Presentation is loading. Please wait.

Presentation is loading. Please wait.

A Practical Guide to Implementing a Share Plan – Plan Design and Shareholder Liaison Matthew Findley.

Similar presentations


Presentation on theme: "A Practical Guide to Implementing a Share Plan – Plan Design and Shareholder Liaison Matthew Findley."— Presentation transcript:

1 A Practical Guide to Implementing a Share Plan – Plan Design and Shareholder Liaison Matthew Findley

2 1 Introduction  Equity-based incentives are firmly entrenched within UK companies  They present particular issues in an SME context  Key design considerations –Further your corporate objectives –Take account of your specific circumstances –Delivery of strategic goals  Shareholder liaison  Implementation nuts and bolts –What documentation do you need? –What do you need to ensure to minimise future administration?  Conclusions

3 2 Design Considerations – Overview  Who do you want to incentivise?  Structure of plan  Currency of plan  Quantum  Vesting criteria  Treatment of leavers  Impact of change of control  Tax  Accounting

4 3 Design Considerations  Who do you want to incentivise? –Founders –Senior management –Other employees  Structure of plan –“Conventional” awards Share options/performance shares Exercise windows if utilising share options –“Restricted” shares Flowering shares Growth shares Jointly-owned shares Nil-paid shares –HM Revenue & Customs approved plans

5 4 Design Considerations cont.  Currency of plan –Shares Source – existing shares or new issue? Number – linked to issue of individual quantum (see below) Valuation – relevant both at the outset and on vesting Possible need for a nominee Transfer, voting and dividend rights Liquidity  How will value be realised?  Creating a market -Use of an employee benefit trust -Issues for close companies -Allowing shareholders to transact with each other –Cash Phantom awards Long-term bonus awards

6 5 Design Considerations cont.  Quantum –May be influenced by market practice –More likely to be driven by the objective of the plan Annual awards?  Salary multiples Exit-focussed?  Proportion of sale proceeds/value on IPO  Vesting criteria –Three years from grant? –Exit? –Exit with long-stop date? –Performance conditions

7 6 Design Considerations cont.  Treatment of leavers –“Good leavers” –“Bad leavers” –Treatment of any shares received by “good leavers” Buy back? Identity of purchaser? Potential cost to company Retain until exit (if unquoted)?  Impact of change of control –What if plan is not exit-focussed? –Unquoted SMEs – usual approach –Quoted SMEs – usual approach

8 7 Design Considerations cont.  Tax –Do not lose sight of tax treatment in designing/implementing your plan –Use a tax-efficient wrapper if at all possible –Interaction with commercial objectives  Accounting –Model any accounting cost as part of the design/implementation process

9 8 Shareholder Liaison  Investor scrutiny of executive pay (including equity-based incentives) has never been greater  Relevance to SMEs  Unquoted SMEs –Case-by-case assessment –Formal shareholder approval unlikely to be needed –Approach heavily influenced by shareholder structure/profile  Quoted SMEs –Best practice to consult –Best practice –vs–pragmatism –Shareholder approval requirements

10 9 Implementation Nuts and Bolts – Documentation Required  “Conventional” share plans – share options/performance shares –Plan rules –Performance conditions –Board minutes adopting plan –Remuneration committee minutes approving awards –Formal grant papers “Global” deed of grant Individual deeds of grant EMI –Communications –EBT? –Post-grant EMI1 Annual return(s) –Ongoing administration

11 10 Implementation Nuts and Bolts – Documentation Required cont.  “Restricted” shares –Flowering shares/growth shares/jointly-owned shares/nil-paid shares Articles of association Shareholders’ agreement Plan rules Subscription/share purchase agreement EBT Explanatory communications Associated board minutes Post-transaction valuation check Tax elections (“section 431 elections”)

12 11 Conclusions  There are multiple ways in which equity incentives can be delivered in an SME context  Key design considerations –Structure of plan –Currency of plan –Vesting criteria –Tax  Position in respect of shareholder liaison will be heavily influenced by quoted/unquoted status and shareholder structure/profile  Design conclusions need to be carefully implemented –Impact on management time if not –Plan rules/Articles of Association likely to be the critical documents –Ensure ancillary papers fit-for-purpose for future use (if relevant) –Ensure deadlines in respect of reporting requirements/tax elections are adhered to

13 Copyright © 2012 Aon Hewitt Limited. All rights reserved. Aon Hewitt Limited, 8 Devonshire Square London EC2M 4PL Registered in England & Wales No. 4396810 These slides are intended only to highlight issues and not to be comprehensive, nor provide specific advice. Aon Hewitt Limited does not accept or assume any responsibility for any consequences arising from any person using or relying on the information contained in these slides. Authorised and regulated by the Financial Services Authority. Any Questions?


Download ppt "A Practical Guide to Implementing a Share Plan – Plan Design and Shareholder Liaison Matthew Findley."

Similar presentations


Ads by Google