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
- 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:
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.
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
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.