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Frequently Asked Questions & Glossary of Terms This section seeks to answer, insofar as is possible, the questions that are frequently asked by participants in relation to the ESOP. It is intended to assist participants in understanding the ESOP and the provisions of the legal documentation, but it is not intended to replace or override or to be a legal interpretation of it. The information below reflects current legislation and tax regulations, both of which are subject to change. If you require legal or financial advice or have any doubt about how the ESOP impacts on you, you should consult an appropriate professional adviser.
Q1. Who was eligible to participate in ESOP? A: All employees of ESB and its wholly owned Irish resident subsidiary companies were eligible to participate, i.e.
Q2. Who qualified for Notional Allocations? A: You had to be continuously employed during the following 12 month periods to be eligible for each share allocation and to have signed a Contract of Participation :
Q3. What is the maximum share allocation? A: The share allocations are as follows:
*Re-allocation of deceased beneficiary shares on pro-rata basis in December 2008
Q4. Did employees who retired or ceased employment between 1998 and 2001 receive their entitlement for that period? A: Yes, the shares were notionally allocated as if the scheme had been established in 1998. Participants who are no longer employed with the ESB Group will be required to begin selling their shares 3 years from the later of, the date of leaving or the date of appropriation of those shares, if they have not already done so by then.
Q5. How were part-time, temporary and job-sharing employees treated? A: All such employees or ex-employees who met the eligibility requirements were treated on the same basis as all other eligible staff.
Q6. How were employees on special leave with pay treated? A: All employees who met the eligibility requirements who were on special leave with pay were eligible for notional allocations. This also applied to employees on parental leave under the terms of the Parental Leave Act 1998.
Q7. How were employees on special leave without pay treated? A: Employees on special leave without pay did not receive notional allocations in respect of the period when on special leave.
Q8. How were employees on career break treated? A: Employees on career breaks did not receive notional allocations while on career break.
Q9. If I retire will I have to sell the shares? A: You will be required to begin selling your shares on the third anniversary of the later of, the date of leaving or the date of appropriation of those shares, if you have not already done so at that date.
Q10. What if I chose to take part in ESB's voluntary severance programme? A: If you left ESB as part of a voluntary severance programme you had an entitlement to a notional allocation of shares for the period up to and including the date of your departure from full-time employment. There was no further entitlement to notional allocations once you left ESB Group.
Q11. What happens if I die in service? A: Where your shares have already passed into the APSS, the sale of the shares by your personal representative (e.g. executor) will take priority in the internal market. Where the shares remain in the ESOT and have not yet been appropriated to you, i.e. have not yet passed into the APSS, then your personal representatives, where you have notional allocations, will receive payment in lieu based on the value on the allocation to date less your share of any borrowings.
Q12. Who manages and administers the ESOP? A: The ESOP is managed and administered by a company set up for the purpose, known as the ESB ESOP Trustee. The Trustee has a duty to act fairly and in the best interests of all participants, and is independent from both ESB and the Group of Unions. Decisions of the ESOP Trustee are made by its board of seven directors. Four of these directors are nominated by the Group of Unions on behalf of the employees, two are nominated by ESB, and there is an independent professional trustee who will also act as chairperson. In addition, there is one alternate (substitute) director for the Union directors and one for the company directors.
Q13. What is the role of the ESB ESOP Trustee? A: The role of the ESB ESOP Trustee is to:
Q14. Does the ESOP have a representative on the Board of ESB? A: The ESOP is entitled to have one ESOP representative on the Board of ESB. This position may be rotated between the four existing Worker Directors. The ESOP representative must consult with the Trustee Board before taking positions in his/her capacity as ESOP representative.
Q15. Will I receive dividends on my ESB shares? A: Any dividends received on shares while they are in the ESOT are income of the ESOT. The Trustee decides what to do with these dividends. They can be used for a number of qualifying purposes, set down in legislation, including payment of administrative expenses, repaying borrowings, if any, or paid out to participants of the trust. Any dividends received by participants will be liable to income tax. Once shares have been appropriated to individual participants, any dividends received on the shares are income of the individual participants.
