Trust model aligns company, key people goals


By Darin Tyson-Chan

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A peak performance trust (PPT) could be the most efficient structure to facilitate an employee share scheme as it allowed the employer more effective goal alignment and eliminated troublesome situations, such as minority shareholdings, according to a succession planning expert.

“A peak performance trust is a special kind of unit trust that usually has a corporate trust deed and receives contributions from the company,” Succession Plus chief executive Craig West told financialobserver.

“Those contributions are not about giving employees cash to take out to spend on individual assets, but instead are used to buy equity in the business.”

Under the arrangement, a company sets a profit benchmark and agrees to share a certain percentage of profits generated above this figure with its employees through contributions to a PPT.

The trust deed only enables the trust to invest in the said company's equities and cash.

The employer then invites employees to participate in the share scheme by allowing them to purchase units in the PPT.

“The peak performance trust owns the shares, and not the employees – this is important because it means the company will not have any minority shareholders in the form of its employees,” West said.

“Minority shareholders are a protected species in Australia and you have to be very careful what you do and don’t do with them.

“There are rules that protect them and the rules are there for a reason – to ensure they don’t get ripped off – but the peak performance trust allows these parameters to be managed in a much cleaner way.”

He said there was another advantage to a PPT structure.

“The other benefit is the PPT actually has a trust deed that has all the rules in it – entry, exit, reinvestment and dividends,” he said.

“All of that’s covered in the trust deed and prevents employers from having to rely on corporation law.”

For maximum goal alignment and medium to long-term goal achievement he recommended employers only included key employees whose departure would cause the most disruption to the business.

He added severe penalties should be incorporated to discourage an early exit from the scheme – such as leaving after only five to seven years’ involvement.

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