Why ESOPs Matter for Polish Startups
Employee Stock Option Plans (ESOPs) are the standard tool for retaining key talent in startups. In the US, UK, or Estonia, dedicated legislation makes implementation straightforward. In Poland, the situation is different — there is no dedicated ESOP legislation, which creates both flexibility and risk.
Three ESOP Models in Polish Law
- Equity model — actual shares (udziały) are transferred to employees. The employee becomes a shareholder with voting and dividend rights. Requires a shareholders' resolution (uchwała ZGW) to create new shares or consent to transfer existing ones.
- Option model — employees receive the right to acquire shares at a predetermined price upon a triggering event (vesting + exercise). Most common in practice. Implemented via a civil law agreement (umowa opcji).
- Phantom model — employees receive cash bonuses tied to company valuation, without actual equity transfer. Simplest to implement, but does not create real ownership alignment.
Key Tax Considerations
The critical provision is Article 24(11b) of the PIT Act, which allows tax deferral for incentive programs that meet specific conditions:
- The program must be based on a resolution of the shareholders' meeting (zgromadzenie wspólników)
- Shares must be in a company that is the employer or a related entity
- Tax event is deferred to the moment of disposal (sale of shares), not the moment of exercise
- Income is taxed as capital gains at 19% flat rate (not progressive income tax)
Without meeting these conditions, taxation may occur at the moment of exercise — at progressive rates up to 32%+4% solidarity surcharge — which can create a severe cash flow problem for employees who receive illiquid shares.
Corporate Implementation Steps
- Shareholders' resolution — approving the ESOP program, defining the pool size (typically 10-15% of total equity)
- Option agreements — individual contracts with each participant, defining vesting schedule, exercise conditions, and good/bad leaver provisions
- Articles of association amendments — may be needed to facilitate share transfers and preemption rights waivers
- Valuation methodology — establish how share price is determined (409A-equivalent for Polish context)
- Cap table management — maintain a clear record of all outstanding options and their dilutive effect
Common Mistakes
- No shareholders' resolution — loses the Article 24(11b) tax deferral benefit
- Vague vesting terms — creates disputes when employees leave
- Ignoring the cap table impact — confuses investors during due diligence
- No good/bad leaver provisions — allows departing employees to retain unvested options
- Phantom shares in early-stage — employees prefer real equity; phantom creates a misalignment
Planning an ESOP for your startup? Get legal advice on structuring it correctly.