Share Schemes for Key Employees
Twenty years ago, employee share schemes were mainly the preserve of quoted companies. Now, no self-respecting ambitious private company can really afford not to include its key people in some type of share ownership.
The competition for talent, the enormous investment made in developing key people, the risks of losing technical specialists, the need to focus the top team on clearly defined goals – these are all compelling reasons why growing private companies turn to share schemes to meet their business goals.
Fortunately, with the range and flexibility of share schemes, there is something to suit most needs.
And RM2 has more experience than any other team in the UK in designing, implementing and operating employee share schemes in private companies. We’ve worked with hundreds of private companies and established more than a thousand schemes.
Concerned that people won’t be able to afford to buy shares?
Then use options or low cost Growth Share Plans (GSPs) or a Deferred Share Purchase Plan (DSPP).
A GSP provides a type of share that can be purchased by employees for a price that is far lower than ordinary shares.
A DSPP allows employees to spread the purchase price of your ordinary shares.
Concerned about immediately diluting founders’ ownership?
Then consider using exit-based share options.
Employees only become shareholders immediately before the sale of the business (or any other form of exit). Until that time, they will not dilute founders’ rights to vote or receive dividends. It also becomes easier to ensure that the only employees who benefit are those who have stayed with the company all the way through to the exit.
Concerned about what happens to leavers’ shares?
Then redraft your company’s Articles to include clear leaver provisions that distinguish between “good” leavers and “bad” leavers. Or go further and establish an Employee Benefit Trust (EBT) to act as a warehouse for leavers’ shares before they are allocated to others.
This gives you the power to ensure that the only employees who benefit from a shareholding are those who deserve it.
Wary of paying tax before you have the sale proceeds to pay?
Then consider one of the tax-advantaged share schemes specifically designed for growing private companies, such as the very flexible Enterprise Management Incentive (EMI) or the Company Share Option Plan (CSOP).
An EMI or CSOP can be designed so that, if any tax becomes due, it only needs to be paid when the shares are sold.
Contact RM2 today on 020 8949 5522 or via firstname.lastname@example.org for a free consultation with one of our share scheme experts.
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