Phantom Shares

A strategic tool to retain talent without diluting share capital

1. Introduction

In the current context of the business ecosystem, and particularly in the field of startups and growing companies, attracting and retaining key talent has become a strategic challenge. The competition for high-level professionals, experienced managers, and collaborators with critical skills forces organizations to design compensation plans that are not only financially attractive but also foster long-term commitment to the company. Among these alternatives, Phantom Share plans have emerged as an effective solution, allowing companies to link the interests of key talent with corporate performance, avoiding capital dilution and preserving corporate control.

2. Concept and legal nature

Phantom Shares constitute a contractual deferred compensation instrument, through which the beneficiary acquires economic rights equivalent—but not identical—to those that would correspond to a shareholder or partner for holding a specific number of shares in the company. It is important to emphasize that there is no transfer of share ownership or granting of political rights. The beneficiary does not become a partner/shareholder and therefore does not acquire voting rights or the right to participate in meetings or board meetings. The payment derived from Phantom Shares is directly linked to:

• At the market value of the actual shares/interests.
• The variation (appreciation) of said value in a given period.

3. Operating mechanism

The design and implementation of a Phantom Shares plan requires a specific contract , normally approved by the board of directors and, in certain cases, by the general meeting of shareholders (especially when the beneficiaries are members of the board itself). A typical plan includes:

1. Determination of the pool : Total number of Phantom Shares to be granted, equivalent to a percentage of the theoretical share capital.
2. Definition of beneficiaries : Managers, key employees, mentors or strategic collaborators.
3. Vesting clauses : Period in which the beneficiary consolidates rights (by duration or achievement of objectives).
4. Cliff period : Initial period during which no rights are acquired, avoiding short-term benefits for those who do not consolidate their relationship with the company.
5. Liquidity events : Circumstances that trigger payment (total or partial sale of the company, exceeding billing thresholds, closing of strategic contracts, etc.).