Q16. Are there voting rights attaching to the shares? A: Shares held by the ESOP (whether allocated or appropriated) carry voting rights. While shares are held in the ESOT the ESB ESOP Trustee exercises the voting rights attached to the shares. In circumstances where shareholders are required to vote, if the issue is of material importance, participants will normally be asked to indicate by ballot their voting preference if there is sufficient time to do so. The ESB ESOP Trustee, then, exercises the block vote in accordance with the majority preference expressed. Once shares have been appropriated to individuals, the ESB ESOP Trustee is no longer entitled to exercise voting rights with respect to those shares unless you choose to appoint it to do so. Otherwise, the voting rights will then rest with the individual participant. The ESB ESOP Trustee will continue to exercise voting rights attached to the unappropriated and undistributed shares still held in the ESOT.
Q17. When will I be able to sell my shares? A: Once appropriated, shares may be traded on the internal market.
Q18. Can I use the Notional Allocation as security for a loan? A: No, as you do not have a legal or beneficial entitlement to the shares until after appropriation, they may not be used by you as security for loans.
Q19. Do I have to pay tax on the shares? A: The ESOP was designed specifically to minimise the amount of tax you will have to pay on your shares. You should refer to the section below for a summary of the tax implications of the ESOP. What are the Tax Implications? The ESOP has been designed to facilitate the release of shares to participants in the most tax efficient manner. While it is acknowledged that each participant's individual tax circumstances may differ significantly, this section provides an analysis of the general tax consequences of each stage of the ESOP process. The following applies to all Irish tax resident participants. Under current tax legislation, and provided that the appropriate tax rules are complied with, there should be no Irish income tax to pay on any shares received through the ESOP. A brief summary of the tax position is set out below.Tax Liabilities and the ESOP Process
Capital Gains Tax Liability on Disposal of Shares A liability to Capital Gains Tax (CGT) may arise on the disposal of shares. CGT is calculated based on any gain made on the sale. The gain is calculated as the difference between the sales proceeds and the value of the shares on the date of appropriation, applying an indexation formula. The current rate of CGT is 25%. Each individual has an annual CGT allowance (currently €1,270) which can be set against any gains from the disposal of assets, (including shares) in that tax year for the purposes of calculating CGT. Participants may also be eligible for other deductions or loss relief depending on their personal circumstances.
Q20. How will the internal market work? A: The ESOP Trustee will establish an internal market for buying and selling the shares. The market will operate on an annual basis. Each participant in the ESOP will be entitled to buy up to seven times the maximum aggregate notional allocation of shares made under the plan. Trading will take place on a fixed "market day" in the year, and participants will be notified well in advance of the date, as they must register their interest as a buyer or seller ahead of the closing date. Trading on the internal market may only take place after shares have been appropriated.
Q21. How much are my shares worth? A: Beneficiaries are unable to sell notionally allocated shares and this means that it is not possible to provide a valuation of the shares at this time. A formal valuation of the shares will take place at, but not before, appropriation. You should, however, be aware that the value at appropriation may not be the value you receive when the shares are sold on the internal market.
Q22. How do I get more information? A: Questions may be sent by e-mail to: esop@esb.ie
Appropriation The formal setting aside of shares for individual participants in the APSS. Although the shares may remain in the ESOP after appropriation, the legal ownership and entitlement has transferred to the individual participant. APSS Approved Profit Sharing Scheme - a trust established under tax legislation which will receive the shares from the ESOT and will appropriate shares to individual participants. Contract of Participation The contract which an employee must sign and return in order to be eligible to participate in an ESOP. ESOP The Employee Share Ownership Plan - the overall scheme, designed to hold and transfer the ESOP stake to the participants through the ESOT and the APSS. ESOT Employee Share Ownership Trust - a trust established under tax legislation to acquire and hold the shares on behalf of participants. Forced Sales Applies to situations where participants will be required to sell their shares within a specific time frame, e.g. due to death or cessation of employment. Notional Allocation The 'earmarking' of particular shares in the ESOT for individual participants according to an agreed formula. Notional allocation does not give an entitlement to any shares so allocated to participants. Participants Employees who completed an agreed qualifying period of service with the company, and who signed and returned a Contract of Participation. Retention Period The period during which the participant is required to allow his shares remain in the ownership of the Trust. Shares ESB is a statutory corporation not a company established under the Companies Acts 1963-2000. The statutory corporation's equivalent to fully paid ordinary shares is fully paid Capital Stock. Trust Deeds The legal documents agreed by ESB, the Group of Unions and Government Departments and approved by the Revenue Commissioners, setting out how the ESOP is to operate. The Trustee is bound to act in accordance with the provisions of the Trust Deeds. Trustee ESB ESOP Trustee Limited acts as Trustee of both the ESOT and the APSS. |
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