New Year's Resolution? Are you ready?

Posted by RM2 at 08:00 on 16 Dec 2020

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Suddenly it’s December … Where did this exceptional year go?

If you had big plans to put in place a share plan for employees this year, but you’ve not quite got around to it you could start working on a 2021 New Year’s Resolution now & have your employee share plan ready to roll by the start of April.

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 the Enterprise Management Incentive (EMI). Delaying implementation might mean you miss the boat entirely.

In short, delays cost money.

We don’t recommend rushing things. A 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 – contact RM2 today at enquiries@rm2.co.uk. Our advisers will happily schedule an initial call to discuss your share scheme and employee ownership requirements.