Share Options Solicitors
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Some companies have a share option policy which allows employees to take out company shares as a form of benefit.
A business might choose to introduce a share scheme to act as an incentive for potential employees to join the company or for current employees to stay with the company.
What is a share option?
An employee share scheme provides the employee with an opportunity to buy a share in the company they work for.
There are a number of different employee share schemes available, depending on the eligibility of the business and employee in question.
Examples of share schemes include:
- Save As You Earn (SAYE scheme)
- Company Share Option Plan (CSOP scheme)
- Non-tax Favoured Share Option Plan
- Enterprise Management incentives (EMI scheme)
Spencer Churchill Solicitors offer specialist advice regarding the different types of company share schemes.
Save As You Earn (SAYE)
A Save As You Earn (SAYE) scheme is a savings share scheme that allows you to purchase shares using savings.
At the end of a three to five year savings contract, you can use the savings to then buy shares.
The advantages of using this scheme mean that at the end of it, any interest or bonuses will be tax-free.
Capital Gains Tax might only apply if you sell the shares but if you transfer shares to an individual savings account (ISA) or a pension after the end of the scheme then you will not need to pay this.
Non-tax Favoured Share Option Plan
A non-tax favoured share option plan permits, at the discretion of the company, a select number of employees to receive the option of acquiring shares.
This scheme is viewed as low-risk because there is no up-front cost or obligation for the individual in receipt of the offer to pay monies over.
Enterprise Management Incentives (EMI)
An Enterprise Management Incentive (EMI) is a share scheme designed for small to medium scale businesses.
With the EMI scheme, companies can select employees who will be given the option to take shares over a certain amount of time, upon meeting specific criteria.
Company Share Option Plan (CSOP)
With a Company Share Option Plan (CSOP), employees have the option to purchase up to £30,000 worth of shares.
This CSOP scheme is suited to businesses that are not eligible for an EMI scheme and is advantageous as there are no Income Tax or National Insurance charges.
A CSOP scheme is designed to promote long-term commitment from employees who take part.
How do share options work?
Share schemes can vary and can also be tailored to suit your specific requirements. To understand which share scheme is the right option for your business, it is important to ask the right questions:
- Do you want employees to be able to exercise their share options immediately or at some point in the future?
- Can non-employees be given share options?
- Are share options dependent upon work performance?
- What is the size of your business?
Spencer Churchill Solicitors can offer specialist share scheme advice to make sure that you adopt the right scheme for your company.
The criteria of a Share Option Scheme
A share scheme has criteria that it must follow, and must address certain important points such as:
- how many shares the individual can purchase
- when the individual is able to exercise their share option
- how much the individual has to pay to exercise their share option
- what should happen in the event of employee dismissal or leave.
Common features of a share option scheme
It usually takes a certain period of time before an employee is eligible to take advantage of any share options and purchase shares. A three year period is standard.
A scheme should consider what happens in the event that an employee should leave the company and what is in place for redundancy leaves or leaves due to misconduct.
Why set up a share scheme?
There are a number of benefits to setting up a company share scheme.
Encourage employees to stay with your company
If employees own a share of the company, then they are more likely to stay with the company for the long-term. Replacing an employee can be a heavy burden – especially on start-up businesses.
Share schemes can help to retain employees and get them more involved in the company.
Encourage potential employees to join your company
Share options can be a useful method of attracting potential employees and bringing new talent into the business.
Boost performance
Research has found that employees who own a share of the company they work for tend to work harder because they recognise their direct value to the company and feel more responsible for it.
Productive employees mean a higher output for the company and will boost the overall success of the business.
Boost employee satisfaction
Share schemes can make employees feel more involved in the management of the business. For employees who feel like they have a say in the direction of the business and its success can boost satisfaction and employee contribution.
Enhance company value
Share schemes can create a happier, more productive workforce that truly believe in the company’s mission. Overall, this will enhance company value significantly.
Why choose Spencer Churchill Solicitors for share scheme legal advice?
We are an experienced and dynamic law firm offering specialist share scheme advice to companies looking to retain or recruit employees.
Our specialists can talk you through any queries you may have about adopting a share scheme as well as tailor a service that suits you and your needs, in line with official legislation.
We offer expert advice on growth shares, share incentive plans, unapproved share option schemes, employee benefits and more.
Transparent, open and tailored advice is at the heart of what we do and we strive to help businesses achieve their goals.
Share Options FAQ
How do employee share schemes work?
Share schemes are set up for employees to have the opportunity to own a share of the company they work for.
This means that employees can have more of an investment in their place of work and in driving its success.
What is the difference between shares and options?
Shares involve owning a piece of the business but options can be used at some point in the future that can become shares at a later date or in the event of an exit.
How are share options taxed?
Company share schemes are not free as shareholders are always subject to Capital Gains Tax but paying the top rate of this can be avoided.
Many share schemes, in particular EMI schemes, are very tax friendly. Our EMI share options solicitors can provide guidance on what is best for your business.
How much does it cost to set up a share scheme?
The cost of launching a share scheme can range from £5,000 and beyond to set up. This figure will vary and there will be additional costs along the way.