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New Year’s Resolutions?

Posted on November 18, 2014

Suddenly it’s September… Where did the year go?

If you had big plans to put in place a share plan for employees this year, but you’ve not quite got round to it, it might not be too late. Alternatively, you could start working on a 2015 New Year’s Resolution now & have your plan ready to roll by the start of January.

Here’s what you need to do:

  • Know your business/shareholders. Your adviser will check your articles and any shareholders’ / investors’ agreements as part of the process, and you may need approval before you go ahead – do you have buy-in? Are all your company documents up to date and have all filings been completed correctly?
  • Clarify your objectives Whether it’s reward for past loyalty, or motivation for future growth, or a mix of the two, if you have a clear reason to implement the plan, everything else will fall into place much more easily.
  • Decide on participants. Is the plan for everybody, or just for the key drivers in your business?
  • Set some limits. How much do you want to share with employees?  What value do you think they should receive, and when?
  • Have a timetable. Make sure you’ve got a clear idea when you’d like to make awards to employees, and stick to it.

Having a solid basis means that you can put in place an employee share plan quickly. That’s important because needless delays have several consequences:

  • Employees who have been promised rewards by a certain date, but don’t get them, become disillusioned and demotivated – sometimes even to the point of leaving.
  • In a growing business, every day’s delay means an increase in share value – not what you are looking for with equity based rewards when you want to award shares/options with a low value to maximise long term reward.
  • A substantial change in your business could mean your business no longer qualifies for certain types of plan – particularly EMI. Delaying implementation might mean you miss the boat entirely.

In short, delays cost money.

RM2 can implement a share plan – if necessary – in only a few days but we don’t necessarily recommend rushing things. A more typical timeframe for an EMI plan might be three to four months from initial instruction to award/grant date, which would include seeking a valuation from HMRC.

Don’t delay – call today!

 
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