- Will the employee incur a charge to tax if shares are sold within
a certain period?
- What are the risks of unexpected tax charges (usually called ‘chargeable
events’)?
|
From a wider perspective: |
- Must the scheme be available to all employees?
- Is there any limit on the amount that can be put into the scheme?
- What does the scheme do to the share structure of the company?
Is there a risk of dilution? Does the company receive any money from the
employee?
- Will the scheme give rise to employee participation in the company
to a degree which ‘management’ may find unacceptable?
- How free are employees to sell the shares and thus rid themselves
of the links with the company which these schemes are meant to foster?
- How flexible are the schemes? Clearly, approved schemes will be
less flexible than unapproved schemes since they have to conform to statutory
conditions, but how flexible are they?
- What financial risks are inherent in the scheme (shares can go
down as well as up)?
- From the employee’s viewpoint, share options have attractions over
other share plans in that no money has to be invested, there is no risk
of loss since options do not have to be exercised and success can lead
to a very high rate of return owing to the element of gearing involved.
|
The battery of sets of rules and factors makes this
area complicated. In this book it is not appropriate to cover every detail;
as such only the principal points will be considered in relation to each
scheme. However, some other general points must be grasped. |
First, this is a political minefield. Some believe
in the value of share schemes as ways of encouraging better performance
by executives and general loyalty of the workforce as a whole. A profit-sharer
tends to take a longer-term view of company, is less inclined to leave |
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