1. GANNONS IOD in Association with ESOP Centre Implementing Employee Share Plans Without Racking up Legal Costs

2. This session covers Background information Implementation checklist Common pitfalls

3. Collation of basic ‘core’ details Company/group Employee(s) / non executives / consultants Articles Share capital Constitution of the company & powers

4. Current shareholders What are the % of current holdings? Informal promises? Dilution

5. Exercise and take up of shares What if the employee leaves/is dismissed/dies? oTransfer? oBuy back? oPrice? Powers of attorney

6. Implementation Division of share capital Will this be necessary to:- oAccommodate desired percentage split between current/future shareholders oMake the award look more appealing New class of shares?

7. Authority to allot shares? Authority oArticles oMembers ordinary resolution oAutomatic under the Companies Act Is the authority current? Maximum number of shares that can be allotted?

8. Share valuation HMRC valuation Commercial valuation What basis are you using oCommercial value oMinority/majority valuations oActual market value oTax market value

9. Paying for shares Exit – usually out of proceeds of sale Entrepreneurs’ relief – tax advantages but will require funding Acquisition in other circumstances oVote a bonus? oNil paid shares o£10,000 loans to directors exempt from shareholder approval Financial assistance abolished for private companies (but not for plcs)

10. Documentation - unavoidable Award documentation Subscription letters Employee loan agreements Corporate documents oArticles/shareholder’s agreement oResolutions/power of attorney

11. More documentation Elections required to preserve CGT treatment NIC joint election – form to be approved by HMRC in advance Notification to HMRC Notice of for shareholder approval

12. Don’t overlook Investment advice – prohibited Discretion to award must be used fairly Supporting evidence of justification Clear communication – dilution in particular

13. The board meeting Can the director vote? Directors duties – reasoned approval Duty to promote the success of the company for the benefit of its members:- oLong term consequences oInterests of the company’s employees oThe need to act fairly at between members

14. Resolutions that may be required Increase in share capital Division of share capital Extension of authority to allot Consent to dis-apply pre emption provisions Revision to articles Shareholder approvals

15. Resolutions – private companies Alternative procedures oWritten resolution – will be the most usual oResolution at a meeting Filings required at Companies House

16. Final steps Execution of documents oDate of grant = execution of the option by the company oNew rules for execution where 1 director Companies House filings (note – penalties for late filing) oIs a statement of capital required?

17. Traps and pitfalls – in no particular order Employee holding shares – what will this mean? Have you got your corporate history correct? Did you get authority and deal with allotment issues? Have you considered the tax issues – notoriously complicated area

18. Traps and pitfalls If employees are to hold shares oUnintended consequences – giving away more than intended oArticles and shareholder’s agreement not fit for the job Timing HMRC reporting – missing the deadline and facing increased tax liabilities

19. ANY QUESTIONS? MORE INFORMATION ON OUR WEBSITE WWW.GANNONS.CO.UK