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 / administrators
• Whether any individuals 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. option 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
• Modelling the financial implications for the company
• Notice periods and arrangements for transmission of documents
• Whether participants will assume liability for employer national insurance and if so, within the scheme itself or by separate deed
• Design of employee materials and presentations
• Target date for implementation