Motivating and rewarding key employees through share-based incentives


Author: John Forde


There are various ways to motivate and reward key employees through share-based incentives.

The optimum structure for any given company will depend on its specific circumstances and commercial objectives.

Enterprise Management Incentive (EMI) option plans are widely recognised as an attractive and very tax efficient structure and are therefore the first port of call for many of our clients.

However, not all companies will be eligible to put in place an EMI option plan (particularly larger companies, investment companies, or those in asset backed trades).

A Company Share Option Plan (CSOP) is an alternative form of option plan that also benefits from tax advantages. As its availability is not restricted to smaller companies, or those in specific trades, it is sometimes considered by companies that are keen to implement an option plan but cannot qualify for EMI.

If a company wishes to give employees an immediate equity stake, rather than implement an option plan, then growth shares and nil paid shares are worth considering. They offer a way to do this tax efficiently, although they are only really feasible for private companies due to stock market listing requirements.

Listed companies seeking to implement a growth share type structure might consider Joint Share Ownership Plans (JSOP) instead.

A more detailed overview on the various structures mentioned is set out in the linked notes below.

Company Share Option Plan

EMI share option plan

Growth shares

Joint Share Ownership Plan

Nil paid shares

We can work with you to help you find a share scheme that would align best with your business and other objectives.

John Forde, Partner, Fladgate LLP (jforde@fladgate.com)

 

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