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Issues to consider when drafting a settlement agreement—checklist (employer)

Issues to consider when drafting a settlement agreement—checklist (employer) The employer (and its advisers) should consider the following issues: Preparatory steps • Obtain from the employer: ◦ a copy of the departing employee's latest contract of employment/other relevant documents containing contractual terms (NB these may be in a staff handbook) ◦ details of the contractual benefits enjoyed by the employee ◦ relevant information regarding the employee's pension benefits ◦ relevant information regarding any shares/share options, etc held by the employee? Consider the Articles of Association/any relevant shareholder agreement, share scheme documentation, etc. See also Shares and share options below Status of negotiations • Will negotiations take place between the parties directly, or between their respective legal advisers? • How strong is the employer's negotiating position? How strong are the employee's claims or potential claims? In the case of dismissal, is there a fair reason and has the employer carried out a fair procedure? Is the employer in repudiatory breach? What is the employer prepared to offer initially, and is that...

Granting unapproved share options pursuant to a standalone share option deed—all-encompassing resource pack

Granting unapproved share options pursuant to a standalone share option deed—all-encompassing resource pack For more general information on unapproved share option schemes, see Practice Note: Unapproved share options. Step Details of step Resources required to implement step Timing of step 1 Determine whether the company qualifies to operate a tax-advantaged share scheme Unapproved share options are often, but certainly not always, used when a company, or the employee, does not qualify to grant or be granted tax-advantaged share options (ie enterprise management incentives (EMI) schemes, company share option plans (CSOPs), save as you earn (SAYE) schemes, and share incentive plans (SIPs)). It is therefore important to first determine whether a tax-advantaged share scheme is possible and appropriate. For further detailed information on the eligibility criteria for the tax-advantaged share schemes, see Practice Notes: When is an EMI scheme appropriate?, How CSOPs work and key features, How SAYE schemes work and key features and What is a SIP?. As early as possible but before step 3 2 Decide...

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Income tax and NICs treatment of EMI options on exercise flowchart

Income tax and NICs treatment of EMI options on exercise flowchart The enterprise management incentives (EMI) scheme is a highly flexible and tax-efficient scheme designed specifically for small or medium-sized companies. While the EMI eligibility criteria are very strict, this is countered by the fact that the income tax and National Insurance contributions (NICs) treatment of qualifying EMI options which have been implemented and operated correctly is extremely favourable. This flowchart details the income tax and NICs treatment of qualifying EMI options as detailed in sections 527–541 of the Income Tax (Earnings and Pensions) Act 2003. For an explanation of the capital gains tax treatment of EMI options, see Practice Note: EMI—CGT, including business asset disposal relief and corporation tax relief. This flowchart must be read in conjunction

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Introduction to employee share ownership schemes

This Practice Note provides an introduction to:•why companies have employee ownership models•the main types of share ownership models, and•issues to consider when implementing a share schemeFor a more detailed analysis into why companies use share schemes, see Practice Note: Why do companies use share schemes?Why do companies have employee ownership?Employee ownership typically happens in one of the following scenarios:•business succession or ownership succession—private owners, such as an entrepreneur or family business, decide to sell all, or usually, part of their share holdings to their workforce•insolvency or closure threat—employee buyouts can prove an effective route to recovery for businesses that might otherwise fail•independence—companies may decide that a significant and even majority employee stakeholding will demonstrate and help protect the company's independence•privatisation—the privatisation of various companies have provided occasional opportunities for employee buyouts, and •owner vision and incentivisation—as in the case of John Lewis or Arup Group, at the outset of the business or later on, the founder of a business opts for employee ownership. Alternatively, a smaller proportion of the equity...

UK Corporate Governance Code: comparison between 2012 and 2014 editions—checklist [Archived]

UK Corporate Governance Code: comparison between 2012 and 2014 editions—checklist [Archived] Checklist—2012 and 2014 editions of the UKCG Code compared This archived Checklist is a summary of how the 2014 edition of the UK Corporate Governance Code (UKCG Code or Code) differed from the previous edition published in September 2012. In September 2014, the Financial Reporting Council published a revised version of the UKCG Code following its two-yearly consultation on possible UKCG Code changes launched in April 2014. The 2014 edition applies to companies with accounting periods beginning on or after 1 October 2014. The following table shows how the 2014 edition of the UKCG Code differs from the previous edition published in September 2012. Provision 2012 edition 2014 edition Preface Wording specific to the 2012 edition and preceding review of the UKCG Code has been removed and the overall section revised. The Main Principles Updated wording to reflect the changes made to the main principle wording in Sections D and E. Provision...

