An ESOP (or Employee Stock Option Plan) is a plan for genuine employee participation. Under this plan, employees participate directly in the growth of the company through the allocation of real business shares or options on them. ESOPs are usually designed in such a way that the options are not converted into real shares until the startup is sold (exit) or an initial public offering (IPO).
With the VSOP (Virtual Stock Option Plan), on the other hand, employees receive a purely virtual share in the company. The virtual shares serve as a mere calculation factor to put employees in the same financial position in the event of an exit or IPO as if they were the owners of real shares. The employees receive a payment claim against the company and thus participate in the sales proceeds. Due to their contractual nature, VSOPs can be used more flexibly and, if structured correctly, avoid the tax disadvantages and formal hurdles that apply to ESOPs in Germany.