Calling all non-executives!
Tax efficient approved share option schemes (including Enterprise Management Incentives and Company Share Options Plan) are great news if you are an employee. Such plans operate to place participants in the Capital Gains Tax (CGT) regime rather than in an income tax one, and reduced tax means greater reward. Non-Executive Directors (NEDs) are not normally employees, and therefore cannot benefit under such plans. So what can be done for non-execs?
All too often, NEDs are awarded equity under an Unapproved Share Option Plan (USOP). Tasked with helping an executive board to navigate a safe course of passage for an entrepreneurial business, often for the whole journey from start-up, through fund-raising to commercial viability and ultimately to exit, it is not surprising that many non-execs are less than happy with the income tax charges associated with USOPs. Particularly when you consider that such inefficient incentive awards are probably not just in one company, but across the portfolio of businesses they mentor. So to all those NEDs out there holding or contemplating unapproved share options, we want you to know that there is a more tax efficient way to receive equity in the companies you advise.
Created: April 17, 2012, 10:34 am