The RM2 Partnership has clients in almost all business sectors. The following are a small selection of case studies. For reasons of confidentiality, only outline details are given and client names are omitted.
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Advanced systems for military aircraft
50 employees, Hampshire. This company is a relatively small player in an international market place. Cash availability can be uncertain. Management decided that a broad based share option scheme would be an effective way to retain and motivate staff even when cash is short. The company asked RM2 to implement EMI share options for 30 staff. RM2 also put in place an Employee Benefit Trust to grant the options. Subject to cash availability the trust will offer to repurchase shares from employees so that they can enjoy a cash benefit at a low tax rate.
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Civil engineers for large retail outlets
80 employees, Essex. The two principal shareholders were keen to retain key staff. They were also seeking to reduce their holdings and receive value for their shares, but without introducing a third party. RM2 suggested that key staff be offered EMI share options, the shares for which would be purchased at fair value from the principal shareholders by an employee trust funded by the company. The transaction was at arms' length and the principal shareholders should pay a low rate of tax on their sale. The employees will also pay a low rate of tax on their share option gains. Their exit will be provided by a trust repurchase of shares or a sale or refinancing of the company.
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Support services for independent house-builders
25 employees, West Scotland. This rapidly growing company felt that all employees should have the opportunity to buy in to the company's future through a save-as-you-earn share option scheme. Having initially received incorrect advice from a firm of Scottish solicitors, the company approached RM2 who implemented the plan and arranged for Yorkshire Building Society to act as savings carrier. RM2 also put in place an EMI share option scheme for selected senior staff.
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Supply of staff for temporary and permanent assignment
200 employees, Surrey. Staff loyalty and morale is crucial to the success of this business. The company asked RM2 to design a staff share purchase scheme. RM2 implemented a Partnership Share scheme within a statutory Share Incentive Plan. Take-up levels exceeded 80 per cent. RM2 also implemented EMI share options for senior staff. The company used these scheme positively to communicate with staff about company performance, and also used the schemes in external public relations. The company was recently sold and all participants in the company share schemes made a substantial cash profit. This company was used as a case study by the government in a national campaign to promote the Share Incentive Plan.
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Packaging manufacturer
60 employees, Merseyside. This company was seeking a method of incentivising staff that would give them a sense of participation in the business and also tax efficient rewards. RM2 implemented a free share scheme within a statutory Share Incentive Plan. Free shares are offered on a rolling basis every year. Early leavers are penalised by forfeiture of the shares. Those who remain with the company can remove their shares from trust after three years and sell them back to the trustees for cash if they so wish. If the shares are withdrawn after three years, their original value is taxable but any gains are tax free. If withdrawn after five years or more, the whole of the value is tax free. Shares repurchased by the trustees are used for further rounds of incentives.
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Design consultancy, West London
60 employees, West London. This company has a strongly all-inclusive culture and was looking for a combination of schemes to provide free shares, share purchase and also share options for senior executives. RM2 implemented a Share Incentive Plan, which was used initially to provide free shares on an all-employee basis. Subsequently employees were given the opportunity to acquire further shares out of income before deduction of tax or national insurance contributions. A large proportion of the employees chose to do so. Additionally, RM2 implemented a tax efficient share option scheme for key employees. All shares to date have been sourced from a departing shareholder. This company was used as a case study by the government in a national campaign to promote the Share Incentive Plan
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Finance House specialising in Russian shares
120 employees, City of London. Most of the UK employees of this FSA regulated company are not UK domiciled. Such individuals are taxed only on earnings arising from UK employment and on other capital or income remitted from abroad. RM2 established an offshore employee benefit trust which is able to accept payments from the company for the general benefit of employees. Sums held within the trust accumulate free of tax. When the trustees decide to pay out benefits to a beneficiary the tax payable depends on the beneficiary's country of residence at the time. Following recent changes to the law, a corporation tax deduction is no longer available on payments made into trust but will normally be available when benefits are paid out that are subject to UK tax and national insurance.
Further help and information on employee share schemes
For detailed guidance on all aspects of the design, implementation and administration of employee share schemes see "Employee Share Schemes: a Guide for Directors" (2006/07 edition). You can view the Guide online or order a free copy here. Or ask for a free consultation.
