Companies often experience difficulties in attracting and retaining talented employees. In addition, start-ups and scale-ups are often unable to offer high salaries due to liquidity requirements. Entrepreneurs have various alternatives to reward their employers and thus bind them. The most well-known form is salary. Nowadays, however, talent is no longer always satisfied with salary alone and a future-oriented reward is often expected. For these reasons, more and more companies are offering alternative rewards, such as Stock Appreciation Rights (SARs).

Screen with Scock Prices

What are Stock Appreciation Rights?

With SAR, the employee does not receive shares, but a receivable on the value development of a share in a company.

When granting SARs, the shares are valued at a specific point in time using a contractual method. When an employee exercises his SARs at a later time, the shares are again valued using the same method. The difference between the two valuation moments will be paid out.

The exercise moment can be a breakup on good grounds (‘good leaver’), a sale of the company or an IPO. It is often also agreed that ‘vesting’ takes place. In that case, the employer builds up its SARs over a number of years to 100% of the SARs.

An example: an employee receives SARs that correspond to 1% of the shares. At the time of receipt, the company is valued at €5,000,000. Ten years after receipt, the employee decides to exercise his SARs. In accordance with the same valuation method, the company is valued at €10,000,000. Where 1% of the shares used to be worth $50,000, it is now $100,000.

Advantages of Stock Appreciation Rights

Stock Appreciation Rights have a number of clear advantages:

  • Limited costs of issuance: SARs are arranged through a private contract, so no notary needs to be involved
  • Flexibility: contractual conditions can be freely included
  • No voting rights for employees
  • Fiscally attractive for employer: the cash benefit is deductible from the profit

Disadvantages of shares and certificates

In addition to paying out SARs, companies can also choose similar rewards. The most famous form is the issuance of shares to employees. However, there are drawbacks to this.

This gives employees the right to vote in the general meeting, which is often undesirable for the board.

Shares without voting rights deprive the employee of the right to vote in the general meeting, but does not deprive the employee of the right to attend the meeting and speak there.

Issuing certificates through a foundation limits the above rights and only provides financial participation for employees in the company. Nevertheless, many formalities and costs are involved, such as establishing a trust office foundation and drawing up trust conditions. As a result, certificates are often unattractive to employers.

In addition, the trust office foundation is not legally known outside the Dutch legal system, and potential foreign buyers are often wary of unknown constructions.

Legal advice on SARs

All in all, the payment of Stock Appreciation Rights is a tax-efficient option for companies to reward and retain their employees without loss of control. At Viotta we are specialized in agreements such as Stock Appreciation Rights. We will gladly advise you.

Viotta Law - Dirk de Waard

Dirk de Waard


If you need a legal opinion under Dutch law, please do not hesitate to contact our legal opinion expert Dirk de Waard at


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