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Optimising the ownership structure Maximising value from shares, options, trusts and tax

Optimising the ownership structure Maximising value from shares, options, trusts and tax Strand 3/afternoon. Panel. Robert Postlethwaite Chairman Chris Billington Wrigleys Graeme Nuttall Equity Incentives Field Fisher Waterhouse LLP Kevin Meehan

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Optimising the ownership structure Maximising value from shares, options, trusts and tax

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  1. Optimising the ownership structure Maximising value from shares, options, trusts and tax Strand 3/afternoon

  2. Panel Robert PostlethwaiteChairman Chris BillingtonWrigleys Graeme NuttallEquity IncentivesField Fisher Waterhouse LLP Kevin Meehan Employees Shares & Securities UnitHM Revenue & Customs

  3. Key issues • Choosing direct or indirect share ownership • Operating an employee trust • Using tax advantaged share plans

  4. Choosing direct or indirect employee ownership Chris Billington Partner Wrigleys Solicitors chris.billington@wrigleys.co.uk www.wrigleys.co.uktel: 0113 244 6100

  5. Choosing direct or indirect employee ownership • What is employee ownership? • Why share? • Incentives • Participation • Opportunistic

  6. Choosing direct or indirect employee ownership • Direct -v- indirect ownership • Does it make any difference? • Some advantages & disadvantages • tax treatment & formalities • realising value • protection

  7. Harnessing co-ownership to improve business performance 2 October 2007

  8. Operating an employee trust Graeme Nuttall Partner and Head of Equity Incentives Field Fisher Waterhouse LLP Solicitors graeme.nuttall@ffw.com www.ffw.com www.equityincentives.co.uktel: 020 7861 4717

  9. Operating an employee trust Uses of an employee trust, include: • Market maker • Warehouse • Providing an exit • Permanent owner • Operating share plans • Increasing productivity

  10. Operating an employee trust Market making • Regular dealing days • Joiners and leavers • The importance of Market Value (MV) • Does dealing day price = MV?

  11. Operating an employee trust Type of trustee • Corporate or individuals • Professionals or volunteers • Offshore or onshore

  12. Operating an employee trust Composition of trustee/directors • Company elected • Employee elected • Independent • Paritarian

  13. Harnessing co-ownership to improve business performance 2 October 2007

  14. HMRC Update Kevin Meehan Employee Shares & Securities Unit (ESSU)Room G52, 100 Parliament Street, London SW1A 2BQ

  15. HOW WE ARE ORGANISED

  16. Types of tax-advantaged schemes • Schemes that meet legislation have Income Tax and National Insurance Contributions (NICs) advantages (known as approved or tax-advantaged schemes). • Share Incentive Plan (SIP) • Save As You Earn (SAYE) • Company Share Option Plan (CSOP) • Enterprise Management Incentives (EMI) • Schemes that fall outside legislation do not have these Income Tax or NICs advantages

  17. Company Share Option Plan (CSOP) • Discretionary. • Up to £30,000 worth of share options can be awarded. Minimum of 3 years gap between grant and exercise of option to get tax relief. • Take- up. 3,030 live plans. In 2005-06, 120,000 employees were granted options over shares worth almost £760m at grant. Often used to incentivise executives and other key employees.

  18. Enterprise Management Incentives (EMI) • £100,000 of options for each employee. Total of £3m under option for each company. • For small high risk companies with less than £30m of gross assets. • Take- up - By 2005-06, 11,740 companies had granted options over £1.87bn of shares to around 122,000 employees.

  19. Save As You Earn (SAYE) • Must be offered to all employees who decide to save between £5 and £250 each month for a period of 3 or 5 years. • Tax and NICs free bonus paid at end of period. At end of contract employees can buy shares in company with savings at up to 20% discount. • Take-up - 960 live schemes. SAYE has declined in popularity in recent years as SIP has taken off. In 2005-06, 560,000 employees were granted SAYE options over shares worth £2.12 billion at grant.

  20. Share Incentive Plan (SIP) • Must be offered to all employees. • Tax/NICs relief kicks in at 3 years and 5 years. • Take-up -830 plans have been approved. Employee participation in SIP rose to over 4.5 million employees acquiring shares in 2003-04 – making SIP the UK’s most popular tax-advantaged all-employee share scheme ever

  21. Approved Schemes Update • SIP/SAYE Survey • EMI Survey • Oxera Survey • On-line filing

  22. Dialogue and debate Robert PostlethwaiteChairman Chris BillingtonWrigleys Graeme NuttallEquity IncentivesField Fisher Waterhouse LLP Kevin Meehan Employees Shares & Securities UnitHM Revenue & Customs

  23. Harnessing co-ownership to improve business performance 2 October 2007

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