Jacksons Law Firm corporate/commercial lawyer Sam Dixon with valuable advice to businesses considering employee share schemes…
Currently, there is a particular focus on recruitment and retention of employees for many businesses.
Providing incentives to employees can help retain and motivate key members of staff who have the skills to make your business succeed.
Various types of incentives can be given, with companies now, more and more frequently, offering employees shares in the business.
Employees can be offered shares either by way of an immediate allotment or by way of share options.
Share options provide an employee with an option to purchase certain shares in the company at a certain future time, for a certain price, and can be more tax effective for the employee than an immediate allotment.
Many considerations need to be taken into account when deciding to offer shares to an employee.
Recently, we have seen a number of instances whereby an employer has awarded shares to an employee, but there has been a lack of adequate supporting documentation.
The employee has, subsequently, left employment of the employer, in some instances to join a direct competitor, but remained a shareholder in the employer.
This can then become a very difficult scenario for the employer to negotiate.
It is therefore imperative that, before issuing any incentive shares, you ensure that your company’s regulatory documents, including its articles of association and any shareholder’s agreements, include provisions that adequately regulate the terms of ownership of employee shares.
If you are considering implementing a scheme, you should always speak to your trusted advisors in the first instance.
If you would like to discuss further, please feel free to contact us.
Sam Dixon
Corporate/commercial lawyer, Jacksons Law Firm
