The CFOO Centre Limited

28/02/2022

ESOPs (Employee Stock Ownership Plan) and Incentive Plans

An employee stock ownership plan (ESOP) is a type of employee benefit plan whereby an employee acquires equity in the Company.
The employer gives a certain percentage of the equity of the Company to the employee for negligible or lower costs which remain in the ESOP trust fund until the options vest and the employee exercises them or the employee leaves/retires from the Company or institution.

ESOPs have been popular in the Western world and are now gaining popularity in Asia and Africa too.
ESOPs and Incentive plans are qualified retirement plans, succession plans, a market for non-publicly traded stock and employee incentive programs.

The objectives
To create a variable pay structure for senior employees, incentivise them in line with Company’s performance and retain and motivate senior and critical human resources, to promote loyalty to the Company. ESOPs have proven to be of immense value aimed at improving the overall workings of the Company and increasing the value of shares by involving equity holders, who are also employees, in the performance of the Company. These plans provide benefits to employees based on the value of the Company (Company’s equity value) and, in so doing, provide a powerful equity incentive that motivates employees to grow the value of the Company.

The mechanisms
Under these plans, options are granted to employees, giving them the right, but not an obligation, to purchase or subscribe at a future date the shares underlying the option offered by the Company at a pre-determined price.

When considering implementing these plans, there are a number of deliberations the current shareholders need to take into account including granting of the options, vesting of options, exercising options, exit plans, termination of employment, death and total and permanent disability, non-assignability, the rights of an employee in eligibility, change in capital structure or corporate action, amendment or termination of the plan etc.

Obviously, these plans are not for every employer. However, they may be the right fit for shareholders who do not want to sell to a competitor, for companies that want to get their employees invested in the success of the company or for those who want to sell the company but also provide a retirement benefit for the employees. There are numerous reasons to consider these plans. Whatever the reason, do not pass by the ESOP and Incentive plan concept without consideration.

The CFOO Centre has been advising and helping prepare these plans for many organisations.

Contact us on +254-722-714-190 / [email protected] to speak to us on ESOPs and Incentive Plans.

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Feasibility Study

The CFOO Centre team has years of experience in undertaking feasibility studies for new businesses and projects including Greenfield. The feasibility study is the first stage of the project development process where many key pieces and information about the project and the proposed industry will be assembled into one overall analysis.

The feasibility study will by the end, show how well all of these pieces fit and perform together. The result of the feasibility study will be an overall assessment of whether the proposed business concept is economically feasible.

Our methodology

The feasibility study would be an analytical tool used during the business development process, showing how a business or project would operate under a given set of assumptions. These assumptions would include the following broad factors;

Manufacturing or service industry processes,
The facilities,
The equipment,
Capital needs,
Organisational people needs,
Working capital needs,
Volumes, cost of goods (COGS), wages, etc,
Marketing (prices, competition),
Technology,
Finance,
Legal,
Other considerations including PESTEL analysis and SWOT analysis
Feasibility studies help investors to discern the pros and cons of undertaking a business or project before they invest a lot of time and money into it or prevent investors from entering into a risky venture.

At the initial stages, a number of key businesses will be identified before the feasibility progresses to the next stages of the identification of one main line of business.

In this main line of business, some of the factors that would include the feasibility study would be the estimation and budgeting of;

Sales and sales programmes
Marketing costs
Raw material and supplies
Land and site preparation
Plant, machinery and equipment
Civil engineering electrical engineering works
Building structure costs
Cost of production
HR
Source of finance
Cash flows
Pre-operating expenditures
Working capital
Etc Etc
The feasibility study process could take up to 20 weeks or so of full-time work but a feasibility study is a very worthwhile exercise to get estimated overall costs and estimated revenues of the project.

Our engagement process is not a checklist of sorts but rather a tailor-made approach where we will regularly keep the client informed of the progress of the engagement.

Contact The CFOO Centre Limited to undertake your organisations' feasibility study needs.

www.cfoocentre.com

[email protected]

+254-736-515-168 and +254-722-714-190