We have selected a few typical employee share schemes as case studies. For reasons of confidentiality, only outline details are given. If you are interested in our experience of designing and/or administering share schemes in your sector, contact us now.
An award winning architects firm with a score or so of employees. The founder still owned the majority of the business with one other director owning a substantial majority of the shares.
The founder wished to encourage and reward this collegiate atmosphere and was concerned about the long term future of the firm. He began to consider employee ownership as a means of (1) giving an exit for existing shareholders and (2) to protect the long term future of the Company. In particular, although the Company tended to retain its employees due to the culture of the firm, an employee ownership structure would help to cement the culture with the ownership structure reflecting the way the Company was run.
Get the full story: EOT_Case_Study_2015.pdf
A wireless payment company wanted to incentivise senior staff to build shareholder value ahead of an exit - In 2006, we implemented a tax-efficient share option scheme for them, the Enterprise Management Incentive at an exercise price of £6.15 per share. The company was sold earlier this year for £117 per share. Several employees made six figure gains and 2 employees became instant millionaires.
Each year the company makes profits, the founder sells shares into a Share Incentive Plan (SIP) which then awards free share awards to all the employees (based on salary and service). The founder also sells shares into an EBT to cover Enterprise Management Incentive (EMI) options for key management above and beyond the SIP awards. Using the trusts and share schemes together means that the founder can sell his shares tax efficiently and enable management and employees to build a significant stake tax efficiently over time.
55 option holders, Wales – This research company wanted to provide an online cashless exercise facility to its option holders. RM2 was responsible for; finding a broker willing to undertake a cashless exercise, set up of the appropriate accounts and transition and administration of records onto an online portal to facilitate the effortless flow of a participant’s exercise request to a share transfer/sale. RM2 administers the plan and the employee portal on behalf of the company.
30 employees, London – This fast growing company is a specialist consultant in telecommunications and networks. From the outset, the shareholder directors wanted to create a share owning culture within the company based on superior performance. RM2 implemented an Enterprise Management Incentive (EMI) plan with option exercises based on stretching profit and turnover targets. RM2 also set up an Employee Benefit Trust (EBT) to grant the options and acquire shares from existing shareholders on exercises. This has prevented dilution and delivered value to the shareholders. Cross options between the principal shareholders were introduced by RM2 Community members to protect both the Company and shareholders.
100 UK employees, Basingstoke – The parent company planned a share offer to its global workforce on advantageous terms. For UK employees, RM2 designed and implemented a HMRC-approved Share Incentive Plan (SIP) involving employee purchased and matching shares. The Plan offered tax advantages for employees and NIC savings for the company. RM2 gave onsite presentations and provided telephone and email helplines for employees. RM2 also set up a dedicated website to launch the Plan and receive applications, which helped achieve a high take-up level. RM2 acts as Plan trustee and administrator.
200+ employees and partners, London and Nationwide – This Company provides independent financial advice to private and corporate clients throughout the UK. The company wished to incentivise its employees, directors and partners through performance-based equity awards. RM2 worked with the company to design and launch a wide range of incentives, including Enterprise Manabegemt Incentives (EMIs), a Deferred Share Purchase Plan (DSPP) and several Unapproved equity plans. RM2 administers the plans for the company and advises on the share-based payment costs to be charged to the accounts under option expensing.
2200 UK employees, UK Wide – Again the Overseas Parent Company wished to include its worldwide workforce in a share purchase plan. RM2 was responsible for the design of the plan for UK personnel and continues to carry out the ongoing administration. Employees purchase shares on a monthly basis through the HMRC approved Share Incentive Plan (SIP). The employees can also use their annual bonus or part of it to acquire further shares to the £1,500 per annum limit. Under these arrangements the employees can also track their share plans on a dedicated web-link.
For detailed guidance on all aspects of the design, implementation and administration of employee share schemes, call us on 020 8949 5522 and ask for a free consultation.