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Outline timetable for an AIM admission

Outline timetable for an AIM admission This precedent timetable shows the main steps involved in an AIM IPO (where a UK company is applying for the initial admission of its shares to trading on AIM) and no prospectus is required. Impact Day – 12 weeks Event Responsibility All parties meeting All Circulate timetable Nomad Circulate draft list of documents and list of parties Nomad Circulate draft engagement letters Nomad Circulate financial due diligence questionnaire and legal due diligence questionnaire Reporting accountants and Company solicitors Impact Day — 11 weeks Event Responsibility Circulate memorandum on directors’ responsibilities and potential liabilities in respect of an AIM admission document Company solicitors Circulate memorandum on the responsibilities and continuing obligations of a director of an AIM company Company solicitors Circulate directors’ questionnaires, directors’ powers of attorney and directors’ responsibility letters Company solicitors/Nomad Return response to financial due diligence questionnaire and legal due diligence questionnaire Company Commence financial due diligence (including financial procedures review) Reporting accountants Commence legal due diligence Company...

Joint venture shareholders’ agreement—deadlock (50:50)

Joint venture shareholders’ agreement—deadlock (50:50) This Agreement is made on [insert date] 20[insert year] Parties 1 [Insert name of first shareholder] incorporated in England and Wales under number [insert company number] whose registered office is at [insert address] ([A]), 2 [Insert name of second shareholder] incorporated in England and Wales under number [insert company number] whose registered office is at [insert address] ([B]), and 3 [Insert name of the company in which the shares are held] incorporated in England and Wales under number [insert company number] whose registered office is at [insert address] (the Company). BACKGROUND (A) The Company, at the date of this Agreement, has in issue ordinary shares of £[insert nominal value] each, of which one ordinary share has been issued fully paid and is registered in the name of [A] and one ordinary share has been issued fully paid and is registered in the name of [B]. (B) The Company shall carry on business in accordance with the terms and conditions of this Agreement....

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Is it possible to grant an enterprise management incentives (EMI) option which can be exercised on an exit but which also allows the board, with the approval of the shareholders, additional discretion to permit exercise in other circumstances?

Is it possible to grant an enterprise management incentives (EMI) option which can be exercised on an exit but which also allows the board, with the approval of the shareholders, additional discretion to permit exercise in other circumstances? Case study Such discretion would be useful in relation to a family-run company, in the event that there is a deterioration in the health of the current majority shareholder, who is also the managing director, and it becomes necessary for the optionholder, who is to become the replacement managing director, to acquire shares in order to facilitate the running of the company. Can the future managing director be granted an enterprise management incentives (EMI) option which covers this eventuality? Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) sets out the requirements which must be met in relation to the terms of EMI qualifying options. These contain no restrictions on the circumstances in which EMI options may be permitted to be exercised, except that the option must be...

Is the grant of a nominal value share option by a listed company to a non-executive director unlawful financial assistance?

Is the grant of a nominal value share option by a listed company to a non-executive director unlawful financial assistance? Although the courts have held that the Companies Act 2006 (CA 2006) does not give a technical definition of ‘financial assistance’, CA 2006 does provide examples of the types of transactions which constitute financial assistance. Looking at these, we consider it unlikely that there is any financial assistance in the given scenario.  In regard to the point of whether the grant of an option to a non-executive director (NED) on this basis could fall within CA 2006, s 677(1)(a) as a gift, at least to the extent of the difference between the shares’ nominal value and their market value, it could be argued that a distinction needs to be made between where the shares being used to satisfy the option are being issued by the company and where the shares are being purchased in the market. Shares can be issued at any price, as long as they...

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Private Client weekly highlights—14 November 2024

This week’s edition of Private Client highlights includes: (1) Ballard v Buzzard, where rectification was ordered to validate pension scheme amendments despite defects in the execution of the deeds; (2) TA v The Public Guardian, which concerned the duties of a certificate provider for a lasting power of attorney; (3) the Civil Justice Council publishes its final report on the procedure to determine mental capacity in civil proceedings; (4) HMRC publishes new guidance on the abolition of the furnished holiday lettings tax regime; (5) Harrow School’s unsuccessful cy-pres application to expand and update its charitable objects, and (6) Raja v ATM Law, which involved a dispute over the beneficial interest in a property subject to a charging order and the validity of trust deeds.

Share Incentives weekly highlights—14 November 2024

This week's edition of Share Incentives weekly highlights includes (1) publication of Finance Bill 2024–25, (2) a change in the bonus rates for SAYE schemes and (3) a new Q&A which considers the requirements of the 'trustee independence condition' in respect of employee ownership trusts (EOTs), which was announced as part of Autumn Budget 2024 and for which draft legislation has also been published.