With Tokenize.it, you can quickly, easily, and securely set up and manage your employee participation digitally. Setting up your employee participation program is done 100% digitally without a trip to the notary. Tokenize.it offers a legal setup optimized specifically for GmbHs (Limited Liability Companies in Germany) with tailored contract templates.
Improved liquidity through tokenization: While traditional participation models often offer limited flexibility in terms of disposal, the technology behind tokens enables significantly increased liquidity. This means that, depending on the specific terms of your employee participation program, your team has the opportunity to trade their tokens.
For a detailed legal analysis of tokenized profit participation rights such as the GmbH-Tokens, please visit the CMS blog (German content).
First, you need to upload company documents (commercial register excerpt, list of shareholders and information on the company's beneficial owners) and go through a KYC process. Have a valid identification document ready for this. To personalize your investment page, you can also integrate your company designs and colors ("white label"). An individual allocation agreement is then concluded with each team member. Tokenize.it provides drafts of the contract documents via the platform free of charge.
Your employees will receive digital versions of all relevant documents, including the allocation agreement, shared through the platform. The contract is legally binding once signed digitally. To comply with applicable laws (Nachweisgesetz), it is advisable to share a handwritten, signed version of the allocation agreement with the employees after its digital execution and have them confirm its receipt.
First, you register on the Tokenize.it platform and go through the onboarding process. In this step, you will be guided through the identification process (KYC) and create your contract documents, including the allocation agreement for token options for your employees. After successful onboarding, you can create individual invitations to participate in the employee participation program. In a following step, you define the individual characteristics (e.g. length of cliff and vesting) of each vesting plan.
Once you have set up the employee participation program, you can send personalized, password-protected links to your team members. Additionally, you can share the generated access password via a separate channel to grant each recipient access to the individualized vesting plan.
If your team is not at all familiar with blockchain and tokens, they can simply register with a Google account. In this case, the Tokenize.it platform sets up a separate virtual wallet for the respective team member, which is controlled via the Google account and in which the tokens can also be received later. If possible, we recommend using your own wallet to receive the tokens, preferably a "Cold Wallet". The tokens are sent to this "digital wallet" when the employee exercises the options. It is also possible to add a (further) wallet only when the option is exercised.
Similar to the known ESOP/VSOP programs, a company offering Token options via the Tokenize.it platform to its team members can set individualized "vesting" and "cliff" thresholds for the token options you receive. Both can vary from team member to team member and are mechanisms that regulate the way the token options you receive are earned.
The cliff is a threshold that you, as a team member, must cross during your time with the company in order to receive token options (e.g. one year after signing the employment contract). The vesting period is the period of time during which you earn or “vest” additional token options because you are actively working for the company. Token options are often vested over time in a linear fashion (e.g. 25% of the tokens per year over four years). The tokens grow linearly (per second) until the maximum allocation of the vesting plan is reached.
If your work for the company ends or is paused, your earning of token options usually ends or is paused as well in the discretion of the company. The Token options that have vested or which you have earned up to that point remain in place. However, please note the specific conditions in your allocation agreement.
During vesting, you will receive token options, which represent participation rights in the company, over time,. You are free to choose when to exercise these options or part of them and have the corresponding tokens created on the blockchain, provided that the cliff period has expired and you have already vested token options.
You can simply initiate the exercising via the Tokenize.it platform. The tokens created as a result of an option exercise are immediately sent to your recipient wallet. We recommend setting up your own wallet ("digital wallet"), ideally a cold or hardware wallet, and entering it on the Tokenize.it platform.
The tokens, once minted, are generally tradable from a technical point of view if they are not restricted by a so-called “lock-up” period. This is a period of time predefined by the company during which the tokens cannot be transferred. The company can also set up an "allow list". This is a whitelist with blockchain addresses to which tokens may be sent and among which tokens can be traded. This means that actual tradability may be restricted by the company itself.
As the tokens are securities, trading the tokens on a marketplace in Germany typically requires a license. In the future, a secondary market is planned on the Tokenize.it platform to allow for a regulated trade of the tokens.
There is no minimum team size requirement. You can set up an employee participation program on Tokenize.it with just one team member. We charge a one-time fee of 200 Euros for the setup of each individual vesting plan. About our pricing
Yes, team members who are not hired as employees can also participate in your employee participation program via Tokenize.it.
As the managing director, you are in control of the specifics of each vesting plan and can set an individual cliff and vesting schedule per team member.
To a certain extent, adjustments to standard contracts can be made by your legal advisors. Please contact us directly if you have any specific questions. However, the standard setup does not provide for a complete elimination of the put-option.
Yes, additional tokens can also be issued after the start of a vesting plan, e.g. as a bonus or for special occasions, by setting up another vesting plan for a team member. Please note that no more tokens can be issued than are "approved" in the shareholder agreement.
First of all, it is important to note that your team members receive options for GmbH tokens. GmbH tokens are liquid and can in the future potentially be traded on a secondary market. This is generally not the case with ESOP and VSOP programs. Each team member can decide for themselves when vested options should be converted into GmbH tokens and can trigger this independently via the platform. The token options have no expiration date.
Ideally, GmbH tokens are also the instrument that your investors hold. This creates a unified market of one asset for all company stakeholders. In addition, unlike a typical ESOP or VSOP program, GmbH tokens can participate in profit distributions that are not related to an exit. Finally, with the Tokenize.it solution, you can save yourself the repeated trips to the notary and the corresponding costs that you have with ESOP programs.
Our contract drafts have been prepared by an international law firm and optimized for tax purposes. For specific tax-related questions, please consult your tax advisor.
In principle, the tokens are taxed at the personal income tax rate at the time of their creation (i.e. the "minting"), i.e. the inflow (the "monetary benefit" from this). Unlike with ESOP or VSOP programs, as an employee you are free to choose this point in time. This setup avoids the "dry income" problem that can arise when exercising options in an ESOP program.
In addition, any increase in the value of the tokens after minting is subsequently taxed at the often more favourable capital gains tax rate. This type of tax optimization is not possible with typical ESOP or VSOP contracts. Holding or receiving the token options prior to minting generally has no initial tax relevance. If you have specific tax questions, please contact your tax advisor.
