As the first publicly listed Bulgarian company in the gaming industry, Telematic Interactive Bulgaria has set its sights on aligning employee engagement with corporate growth through an ambitious Employee Stock Ownership Plan (ESOP). Being part of the team that advised Telematic on this project, in this article, I’ll provide a detailed look at the motivations behind this decision, the structure of the ESOP, and the intricate legal challenges faced during its implementation.
TIB’s Global Operations
Telematic Interactive Bulgaria has been our client since 2022. It is a Bulgarian publicly listed company in the Bulgarian regulated market operating in the online gaming industry. TIB is the licensee of one of the largest platforms for casino games and sports bets in Bulgaria, operating under the brand of Palms Bet, and is the sole owner of the capital of the gaming content provider CT Interactive. In addition to its operations in Bulgaria, the company also has a presence abroad – its group includes subsidiaries registered in Peru and Curacao. TIB is the first publicly listed Bulgarian company in the gaming industry, with over 280 employees.
Why an ESOP?
TIB’s decision to introduce an Employee Stock Ownership Plan stems from its belief in fostering a strong, loyal, and motivated workforce.
Our client firmly believes that employee treatment is the crucial factor for business success.TIB views its team as a large family where everyone supports each other and works together to achieve shared goals. For this reason, a decision was made to implement an ESOP, providing employees with the opportunity to receive shares or share options as a bonus for loyalty and achievements. Our team advised TIB’s management on the development of the ESOP, which was presented to the company’s shareholders for approval in September 2024.
As a public company, adoption of an ESOP by TIB, and the subsequent allocation of share options or shares to employees, are subject to numerous legal requirements. When choosing the specific mechanism by which the share options or shares shall be allocated, both the provisions of supranational regulations and the provisions of national legislation, including the Public Offering of Securities Act, need to be taken into account.
The allocation of company shares to employees is a trend that is well-established in many countries and has started gaining popularity in Bulgaria over the last few years. The aim of the ESOP is to recruit and retain employees by supporting their development, encouraging growth, and offering them opportunities for advancement. By receiving company shares, employees become more engaged, which in turn contributes to the success and strong performance of their employer.
The program encompasses a broad spectrum of participants. TIB’s ESOP covers a wide array of employees, including senior and mid-level management, as well as expert staff within TIB, its subsidiaries, and affiliated entities. Under the program, a minimum of 12 months of experience within the group of companies is required, as of the date when the Board of Directors decides on the bonus allocation.
The ESOP offers various mechanisms for share allocation, including share transfers, buy-backs, or capital increases. The implementation and execution of the ESOP fall entirely within the authority of the Board of Directors of TIB. The Board independently sets the criteria, evaluates their fulfillment, and determines both the allocation and the size of the bonus in shares.
Challenges and Hurdles
The implementation of the ESOP was not without its challenges, particularly due to TIB’s status as a public company.
As mentioned earlier, TIB is a public company, which makes the procedure really complex. On the one hand, it must comply with the regulations of the POSA and various supranational regulations. On the other hand, it must take into account the specifics of labor and social security legislation. In this particular case, the procedure required several months of hard work, as it was back in July when we started work on convening a general meeting of shareholders to approve the ESOP.
TIB had previously initiated a share buy-back program, the purpose of which was to reduce the company’s capital. For this reason, it was necessary to adopt a new resolution to amend the purpose of the buy-back and to allow the company to use these shares in accordance with the approved ESOP.
The “Most Liquid Issuer”
The Bulgarian Stock Exchange (BSE) awarded TIB with a prestigious award, naming the public company as one of the most liquid issuers in the Standard segment of the BSE's main equity market in 2024.
The TIB increased the number of shareholders due to transparency of management, communication with investors and а strong dividend policy. This gives reason to believe that the company can be included in the main index of the BSE – SOFIX (a major stock market index which tracks the performance of the most liquid companies listed on the BSE).
Thank You to the Team
On a personal note, I’d like to acknowledge the exceptional professionalism and dedication of Tokushev and Partners Attorney-at-Law Maria Gigova, whose hands-on approach was key to navigating the complexities of the plan, as well as the invaluable support of Managing Partner Mr. Viktor Tokushev alongside his own contributions.
By Boris Teknedzhiev, Partner, Tokushev & Partners
