The general pattern of giving ESOPs to employees in closely held companies is based on the valuation of the company, book price of the share (notional), and the percentage of shares you want to give to your employees based on certain parameters that you set. It is an elaborate exercise and requires a lot of information and discussions.

Daleep

Hi,

There are many legal parameters to be considered, but for the organization to opt for ESOPs is one of the best strategies to retain its employees. It will make employees think as employers. There is always a sense of ownership that gets created among the employees with the ESOP option. Then it becomes only natural for them to contribute.

Regards,
Vidhyaa