On december 6th, the Parliament voted in favour of amendments to the legislation, which provides for the allocation of stock options to employees in Latvia. Passed law is expected to come into force at the beginning of January next year. This will certainly promote the development of the ecosystem of start-ups in Latvia.
Share options allow employees to acquire shares of the company at a nominal price or free of charge after a specified period, regardless of the fair value of the capital shares at that time. Granting share options is a bonus payment system that allows companies to attract prominent employees for many years.
The initiator of the regulation, 13th Parliament deputy Reinis Znotiņš said, “We want to change the way we look at business. We want to implement experiences that are already elsewhere in the world where capital is distributed to employees in order to promote their interest and attract highly qualified specialists to companies with high potential for development.”
“This is already the second initiative in a relatively short time, which has succeeded in improving the environment of start-ups in Latvia. The previous framework for supporting this sector prevented many companies from qualifying for much needed aid. After making these amendments, we are looking forward to a wave of growth in Latvian start-ups.”
New regulation will boost the growth of start-ups and will benefit the Latvian economy. Successful start-ups will quickly become giants of goods and services that will be able to attract investors to invest millions of euros of capital – money that will mostly come into wages. This framework will help Latvia recover from the crisis caused by COVID-19 more rapidly and successfully and will empower highly qualified specialists to stay in Latvia.
This method of attracting highly qualified specialists is an important tool for improving equality in our economy. The nature of share options is an opportunity for owners to share capital shares with a broader management team, which has so far been rarely done in Latvia by financially wealthy entrepreneurs. In the ecosystem of start-ups, there is a trend where successful individuals are investing part of their capital in start-ups, setting up the next company, or being angel investors.
Znotiņš said, “I would like to thank all those people who contributed for these changes in the legislation to take place – the Latvian Startup Association, the Venture Capital Association, the Cobalt Advocates office, Andris Kariņš-Bērziņš and other startup enthusiasts who contributed a lot of their time in drafting this bill. I would also like to thank the Parliament’s IT and Innovative Business Sub-Commission.”