New Year's Resolution? Are you ready?

Posted by RM2 at 08:00 on 16 Dec 2020

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.