The differrence between profit sharing & depositary receipts
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Overview of profit sharing & depositary receipts
There are quite a few differences and similarities between profit sharing and depositary receipts. To help you make a choice, we've listed the most important points below.
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What does it mean?
PARs are similar to SARs, but instead of the increase in value of a share, the employee receives a cash amount linked to the company's profit.
Certificates of shares are financial instruments issued by a foundation administration office (STAK). This creates a separation between the economic rights (dividend) and the legal rights (voting rights).
How does it work financially for employees?
Employees receive a cash amount linked to the company's profit.
Certificates of shares allow employees to directly benefit from the increase in the company's value.
What about employee engagement?
Employees do not have a say in the company, so employee involvement is somewhat lower than with shares or share certificates.
With share certificates, employees have voting rights in a foundation that stands between the company and the employee. This means that employees do not have direct influence in the company, but rather it goes through the foundation (STAK).
What about tax implications for the employee?
The profit made by an employee is taxed as income.
When the employee buys shares below market value, the tax authorities consider the difference as income. Income tax must be paid on this amount.
What are the costs?
This is just a contract.
Setting up and maintaining a foundation is an expensive process for share certificates.
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