48 legal focus
Employee share option schemes – sharing success
In these challenging times, employee share option schemes offer businesses a way of motivating, retaining and rewarding their employees by giving them a share in the success which they have helped to create, writes Caroline Lindon-Morris of Clifton Ingram LLP
In the aftermath of the recent global recession, many businesses have imposed pay freezes or have otherwise restricted employee benefits. Against this background, a share option can provide commercial benefits to both employer and employee.
A share option scheme is attractive to the employer because it provides an incentive which does not have the cashflow implications of a highly competitive salary or a cash bonus related to performance.
A share option gives the employee a right to purchase shares in the employer company at a predetermined price at some future date. There is no obligation imposed on the employee to buy the shares. This means that the employee has no financial risk because, if the market value of the shares falls below the price which the employee must pay on exercise of the option, then the employee can decide not to exercise the option. He loses nothing; but if the company increases in value over the exercise price after the grant of
the option, the employee can choose to buy the shares, making a potential profit if the company is then sold. In this way the employee shares in the growth which he has helped to generate.
There can also be tax advantages to a share option scheme. For example, the enterprise management incentive (EMI) scheme can be a very useful device for businesses which have less than 250 employees. The EMI scheme gives valuable tax incentives to both employers and employees by minimising the tax and national insurance contributions involved on the grant and exercise of the options, provided that certain statutory criteria can be met. These statutory criteria relate to the type of company and the terms of the share options.
Provided that the statutory criteria are met, EMI share option schemes are flexible. The employer has the discretion to decide on matters such as what class of shares can be purchased by the employee and whether these are voting or non- voting shares; what price is paid by the employee
Thames Valley based lawyer appointed to Panel of Deputies
Thames Valley based law firm Blandy & Blandy LLP has announced that partner Jonathan Gater has been the only solicitor in Berkshire to be appointed to the office of the Public Guardian’s Panel of Deputies
A deputy is a person who is appointed by the Court of Protection to manage the personal welfare or property and affairs of another person who lacks the mental capacity to do so themselves. All people applying to be appointed to the office of the Public Guardian’s Panel of Deputies must undergo a rigorous selection process.
The Court of Protection makes decisions in relation to the property and financial affairs and health and welfare of adults (and children in a few cases) who lack capacity. The Court also has the power to make declarations about whether someone has the capacity to make a particular decision.
As a panel deputy, Jonathan Gater will be asked by the Court to take on difficult or disputed cases in order to protect the financial interests of vulnerable people.
Partner Jonathan Gater specialises in all aspects of estate and trust administration, lifetime estate planning and Court of Protection work. He also assists a number of
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his clients with the day-to-day management of their affairs acting both as deputy and as an attorney, under a lasting or enduring power of attorney. Gater is also a professional member of solicitors for the elderly and in 2002 he became the under sheriff of Berkshire.
Gater, partner in the private client team at Blandy & Blandy, said: “I am pleased to have been appointed to the Office of the Public Guardian’s Panel of Deputies. Blandy & Blandy is one of a very few firms to have expertise in Court of Protection work and regularly deals with complex issues which require this specialist knowledge.”
The private client team advises clients on estate tax planning in conjunction with the preparation of wills and trusts; administering estates when someone dies and dealing with elderly client issues such as powers of attorney and Court of Protection issues. The team also advises high-net-worth individuals on all aspects of their wealth
THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2011
and the period during which the option must be exercised, as well as deciding how many and which employees will be granted the options.
The right to exercise the option can be made conditional upon the employee achieving performance targets. This gives a spur to the employee and enhances the incentive and motivational advantages of the share option from the employer’s perspective.
Smaller businesses, who expect a high growth within the next few years and who have a restricted cash resource at the present time, would do well to consider retaining key staff by offering share options.
Details: Caroline Lindon-Morris 0118-912 0227
c.lindonmorris@
cliftoningram.co.uk www.cliftoningram.co.uk
Jonathan Gater
and estate management and is particularly respected for dealing with complex issues that many firms do not have the expertise to handle.
Details: Jonathan Gater 0118-9516842
jonathan.gater@
blandy.co.uk
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