“The new regulatory framework for employee stock options will help transform our understanding of entrepreneurship and drive the development of new businesses. Our aim is to have the best regulatory framework in the region that will encourage the growth of new businesses competitive on an international scale. The framework will allow businesses to attract high-skilled employees in the long term. At the same time, it will help distribute capital among a broader population, raising their standard of living and letting them enjoy a share of the company's success," explained Reinis Znotiņš, Chair of the Information Technology and Innovative Entrepreneurship Subcommittee of the Sustainable Development Committee of the Saeima.
The changes are a part of the amendments to the Commercial Law adopted by the Saeima. According to the amendments, employees of a limited liability company (LLC) will have the right to acquire company shares.
Before the amendments, only employees of joint stock companies had the right to purchase company stocks. This opportunity was not available to employees of LLCs, start‑ups, or other fast growing businesses, such as information and communications technology LLCs.
“This is a legislative success specifically for the start‑up community in Latvia. Prior support for start‑ups was difficult to access and restricted to a small number of qualified companies. We expect a wave of start‑up growth to take place as a result of these amendments,” stressed Znotiņš.
Stock options allow employees to gain access to shares of the company for which they work at nominal value or free of charge after a certain time period, regardless of the fair value of the shares at that point. It will serve as an incentive system and help attract and retain the necessary personnel, noted the Sub‑committee head.
Znotiņš believes that these changes will encourage the development of start‑ups and benefit the economy of Latvia. The amendments will also help Latvia emerge stronger from the COVID‑19 crisis and retain high‑skilled professionals in the country.
“These new laws are a step towards greater equality in the workplace. Stock options are a tool for founders of companies to share the success of their businesses with a broader management team, which until now has been done rarely in Latvia,” noted the Chair of the Sub‑committee.
Saeima Press Service