Legal Q&A · Company financing

Can self-employed contractors, such as developers outside employment, also receive ESOP equity?

Law as at 1 August 2026

Short answer

In a simple joint-stock company, yes. Section 220r(1)(b) of the Commercial Code expressly covers not only employees but also individuals operating under a trade licence or other authorisation whose work for the company is protected by intellectual property rights. In a joint-stock company, the statutory shortcuts apply only to employees. In an s. r. o., contractors are accommodated through options over members' interests or phantom equity.

Does the law also cover contractors in a j. s. a.?

A simple joint-stock company may subscribe for its own shares intended for transfer to employees and also to other individuals operating under a trade licence or other authorisation whose work for the company is protected by intellectual property rights (Section 220r(1)(b) of the Commercial Code). This fits software companies precisely: a self-employed developer delivering code to the company can participate alongside permanent employees.

What condition does the law impose?

Contractor participation depends on the results of their work being subject to intellectual property rights, which must be contractually addressed between the contractor and company. If licences or assignment of the exercise of economic rights in the delivered work are not covered, the programme may encounter problems both under Section 220r and during an investor’s legal due diligence. Our copyright and licensing service addresses the contractual arrangements for software.

Other routes apply in an a. s. and s. r. o.

In a joint-stock company, the statutory facilitations — preferential subscription on a capital increase, acquisition of own shares for transfer within 12 months, and use of profit shares — apply only to the company’s employees. An s. r. o. cannot hold its own interests as a pool at all. Outside a j. s. a., contractors are therefore offered options over existing members’ or shareholders’ interests, or phantom equity providing a cash entitlement linked to company value.

Our ESOP and employee equity service assesses how to build a single programme for a mixed team of employees and contractors, and whether changing the company’s legal form is worthwhile.

This answer provides general information on the law as at 1 August 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.

More legal questions

All questions and answers
  1. Can our s. r. o. buy back its own business interest and hold it for future employees? No. A limited liability company cannot acquire its own business interests unless the law exceptionally provides otherwise (Section 120(1) of the Commercial Code), so an s. r. o. cannot create an equity pool for future employees. Its participation programme must use another structure: options over existing members' interests, phantom equity, or conversion to a simple joint-stock company.
  2. Can we offer employees shares below their issue price? Yes. A general meeting resolution increasing share capital may approve employees acquiring a specified number of shares below their issue price, provided the company covers the difference from its own resources (Section 204(4) of the Commercial Code). Existing shareholders' pre-emption rights are not an obstacle: by law, issuing shares to employees constitutes an important company interest justifying their exclusion.
  3. What is phantom stock, and when is it better for a company than actual equity? Phantom stock is a contractual arrangement giving an employee a cash entitlement linked to the company's value, typically conditional on continued service, performance and events such as a company sale. The employee does not become a shareholder, ownership is not diluted, and administration is the simplest of all ESOP structures. To work, the arrangement must appear in a contract with the individual concerned, rather than only in a shareholders' agreement.
  4. How many shares can a simple joint-stock company allocate to employees, and when must it distribute them? 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.

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Mgr. Patrik Tulinský, LL.M. Czech and Slovak attorney · SAK 300422 · ČAK 19654

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