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 will be eligible to participate in ESOP?
A: Subject to satisfying the relevant 12 months continuous service criteria, all employees of ESB or any wholly owned Irish resident subsidiary company participating in the ESOP will be eligible to participate.
Q2. How do I qualify for an ESOP Notional Allocation?
A: To qualify for an ESOP Notional Allocation you must have both:
- 12 months continuous service with the ESB Group on the Notional Allocation Date for the particular Notional Allocation concerned; and
- completed and returned a signed Contract of Participation to the ESOP Office by the specified date.
Q3. Will I receive dividends on my ESOP 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 held in the ESOT are income of the ESOT. The Taxes Acts and the Trust Deed set out what the Trustee can do with this income. It can be used for a number of qualifying purposes, set down in legislation, including payment of administrative expenses, repaying borrowings, if any, acquiring shares or distributed to participants of the trust.
Q4. When will I be able to sell my shares?
A: An Internal Market Day will be held annually. Appropriated shares may be offered for sale on the internal market through a dedicated market portal. A valid email address must be held on the register to ensure access to the market portal.
Trading takes place on a fixed "market day", and participants are notified 30 days in advance of the date.
Q5. 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.
This rule applies to all ex-employees – i.e. those who have retired, who have resigned or who have left on VSS.
Q6. 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 a summary of the general tax consequences of each stage of the ESOP process.
Tax Liabilities and the ESOP Process
Stage of ESOP process
Tax Implications for participants
When shares are held in the ESOT
ESOT receives dividends
If the participant receives cash distributions from ESOT
Income Tax, USC and PRSI on any cash distributions received
When shares are appropriated to participants through APSS (up to current tax limit, €12,700 per annum)
No income tax but USC and PRSI may apply
Participant receives dividends following appropriation
Income Tax and USC on any dividends received
When a participant disposes of his or her shares following appropriation
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. Where a participant holds shares that have been appropriated on different dates, the shares appropriated at the earlier date are deemed to be disposed first – this is known as the first in first out rule or FIFO.
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.
Q7. Can I buy more shares?
A: Current employee participants may bid to buy shares in the annual Internal Market. Under the rules of the ESOP former employee participants are not permitted to buy shares.
Q8. How does the Internal Market work?
A: The Trustee will appoint an administrator to operate an Internal Market for buying and selling appropriated Shares. An Internal Market Day will be held once every 12 months and the Trustee will give participants 30 days notice of the Market Day.
In summary, the Market Rules currently in place provide:
- Shares are offered for sale by participants at prices equal to or above the published Minimum Reserve Price
- current employee participants can offer to purchase Shares at a price equal to or above the published Minimum Reserve Price
- the Trustee and ESB can offer to purchase Shares at a price within the published Fair Market Value Range
- the market price is the average of the successful bid prices
- all successful sellers receive the market price
- successful buyers pay the price they bid.
Q9. What happens to my shares if I die?
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 based on the number of shares and the most recent Internal Market sale price.
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 Trustee exercises the voting rights attached to the shares. If the issue is of material importance, participants may be balloted on their voting preference. The Trustee then exercises the block vote in accordance with the majority preference expressed.
When shares have been appropriated to individuals, the 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 Trustee will continue to exercise voting rights attached to the unappropriated and undistributed shares still held in the ESOT.
Q11. Where can I find details of my ESOP shares?
A:You can check details of all shares held by logging in to your Mercer OneView account (www.merceroneview.ie). Mercer act as the ESOP’s registrar.
Q12. How do I update my contact details?
A: You can check and update your contact details by logging in to your Mercer OneView account (www.merceroneview.ie). Mercer act as the ESOP’s registrar.
Q13. How do I contact the ESOP office?
A: You can contact the ESOP Office in any of the following ways:
Telephone: (01) 702 7970
Post: ESB ESOP Office, 56 Mount Street Upper, Dublin 2, D02 P406
Glossary of Terms
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.
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.
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.
Employee Share Ownership Trust - a trust established under tax legislation to acquire and hold the shares on behalf of participants.
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.
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.
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.
The period during which the participant is required to allow his or her shares remain in the ownership of the Trust.
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.
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.
ESB ESOP Trustee Limited acts as Trustee of both the ESOT and the APSS.