“SCARRABELOTTI recommends remuneration funding as the most effective method of financing Division 13A Exempt and Deferred share plans; these are then reallocated to the share plan which acquires shares on behalf of employer.”

Aequum Managing Director
Gary Scarrabelotti

Employee benefits  …

'“By investing pre-tax dollars in the ESOP, employees acquire (depending on their marginal tax rate) up to twice the number of shares they could have purchased using post-tax savings.”

Employer benefits ...

“Remuneration funding means, for the employer, a tax deduction to the company for every dollar contributed to the ESOP”

Division 13A Share Plans

Funding '13A' Share Plans

How the plans work

Alternative ESOP Funding Mechanisms

Loan Plans

ESOP Leveraging

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ESOP Leveraging

This is the most powerful way to fund a share plan. It is also the original way in which ESOPs were designed. The idea is for the ESOP to borrow funds from a third party and with these to acquire shares in the employer’s company on behalf of the participating employees.

The Leveraged ESOP is the most powerful ESOP type available.  It is new to Australia, but common in the UK and USA.

Because the ESOP is ‘leveraged’ it is very effective for buying employees a significant stake in the firm and paying for it in a comparatively short time. 

The leveraged ESOP is an ideal tool for an employee buy-out or buy-in.  It is well suited to ‘succession planning’ providing retiring owners a way of selling the business to their employees.

This is how a Leveraged ESOP looks: 

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