A simple joint-stock company may itself subscribe for shares intended for employees and contractors up to 20% of share capital, within a period approved by the general meeting of no more than 18 months. It must transfer them within five years of subscription (Section 220r of the Commercial Code). Transfer of these shares to anyone other than eligible persons is valid only at nominal value plus share premium and subject to retention of title; otherwise it is invalid.
What does Section 220r permit?
A simple joint-stock company has a special statutory regime for subscribing for its own shares for employees and eligible contractors. It is not, however, the only legal form with statutory employee-share options: for an ordinary joint-stock company, for example, Section 204(4) of the Commercial Code governs preferential acquisition by employees. Under Section 220r of the Commercial Code, the company may subscribe for its own shares forming its share capital if the general meeting approves subscription and sets the terms, particularly the maximum nominal value and subscription window. The articles may dispense with a general meeting resolution, in which case they must set the subscription terms themselves.
Which limits must be monitored?
- 20% of share capital: the aggregate nominal value of shares subscribed for by the company must not exceed this threshold.
- 18 months: the maximum window in which the company may subscribe for shares.
- 5 years: the period within which subscribed shares must be transferred to eligible persons.
- Equity test: subscription must not cause equity to fall below the statutory threshold derived from share capital and mandatory reserves.
The board of directors has a statutory duty to ensure compliance with the conditions other than general meeting approval.
Who may receive shares and what happens if the rules are bypassed
Eligible persons are company employees and individuals operating under a trade licence or another authorisation whose work for the company is protected by intellectual property rights, including external developers and designers. Subscribed shares may be transferred to other persons only for a purchase price equal to nominal value plus share premium and with agreed retention of title; otherwise the transfer is invalid (Section 220r(4)). An alternative to subscription is acquisition under Section 220s: the articles allow the company to acquire its own existing shares for transfer to the same persons, again within five years.
We prepare the programme, including articles, resolutions and participant agreements, through our ESOP and employee equity service.
This answer provides general information on the law as at 10 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
