Share Scheme Jargon Explained

Posted by admin at 15:51 on 13 Feb 2017

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The complexities involved in share scheme implementation and design are difficult enough to grasp despite the added complexity of technical jargon.  We've taken the most commonly used share scheme jargon and simplified:

Allot - Where a company issues new shares to a person, usually in return for cash.

Appropriate (in relation to a SIP) - Under a Share Incentive Plan when shares are allocated in trust for the benefit of a named employee.

EMI - The Enterprise Management Incentive is a government approved scheme that was introduced in the Finance Act 2000. It is aimed at SME's to encourage growth. The scheme offers great flexibility with considerable tax advantages. Options are offered to participants, which are capable of exercise at a later date.

Exercise - When the options are exercised and the shares are bought at the agreed price on the date of grant.

Grant - When the options are given (i.e. the contractual right to buy shares is created).

Lapse - When the right to buy the shares at the exercise price is lost.

Market value - If the shares are listed, an average of mid- market prices. If the shares are quoted but not listed, the market value may need to be adjusted to allow for distortions in the quoted prices. Unquoted shares may be valued by process of analysis.

Nil-cost options - Share options that can be exercised to acquire shares without payment being required as consideration.

Nominal value - The face value of a share. This is usually a nominal amount such as £1 or 1p. It bears no relation to the market value of the share but is determined by how the company's shares capital is denominated.

Pre-emption rights - Rights of first refusal of existing shareholders when new shares become available for sale and for when existing shares are to be transferred.

Share option - The right (but not the obligation) to acquire a share usually at a future date or dates at a price or on terms agreed at the time the option is granted.

SIP - The Share Incentive Plan is a statutory all employee share scheme under which employees are appropriated shares in trust, and/or have the opportunity to purchase shares.

Vest - When conditions have been met which allow shares under option to be purchased.

If you would like advice regarding implementing, administering, or optimising a share scheme, please call 020 8949 5522 and ask to speak to one of our advisers.