Employee Share Schemes are a popular way for companies to offer their employees a stake in the company's success while also providing a means for employees to build wealth.

In a 'loan to purchase' scheme employees are provided with a loan to purchase an allotted number of company shares. This allows employees to acquire shares even if they do not have sufficient funds to purchase them outright. The loan is typically provided by the company or a financial institution partnered with the company and usually has a low or zero percent interest rate. These participants are then obligated to repay the loan from either their salary and potential dividends that are received from the share ownership.

To create a new employee loan you will need to be logged in and have access as a company administrator to make any changes. From your company dashboard, click 'ESOP & share plans' in the left side menu and ‘Employee loans’.

Click the button for 'Issue a new loan'.

Complete the loan form:

1. Loan title - give your loan a name such as 2024 Employee Loan.

2. Description - the loan description appears for the loan holder and can be used to make notes about the individual's loan.

3. Identify party involved - type to search for an existing shareholder, or click 'Create new loan holder' to set up a new shareholder using their name, email and address.

4. Define loan value - enter the 'Number of shares' and 'Share price' (share price can be entered to 2 decimal places). If shares are being offered at a discount to the share price (eg. 10%) then enter this in the 'Discount' field. Click on the '%' block to switch to entering a $ discounted amount.

If the shareholder is not taking up a loan for the full amount (ie. is contributing some of their own cash towards the share purchase) then enter this in the 'Initial cash contribution' field to reduce the loan amount. The 'Loan value' will calculate automatically based on the entered parameters.

5. Loan length - enter a 'Start date' for the loan. If the loan has an 'Expiry date' (a date by which the loan must be repaid or the shares are forfeited) then this can be entered too.

6. Set interest rates - enter the 'Initial interest rate (%)' and the 'Accrual frequency' in months (if interest is accruing annually then enter 12 months). Select the interest 'Compounding frequency' (Daily, Monthly or Yearly). The interest anniversary will be set by the loan 'Start date'. If interest accrues on a different date then toggle 'Set a different date' to ON and enter a date in the 'Interest accrual date' field.

Please note: Interest compounds daily, monthly or yearly, and is charged to the loan balance according to the accrual frequency.

7. Dividend split - a dividend split can be applied so that a percentage of the loan holder's dividend is used to pay down the loan, and a percentage is taken as a cash payment. If the entire dividend goes towards paying down the loan then leave as the default 100% in 'Loan percentage'. Or enter a number into 'Cash percentage'. The two figures auto-calculate to sum to 100%.

8. Administrator notes - these notes do not appear for the loan holder and can be used to make internal administrative notes about the individual loan.

9. Upload supporting documents - drag and drop in a loan agreement and signed offer letter for the shareholder.

10. Click the 'Issue loan' button to save the loan details. Click 'Confirm' to issue the loan and email the loan holder, or click 'Cancel' to return to entering the loan details.

If you're not ready for the loan to be available to be viewed by the loan holder yet, instead of issuing the loan you can click the button to 'Save as draft'. Draft loans are not visible from the loan holder login.

Draft loans can be edited and updated, and stay in draft. When you're ready to issue your loan, click into the loan from the hyperlinked title and click on the button for 'Issue loan'. Click 'Confirm' to issue the loan and email the loan holder.

Please note: A loan cannot be returned to draft once it has been issued.

This is the email notification to the loan holder.

If you are entering a historic loan, and the shares have already been issued to the shareholder in Orchestra, then you can skip the issuing or transferring of shares to the shareholder.

To issue shares to the shareholder complete the share transaction form:

1. Transfer type - select from 'Issue new shares' or 'Transfer treasury stock'. If you choose 'Issue new shares' then new shares are created and the total shares on issue increases. If you choose 'Transfer treasury stock' then type to search for the 'Treasury shareholder'. Shares will be transferred from the 'Treasury shareholder' to the loan holder and the total shares on issue will not change.

2. Transfer type - select the 'Type of share', 'Funding round' and 'Date executed'. There are optional fields for 'Notes' and 'Supporting documents' if you would like to add extra information to the transaction.

