Share Options

What is a Share Option?

A Share Option is when an individual is granted the Option of buy Shares in a company at a future time at a share price agreed when the Option is granted.


Why consider Share Options?

There are three key reasons why you should consider a Share Option scheme:-

1. To reward key employees for loyal service.
2. To lock-in a key employee until Business Sale or Flotation.
3. To reward past loyalty just ahead of a Business Sale.

Locking in key employees can save considerable management time, business interruption and costs involved in having to replace a senior manager.  Can this be done without losing control of your business?  Also can it be done in a tax efficient way?  How do you protect the business should it become necessary to part company with the key employee?  A well designed Share Option Scheme will answer all these questions but it does pay to have an experienced ‘hand on the tiller’ to guide you through the maze of alternatives.

Designing a good Share Option scheme needs to consider:

• Scheme Objectives
• Who allowed to join?
• Any qualifying criteria? eg performance.
• What about Dividends?
• Entitlement to vote?
• Good leaver vs Bad leaver entitlements?

What about Tax?

The Government have shown their support for Share Ownership through a tax -efficient scheme called Enterprise Management Incentive (EMI) Scheme.  Under this scheme there is no income tax or NIC payable on qualifying share Options either on the day they are granted to the employee or on the date they are exercised.

The scheme enables the value of the shares to be agreed with the Revenue in advance of granting each option. If the options enable the employee to buy shares at no less than the current share value then when the employee eventually sells the shares they will only pay capital gains tax on the difference between the amount paid and the proceeds of selling the shares.

For an EMI Share Option Scheme to be set up, certain qualifying criteria need to be met:

1. The Company must be a ‘Qualifying Company’
2. The Employee must be a ‘Qualifying Employee’

Can we help you?

We have delveloped a Share Option fastrack process which is efficient and cost effective.  Why not contact us to discuss your requirements?

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