The Unapproved Share Option Plan ("USOP") is a simple and cost effective way of providing share options to both employees and non-employees such as contractors.
About the Unapproved Share Option Plan
As a share option plan, the Unapproved Share Option Plan offers selected participants the opportunity to purchase shares in a company at a fixed price.
Individual performance conditions can be designed into the plan, helping to ensure rewards are only distributed when key corporate objective have been met.
It can be used as a stand-alone share option plan, or alongside the tax-advantaged Company Share Option Plan (CSOP) in order to provide top-up awards.
Benefits of an Unapproved Share Option Plan
- Relatively straight forward to set up – this means cost savings for you!
- Promotes retention of key individuals
- Offers share based rewards that can be linked to individual performance conditions
- Current shareholders are not immediately diluted
- Focuses participants to work toward established corporate objectives
How we can help you
At RM2, we believe in taking a consultative approach to building share plans and finding out precisely what our clients are looking to achieve. This approach helps us to deliver a professional and effective service, helping clients meet their goals and plan for the future. Our highly experienced team are well positioned to guide your company through every stage of the share scheme process, including:
The design will flow from your objectives, so the more precise you are the better. What is your business plan, and what you need from your employees to execute this plan successfully? Do you want to focus people on an exit? Do you want to reward all employees as a team? Do you have just one key recruit in mind? We will ask you lots of questions to tease out your objectives.
At this stage you will need to decide on any rights and conditions to attach to shares, such as performance conditions and leaver provisions. Don’t worry: we’ll recommend features for you. A key decision is the amount of equity you want to set aside for share schemes. We’ll help you with an indicative valuation and some equity modelling.
Once the design and modelling are complete, we will work through your company structure and identify what changes need to approved by shareholders. We will then prepare resolutions to be passed and work with you to obtain approval from shareholders.
The core of a share scheme is the set of rights and restrictions attaching to shares, and these are set out in the articles of association. We will prepare amendments so that these rights and restrictions strike the right balance between delivering value to employees and protecting the interests of other shareholders.
The share valuation can have an enormous impact on how employees are motivated and the tax treatment of the shares. We will prepare a valuation and agree this with HMRC. Just as importantly, we can help understand the meaning and implications of that valuation, and how you should adapt your strategy according to the result.
Communicating information about your share scheme to all the participants is vital its success. As standard, we will provide all clients with easy-to-follow notes explaining your scheme. We can provide further help and guidance on how to effectively promote your scheme if you wish.
Once your scheme is implemented it will need to be administered to ensure it remains compliant. We have the most experienced Operations team for share schemes in the UK, so you can be confident that your scheme is in capable hands.
We try to be as proactive as possible when it comes to monitoring your scheme’s performance. We can help improve any equity-based arrangements. You and we are always learning.
Employee Share Scheme Support
Most importantly, once an employee share plan is implemented , it is vital that it is administered effectively to ensure that:
- your share plan remains compliant
- all relevant documents are filed online with HMRC
- the intended tax benefits are achieved
- employees are kept aware of their awards and the benefits
- your share plans remain relevant
Next steps
We have successfully designed, implemented and administered over 1,150 share plans across a range of sectors, so you can rest assured your plan will be in the best possible hands.
If you would like to find out more about how an unapproved share option plan can help your business, why not call a member of our team directly on 020 8949 5522, request a callback using the button located at the top of the page, download our fact sheet or send an email to enquiries@rm2.co.uk.
