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.

  • Full time employees, apprentices, job sharers, part time staff, regular reduced hours staff, temporary and fixed term employees;
  • Employees of ESBI and other wholly owned Irish subsidiaries of ESB.

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 :

Allocation Pool Qualifying Period
1998 6 April 1997 to 5 April 1998
1999 6 April 1998 to 5 April 1999
2000 6 April 1999 to 5 April 2000
Apr 2001 6 April 2000 to 5 April 2001
Dec 2001 1 January 2001 to 31 December 2001
2002 1 January 2002 to 31 December 2002

Q3. What is the maximum share allocation?

A: The share allocations were as follows:

Pool Maximum number of shares notionally allocated
1998   1,850
1999   2,270
2000   2,945
Apr 2001   2,258
Dec 2001   1,467
2002   1,012
Re-allocation*      159
Re-allocation**      126
Re-allocation***      191
Total:
12,278

*Re-allocation of deceased beneficiary shares on pro-rata basis in December 2008
**Re-allocation of deceased beneficiary shares on pro-rata basis in August 2011
**Re-allocation of deceased beneficiary shares on pro-rata basis in October 2016

Q4. 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.

Under the rules of the ESOP, all participants who are no longer employed in the ESB Group (ESB or any of its wholly owned Irish resident subsidiary companies) become Forced Sellers and are obliged to sell their appropriated/purchased shares over a period of time.  This rule applies to all ex-employees – i.e. those who have retired, who have resigned or who have left on VSS.

Q5. 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 will receive payment in lieu based on the number of shares and the Internal Market sale price.

Q6. Who manages and administers the ESOP?

A: The ESOP is managed and administered by a company set up for that 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, each group of directors may appoint one alternate (substitute) director.

Q7. What is the role of the ESB ESOP Trustee?

A: The role of the ESB ESOP Trustee is to:

  • make all the day to day decisions about the management and administration of the ESOT and APSS;
  • act on behalf of the participants by voting at Company shareholder meetings
  • calculate notional allocations based on the information provided by ESB;
  • maintain a register of participants;
  • communicate with participants, including issuing statements of shares held on an annual basis;
  • arrange any authorised borrowings and repay loans;
  • receive dividends and apply them accordingly;
  • comply with the Revenue Commissioners' requirements;
  • keep records and accounts;
  • take independent advice when it is appropriate;
  • if relevant, pay cash sums to the personal representatives of deceased participants;
  • manage the transfer of shares to the APSS;
  • appropriate the shares from the APSS to individual participants;
  • operate the internal market.

Q8. 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. The ESOP representative must consult with the Trustee Board before taking positions in his or her capacity as ESOP representative.

Q9. Will I receive dividends on my ESB shares?

A: Once shares have been appropriated to individual participants, any dividends received on the shares are income of the individual participants and will be passed on to you as soon as practicable.  Any dividends received by participants will be liable to income tax and USC.

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 distributed to participants of the trust.

Q10. 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.

Q11. When will I be able to sell my shares?

A: An Internal Market Day will be held annually. Appropriated shares may be traded on the internal market.

Q12. 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

Stage of ESOP process Tax Implications for participants
When shares are held in the ESOT None
ESOT receives dividends None
If the participant receives cash distributions from ESOT Income Tax and USC on any cash distributions received
When shares are appropriated to participants through APSS (up to current tax limit, €12,700 per annum) None
Participant receives dividends following appropriation Income Tax and USC on any dividends received
When shares are released out of the APSS None - provided the shares have been held by the ESOP for the required period
When a participant disposes of his or her shares following release
Capital Gains Tax on any increase in value of the shares from the date of appropriation (see below)

 

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.

The current rate of CGT is 33%. 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.

Q13. How do I sell my shares?

A: An internal market has been established for buying and selling appropriated shares. The market operates on an annual basis.  Each current employee participant in the ESOP is entitled to buy up to seven times the maximum share allocation (currently 7 x 12,278 = 85,946 aggregate share limit).
Trading takes place on a fixed "market day", and participants are notified 30 days in advance of the date.

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Q14. How do I contact the ESOP?

A: You can contact the ESOP Office in any of the following ways:

Telephone:   (01) 702 7970
E-mail:         esop@esb.ie
Website:       www.esbesop.ie
Post:             ESB ESOP Office, 43 Merrion Square, Dublin 2, D02 R997

Glossary of Terms

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 specified 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 the required qualifying period of service with the ESB Group (ESB and Irish resident wholly owned subsidiary companies), and who signed and returned a Contract of Participation.

Retention Period

The period during which the participant is required to allow his or her shares remain in the ownership of the Trust.

Shares

ESB is a statutory corporation not a company established under the Companies Acts 2014. 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.




   
Copyright © ESOP 2008    ESB ESOP Trustee Ltd. Registered in Ireland at 43 Merrion Square, Dublin 2. Registration Number: 351161