Share Schemes, Options & Incentives
Motivating and retaining key employees
At Doyle Clayton, we understand that implementing an effective employee share scheme requires careful planning, legal expertise, and a deep understanding of clients’ business goals.
Our dedicated and experienced team of legal professionals is here to guide you through the entire process, ensuring that the employee share scheme is tailored to the specific needs and objectives.
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Understanding Your Business Goals
We believe that a successful employee share scheme starts with a clear understanding of a business’s goals.
Our experienced team will work closely to gain insights into the company's objectives, culture, and long-term vision in relation to the share scheme or other employee incentive.
By understanding your unique requirements, we can design a share scheme or incentive that aligns with your business strategy and add the maximum motivation to your employees towards shared success.
Designing the Share Scheme
We specialise in creating tailored share scheme solutions that suit the needs of the business and employees.
We will carefully assess various factors, such as the company's structure, employee demographics, and desired outcomes, to design a scheme that is both attractive, feasible and as tax efficient as possible.
Specifically in designing a Share Scheme or incentive, we can:
- Discuss the various difficult share scheme structures to ensure that the most appropriate structure is implemented which may include enterprise management incentives (EMI), growth shares, unapproved options or LTIP’s.
- Determining eligibility criteria and defining the allocation of shares, taking into consideration factors like employee tenure, performance, and contributions to the company's growth.
- Establishing vesting schedules and performance conditions that align with the business objectives, ensuring that shares are earned over time and in line with predetermined goals.
Legal Compliance and Documentation
Navigating the legal complexities of employee share schemes can be challenging, but our team is well-versed in the applicable laws and regulations.
We will ensure that the share scheme is fully compliant with relevant legislation and regulatory requirements, protecting your business and providing peace of mind.
- Draft all necessary legal documentation, including share option agreements, plan rules and Shareholders’ Agreements to implement the arrangement in a compliant and comprehensive manner.
- Liaise with the company’s accountant to endure that any valuation and registration requirements are met in full.
Employee Communication and Engagement
Implementing an employee share scheme requires communication and engagement with the workforce in order to ensure that the incentive is understood, and as effective as possible.
We understand the importance of clear and transparent communication to ensure that employees fully understand the benefits and mechanics of the scheme.
- Develop engaging and informative communication materials that explain the purpose, benefits, and details of the share scheme in a user-friendly manner.
- Conduct workshops and training sessions to educate employees about the scheme, their rights as participants, and the potential rewards.
- Providing ongoing support and guidance to address any questions or concerns from employees throughout the implementation process.
Some of the popular Incentives we can assist with
EMI Options are a tax-advantaged share option scheme approved by HM Revenue & Customs (HMRC) in the United Kingdom.
EMI Options are specifically designed for smaller, high-growth companies to attract and retain talented employees by granting them the right to purchase company shares at a predetermined price.
Some of the key aspects of EMI Options are:
- EMI Options offer significant tax benefits for both employers and employees.
- Employees are generally subject to lower tax rates and can potentially qualify for Business Asset Disposal Relief on capital gains.
- Companies must meet specific criteria, including having gross assets of £30 million or less and fewer than 250 full-time employees.
- EMI Options can be tailored to meet the unique needs of the business, including vesting schedules, performance conditions, and exercise periods.
This flexibility allows you to design a scheme that aligns with business objectives and incentivises employee performance.
Growth Shares are another popular share incentive structure that allows employees to benefit from the future growth of the company.
Unlike traditional equity shares, Growth Shares provide employees with the opportunity to participate mainly in the increase in the company's value over a specified period.
Some of the key aspects of Growth Shares include:
- Growth Shares entitle employees to a portion of the future growth in the company's value, typically upon a triggering event, such as an acquisition or IPO.
- Growth Shares are often subject to performance conditions, ensuring that employees are rewarded based on the company's success and specific performance targets.
- While employees holding Growth Shares may benefit from capital appreciation, they may have limited voting rights or rights to dividends until certain conditions are met.
Unapproved Options, also known as non-statutory options, are a flexible and customisable type of employee share option scheme that does not qualify for the tax advantages of EMI Options.
While they do not offer the same tax benefits, Unapproved Options can still be an attractive incentive for employees because:
- Unapproved Options allow businesses to design bespoke share option schemes with greater flexibility in terms of eligibility criteria, vesting schedules, and exercise prices.
- Unlike EMI Options, Unapproved Options are subject to income tax and National Insurance Contributions (NICs) on the difference between the exercise price and the market value of the shares at the time of exercise so are generally considered relatively tax inefficient.
Over the last five years our team have advised on over 100 employee incentive arrangements including:
- Advising a cyber security business on a refinancing from a private investor which was combined with an EMI Option incentive scheme for key managers. As part of the refinancing additional funds were received to assist in the development of the business, and the EMI Options ensured that key staff were retained as part of that business plan.
- Advising an established IT managed service business with an EMI Option scheme with growth shares to maximise the incentive and tax efficiency of the arrangement.
- Advising an IT managed service business on an EMI Option incentive for a start-up IT Managed service business.
- Advising a plc in the IT sector on an LTIP arrangement for the key management team.
- Advising a plc in the hospitality sector on an LTIP arrangement for the key management team.
Get in touch with Thomas Clark