What are employee share schemes?
Schemes that allow employees or contractors to become shareholders in a company.
Why have an employee share scheme?
- To attract and retain staff.
- To motivate performance, as employee shareholders receive a portion of the company’s profits.
- To set up succession plans for businesses, to allow existing shareholders to step away over time.
Things to consider:
- Performance targets to be met before shares are issued.
- Timing of share issues, for example, this can be staged with a specified percentage of shares issued every two years.
- The consideration for the shares issued. Do employees pay market value or less for the shares?
- Tax consequences, depending on the value of the consideration.
- The buy-back of shares if the shareholder is no longer employed by the company.
- How decisions are made when the company has multiple shareholders.
- Legal compliance, for example, the Companies Act 1993 and the Financial Markets Conducts Act 2013.
We have a specialist employment and commercial business team at TODD & WALKER Law. For more information on setting up an employee share scheme, or business structuring generally, please contact Laura McPhail on [email protected]