Employers Can Now Incentivize Employees with Company Shares to Prevent Turnover, Says Badasyan

The government approved changes to the "Law on Joint Stock Companies" and related laws during its meeting on April 8. The issue was presented by Justice Minister Rustam Badasyan, who noted that several provisions of the law are currently not in line with developments in the business world that influence the evolution of corporate law.

"The project proposes allowing the issuance of different classes of common shares. Currently, we have two types of shares: common and privileged. The essence of privileged shares is that they usually do not have voting rights, instead offering broader opportunities for dividends or positioning demands in a more prioritized manner during company liquidation. Now we allow common shares to also have classes, thus providing flexibility. The flexibility means that a specific class of common shares may offer more voting opportunities, while another class may provide less participation in company management but more substantial chances in other aspects. We do this because investor preferences can vary significantly," said Badasyan.

According to him, changes are also planned regarding employee shareholding. "In Armenia, employee shareholding under current regulations is only possible with strict regulatory conditions and only regarding repurchased shares. However, incentivizing employees with shares is a common tool that allows encouraging workers and preventing them from leaving the company. Therefore, the project intends to introduce modern and effective approaches to employee shareholding. This means we are allowing employers to grant preferential shares to their employees, thus preventing their departure," added the Minister.