PurposeWith a third of business successions failing, the EU is still confronted with a haemorrhage of around 150,000 enterprises and 600,000 jobs every year. Although 30 years of research have confirmed the positive effects of employee share ownership (ESO) for European enterprises and its important function for business succession, best practice, such as the US ESOP, is thinly spread across the EU. Nevertheless, Member States (MS) have developed a broad variety of ESO schemes involving intermediary entities to acquire and administer employee shares in the employer firm in particular for the transfer of businesses to employees. However, for small and medium enterprise (SME) owners the main barrier is still a lack of clearcut and transparent options to sell their enterprise to their employees and corresponding incentives to do so. In this light, this paper proposes a European approach, that is, a European Employee Stock Ownership Plan (European ESOP).Design/methodology/approachA “Common European ESOP Regime”, as a first step towards a “Common European Regime on EFP” would complement existing national laws aiming primarily at their harmonisation. As the name suggests, this would be a second contract law regime parallel to national legislation on ESO. Its objective is to eliminate obstacles to the single market that mainly, though not exclusively, stem from heterogeneous regulatory density. The existing obstacles are due to the multifarious development of national laws governing employee financial participation (EFP) in the MS. The “Common European ESOP Regime” would offer employers and employees a choice between two alternative EFP regimes one originating in national legislation, the other in European legislation. The choice between these two alternatives would be entirely optional, as in the case of the European Company Statute.FindingsThe European ESOP is modelled on the US ESOP and EU best practices. It embraces six European types of legal vehicles, i.e. the employee ownership trust (EOT), the French employee ownership mutual fund (FCPE), the Austrian civil law foundation, the Spanish Sociedad Laboral, the cooperative and the closely held limited liability company.Originality/valueThe “Common European ESOP regime” would neither replace nor override national legislation but would serve as a cross-border alternative to national laws, to be used at the discretion of the parties involved. Regarding its contents, it would contain best practice rules derived from each of the ESOP vehicles discussed to reflect the entire life cycle of SMEs (starting up, consolidation and succession).
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