Share Incentive Scheme

1. Incorrect Valuation – May create unfair distributions or HMRC issues.

2. Tax Inefficiency – Improper structuring can trigger income tax instead of capital gains.

3. Poor Documentation – Ambiguous agreements can lead to disputes or HMRC scrutiny.

4. Eligibility Errors, Exceeding HMRC Limits or Failure to Notify HMRC –can invalidate options and carry penalties.

5. Shareholder Disputes – Lack of clarity on rights and exit participation may lead to conflict.

6. Leaver Disputes – Ambiguous good/bad leaver clauses can potentially result in litigation.

7. Regulatory Compliance – Failure to comply with Companies House and HMRC rules can have penalties.

Our corporate team anticipate these challenges to ensure the scheme delivers the intended benefits.

They can motivate and retain key employees while aligning their rewards with business growth and protecting existing shareholder value.

Growth shares typically only participate in value above a pre-agreed threshold, whereas ordinary shares can have full dividend and voting rights.

Qualifying trading companies and employees who meet HMRC employment and working-time criteria.

Incentivising Key Employees

Expert corporate lawyers guiding you through employee share option or incentive structures, such as growth shares and Enterprise Management Incentive (EMI) schemes.

Growth shares are potentially a tax-efficient and flexible way to motivate and reward key employees, directors, or management teams. They allow participants to benefit from the their hard work and therefore future increase in company value while protecting the interests of existing shareholders. They can be given immediately or under option arrangements over time.

Properly structured growth share arrangements align employee incentives with business growth, preserve control for exiting shareholders, and can be critical in the retention of key members of staff and succession planning for existing shareholders.

EMI schemes are a highly tax-efficient way for UK companies to reward, retain, and incentivise key employees. They allow selected employees to acquire shares at a future date, often at a fixed price, and can benefit from significant tax advantages when the business grows or is sold.

Properly structured EMI schemes align employee performance with company success, encourage long-term commitment, and can be crucial tool in attracting top talent.

At Ellis-Fermor & Negus, our corporate team advise businesses across the East Midlands on structuring, implementing, and managing employee share incentive schemes that are legally robust, commercially practical, flexible , and tax-efficient.

Advance valuation agreement is recommended to secure tax advantages, though formal approval is not mandatory.

Potentially, yes, terms can be set in the option agreement, but tax treatment should be considered.

Yes, leaver provisions in the agreement define what happens to shares when an employee leaves.

Yes. They can complement EMI or other approved schemes for maximum employee retention and tax efficiency.

Depending on complexity, a few weeks for a standard SME scheme; more complex or multi-tiered schemes may take longer.