New Year’s Resolution? Are you ready?
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.