INDONESIA Law and Practice Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
5. Employment Incentives 5.1 General
4.2 Tax Treatment Please refer to a tax adviser on this matter. 4.3 Government Endorsement The OJK has prepared clear initiatives through its 2024‒28 roadmap for venture capital companies. Some initiatives may be counter-productive, as the OJK introduced more stringent requirements for equity and corporate governance, which may reduce the number of new venture capital com - panies – even though this will, in return, increase the oversight and financial soundness of venture capital companies. Further, the participation of several state-owned enterprises in the venture capital industry (such as the previously mentioned state-backed ven - ture capitalists) could be seen as government initiatives to increase the level of equity financ - ing activities, from the perspective of both the funding amount and portfolio’s post-funding life. Those venture capitalists manage the funds from companies listed among the largest asset own - ers in Indonesia. Moreover, state-backed ven - ture capitalists would be able to integrate their portfolios into their ecosystems with access to the wider market. Through this collaboration, several achievements can be attained, such as: • the public can enjoy services according to their needs; • portfolios can grow, leading to subsequent fundraising activities until they become profit - able companies; and • investors can experience economic benefits from the investments made. Ultimately, the government can indirectly play its role as a facilitator for boosting economic growth.
Performance-based incentives include offering management/founders stock grants that are tied to company performance. Vesting schedules, where ownership accrues over time, can also encourage key individuals to stay longer to fully benefit from their equity. Key employees may also be bound by other incentives tied to long- term employment, such as tenured bonuses and leaves. 5.2 Securities The implementation of an Employee Stock Option Programme (ESOP) remains the most- used tool to engage employees’ long-term com - mitment to the company. Commonly, the ESOP is issued with a vesting period requiring the ESOP holder to stay with the company for a cer - tain period of time to receive the shares option in full (usually four years). Moreover, the ESOP is used to incentivise the intended individuals to grow and develop the company so that their stakes resulting from the ESOP exercise will be worthy. For those individuals owning shares in the com - pany (usually the founders), their shares are commonly tied to the reverse vesting provision under the company’s shareholders’ agreement. The reverse vesting provision works in the oppo - site way to an ESOP, whereby the company has the option of repurchasing some of those shares if the intended shareholder (founder) leaves the company during a predetermined period. The duration that the intended shareholder (founder) is required to stay depends upon the company – although, as per ESOPs, the most common requirement is a period of four years.
271 CHAMBERS.COM
Powered by FlippingBook