Employee Share Schemes
At Lotus Amity we are engaged by clients and advisors to prepare valuation reports for Employee Share Schemes (ESSs).
ESSs are created to allow ownership of company shares by employees either:
- through a beneficial interest in a share, or
- through a right to acquire a beneficial interest (Employee Share Option Plan or ESOP).
Market values of the ESS interests to be transferred are often requested for ATO reporting requirements.
Experience
Previous valuation engagements for ESS purposes include:
- Valuation of the shares in a tech start-up providing a marketplace for auto services. ATO compliant valuation report provided in relation to a buy-back of ESS Shares and to issue new ESS shares. Lotus Amity analysed monthly revenue and profit by service, vehicles under management, customer subscription agreements, working capital, shareholder loans, contingent liabilities and internal share transactions and adopted an income and market approach.
- Valuation of the ordinary shares in a superannuation management, administration, advisory and promoter group. Valuation prepared to assist in the valuation of the options per the employee share option plan. The group included recent business acquisitions, preference shares, options, convertible notes, recent capital raises and more than a hundred shareholders. Lotus Amity analysed the investment and management agreements, the business acquisitions and capital raises, preference share terms and share transfers, past and forecast FUM, revenue and profitability, expense composition, cost reduction strategy and industry benchmarks. To value the business, post-acquisition proforma revenue, margins and liquidity and discounts rates were modelled using a DCF income approach and guideline publicly traded companies, comparable transactions and prior transactions were considered under a market approach. To value the ordinary shares, the values and impact of the preference shares and options were modelled and deducted.
Per the ATO, the rules in Division 83A of the Income Tax Assessment Act 1997, which deal with ESS interests acquired under an ESS, do not define market value. Nor do they prescribe any method for determining the market value of a listed share acquired under an ESS.
Market value is therefore given its ordinary meaning, for which the principles in case law and the International Valuation Standards Council (IVSC) are principally relevant.