Advantages of using share option schemes

  • Incentivises employees to improve the performance of the company.
  • Can provide tax benefits and other advantages.
  • Helps attract and retain talented employees.


  • Share option plan.

How can we help?

  • In many cases, smaller companies will qualify to offer tax-favoured “enterprise management incentive” (EMI) options to employees. If this applies to you, we would usually propose that you set up an EMI option plan, but with flexibility to grant non-EMI options also in case where specific individuals do not meet the qualifying conditions for EMI.
  • For EMI options, there is a process to agree a valuation of the shares with HMRC which is not a requirement but which we could recommend in order to get certainty of the tax position.
  • At the outset, when share value is low, you may consider offering direct share ownership to key individuals, provided that you are happy to run the company with minority shareholders involved – this might require some amendments to the share rights in the articles, or the provisions of a shareholders’ agreement. A share option plan will be more appropriate for companies at a later stage of development once there is already some value in the shares as that value may lead to tax charges for individuals if you gave them share directly. A plan may also be more appropriate if you only want the individuals to have a share in the proceeds on an exit, rather than to benefit from a share ownership from the outset.
  • There are a number of different ways in which share incentive arrangements can be set up. The estimate given here assumes a “market-value” exit-based share option plan which would entitle employees to acquire shares on an exit, upon payment of a price per share equal to the share value when the option was granted. We would be happy to discuss what is appropriate to your circumstances and associated fees.

Typical legal fees: £5,000-7,500

This is assuming a straightforward exit-based share option plan for UK-based employees with no performance conditions. We would provide the rules and a pro forma of the relevant employee grant documentation for you to complete. 

 This does not include assistance with agreeing an EMI valuation with HMRC or other tax/accounting advice.