Transfer of a company to employees on retirement

When there is no generational replacement, transferring the company to its employees can help secure the business’s continuity, as they are the ones who best understand how it operates.

In this context, an ESOP (Employee Stock Options Plan) may be considered. Under this model, the company creates a pool of shares to be allocated to key employees.

These allocations give employees the option to acquire company shares at a discount on the market price. This approach is also useful as a retention and incentive tool for key team members.

It is possible to make a gift to a person who works for the company and benefit from tax incentives even without any family relationship.

In Catalonia, a 95% reduction may be applied to the value of the shares received under the Gift Tax (ISD), provided certain requirements are met.

Requirements:

• The recipient must have an employment or service relationship with the company.
• They must have at least ten years of service.
• They must have performed management duties during the past five years.
• After the gift, the recipient must hold more than 50% of the company’s share capital.
• The donor must be over 65 years of age.
• The donor must cease their activity and stop receiving income from the company.

If the transfer takes place without an employee share ownership plan, the transaction is carried out through a direct sale of shares.

The seller must pay Personal Income Tax on the capital gain generated by the sale. This option does not create any tax cost for the buyer.

It is important to note that if the buyer is currently an employee of the company, their employment status and Social Security classification may change. A clear and detailed sale agreement is also essential, specifying the price, payment terms, guarantees, deadlines and any other relevant clauses.