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Irish Independent
Irish Independent
Anne-Marie Walsh

Start-ups seek revamp of under used employee share scheme

Martina Fitzgerald of Scale Ireland

THE government has been urged to revamp a share option scheme to help smaller businesses hold on to staff.

Martina Fitzgerald, CEO of Scale Ireland, told politicians her organisation is also proposing a tax credit-type scheme to incentivise companies to hire tech workers who lost their jobs.

Ms Fitzgerald, a former RTÉ political correspondent, told a Dáil committee it was her first time in Leinster House in over four years yesterday, and her “vantage point” is different.

Speaking at the joint Oireachtas Committee on Enterprise, Trade and Employment as chief executive of the tech start up representative organisation, she said just “50-odd” companies have availed of a Revenue share option scheme.

She called for major changes to the scheme.

They include making it clearer and simpler for employers and extending it to a broader range of companies.

Ms Fitzgerald said recruitment and retention of staff is still start up founders’ second biggest issue, after funding.

She said 35pc of them found it more difficult to recruit and retain staff last year.

They are not just competing with bigger companies, but those in other countries with more favourable tax and conditions, she said.

Ms Fitzgerald said Galway-based medtech company, Aerogen, which was set up over a butcher’s shop 25 years ago and now employs hundreds of people, is finding it difficult to recruit and retain staff.

She said further changes are needed to the Key Employee Engagement Programme (KEEP) share options scheme to ensure it meets it objectives.

The tax incentive scheme for SMEs supports the use of share options as a form of staff remuneration, enabling them to compete with larger firms.

Ms Fitzgerald said the scheme would also give workers a share in companies that could go on to great success. “In a way, it’s kind of workers’ rights 2023,” she said.

“But there are difficulties within that scheme that only 50 odd companies have availed of it, according to the Commission on Taxation,” she said.

She said changes are needed including the removal of a link to salaries and making it clear and simple. For instance, the requirement for a market valuation is very difficult to work out, she said.

Ms Fitzgerald said some types of companies, including those in fintech and insurtech, are excluded.

The Revenue scheme is available up to December 31 this year.

Employees can acquire shares at a fixed price and will not have to pay tax even if they rise in value.

Ms Fitzgerald said a new tax credit-type scheme should be rolled out to incentivise companies to hire those who lost their jobs in the sector.

There are more than 2,200 indigenous tech start-up and scaling companies in Ireland, employing over 50,000 people, she said.

Meanwhile, the Ireland Strategic Investment Fund (Isif) has confirmed that it is speaking to HBSC about future funding for Irish startups following the lender’s takeover of Silicon Valley Bank’s UK arm last week.

Silicon Valley Bank had been a prominent funder of growing Irish tech companies since 2012 following a partnership with Isif.

Isif director Nick Ashmore told the Oireachtas Committee on Enterprise, Trade and Employment that the fund was “hopeful" as it engaged with HSBC to see what its future plans for SVB’s UK business are.

“Its lending capacity has not been lost to the Irish market, which is solid news,” he told the Committee this afternoon.

A spokesperson for the State fund confirmed last week that Isif had around $100m (€92.7m) invested in five investment funds managed by SVB Capital, which was a subsidiary of SVB Financial Group.

The spokesperson added that the fund had received distributions worth more than $100m over the past decade.

The talks between Isif and HSBC follow the bank's purchase of the Californian lender’s UK arm last week after its dramatic collapse earlier this month.

HSBC group chief executive Noel Quinn said last week that the deal “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”

Nick Ashmore, said the country has a “mature” innovation funding landscape, an educated and talented workforce, global reputation and early stage funding environment that is reliable.

In terms of weaknesses, he said the market is small, more vulnerable to shocks, and early exits persist among start-ups. He said there are management expertise gaps.

“Ireland’s track record of creating national champions that go beyond a certain point needs to improve,” he said.

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