Plan design: summary checklist
- Define commercial objectives
- Dilution implications
- Alterations to capital structure, articles and/or shareholder agreements
- Definition and treatment of good and bad leavers
- For private companies:
- Should there be an internal market in the shares?
- Will existing shareholders sell shares into the employee scheme?
- Terms on which leaving shareholders must sell
- Prepare draft valuation – implications for scheme structure
- If there is an employee trust, selection of trustees
- Whether any employees not subject to PAYE will participate
- Whether a new class of share capital required
- Rights and restrictions attaching to shares
- In company groups, which companies will operate schemes and in which shares; implications for use of statutory schemes
- Terms for share acquisition (e.g. exercise price)
- The time or times when scheme rights may be exercised
- The period over which the scheme is expected to operate
- Events which may cause accelerated vesting (e.g. company sale)
- Performance conditions and rules (if any) for amendment
- Relationship between vesting schedule and performance conditions
- Rules in the event of company sale, flotation, liquidation
- Rules in the event of a partial or conditional offer for the company
- Can scheme rights be exercised in part and if so, what rules apply
- Restrictions if any as to dates when scheme rights can be exercised
- Notice periods and arrangements for transmission of documents
- Will participants assume liability for employer national insurance and if so will this be within the scheme itself or a separate deed
- Design of employee materials and presentations
- Target date for implementation