3. Click the 'Transfer' button to view a pop up summary of the share transaction details.

4. Click the 'Confirm' button to complete your share transaction, or click 'Cancel' to return to the transaction page and make a correction. Your completed share transaction can be viewed in your transaction history.

On the loans page click the 'Actions' icon (3 vertical dots) and select 'Edit loan' from the dropdown menu.

Fields that are white can be updated. Fields that are greyed out are not editable.

Click the 'Update loan' button to save any changes.

Click into the loan that you would like to enter a payment for by clicking the hyperlinked loan title.

From the 'Settings' button, click on 'Record payment' from the dropdown menu.

In the 'Transaction history' table click on the trash can icon to delete the payment. Click the 'Confirm' button to execute or click the 'Cancel' button to exit.

You can set up a regular recurring payment on a loan, for example, for an automatic salary sacrifice payment.

From the 'Settings' button, click on 'Add recurring payment' from the dropdown menu. Enter a:

Click the 'Save' button. Recurring payments will appear in the transaction history in 'Money in' and in the 'Recurring payments' table.

To edit a recurring payment, delete the recurring payment from the 'Recurring payments' table using the trash can icon, and add a new recurring payment. Deleting a recurring payment does not delete any of the associated payments that have entered the transaction history. Each payment can be deleted individually if needed.

If the loan to buy the shares is issued by a bank, the interest rate payable on the loan may vary from month to month.

To add a new interest rate to a single loan, click into the loan. In the 'Interest rates' table click on 'Add interest rate'. Enter a number (2 decimal places) into the 'Interest rate' field. Add a date (dd/mm/yyyy) into the 'Effective date' field. Click the 'Add interest rate' button to save. The new interest rate will be added to the 'Interest rates' table.

To add a new interest rate in bulk visit your loans page. Click on the check box to select all loans, or selectively check the boxes of individual loans.

Click on the 'Update interest' button. Enter a number (2 decimal places) into the 'Interest rate' field. Add a date (dd/mm/yyyy) into the 'Effective date' field. Click the 'Add interest rate' button to save. The new interest rate will be added to the 'Interest rates' table for each loan selected.

In the 'Interest rates' table click on the pencil edit icon under 'Actions' to edit the interest rate. Click the 'Edit interest rate' button to execute or click the 'Cancel' button to exit. If interest payments have accrued in the 'Transaction history' then they will be recalculated.

Please note: To avoid any confusion about which interest rate is being edited, interest rates are edited from the 'Interest rates' table and not from the loan form.

In the 'Interest rates' table click on the trash can icon under 'Actions' to delete the interest rate. Click the 'Confirm' button to execute or click the 'Cancel' button to exit.

You can adjust a loan balance up or down. From the 'Settings' button inside a loan, click on 'Adjust balance' from the dropdown menu.

Click the 'Save' button to execute or click the 'Cancel' button to exit.

If an employee sells some of their shares then you can adjust the loan shares and loan balance. From the 'Settings' button inside a loan, click on 'Sell shares' from the dropdown menu.

Click the 'Save' button to execute or click the 'Cancel' button to exit. You will then need to cancel or transfer the shares in your share register on the 'Transfer/share issue' page, as this is not handled automatically from the form.

If the dividends feature is enabled on your profile and you publish a dividend then dividend payments will be used to pay down employee loans based on the loan percentage of the dividend split, and the number of shares in each outstanding loan by shareholder.

If a dividend payment takes a loan balance down to zero then the rest of the dividend payment will be considered as paid out in cash.

If you're an Australian or New Zealand company paying a dividend and you would like a demonstration of the dividends feature please contact us.

Your loans data can be exported as a CSV file (spreadsheet format) from your loans page using the 'Export CSV' button.

The 'Transaction history' of each individual loan can be exported as a CSV file from within each loan using the 'Export CSV' button.

If you have a large number of loans to enter then we can help. Email us at companies@orchestra.io. Additional fees may apply.

Entering employee loans will contribute to your ESS stakeholder count for charging. Please read more here:

How are charged stakeholders counted in Orchestra?