Jeremy Glover (Share Schemes)

A deferred share bonus plan is a type of long-term incentive plan, typically put in place by quoted companies or those in certain sectors (such as the financial services sector). A deferred share bonus plan is a hybrid plan that combines awards payable or potentially payable under an annual bonus plan with a long-term incentive share plan. Under them, part of the participant’s bonus is delivered in shares instead of in cash, and the relevant shares are not received until the end of a deferral period, and subject to continued employment. There are no statutory requirements for these plans. This Practice Note introduces the concept of a deferred share bonus plan, the requirements relevant to its implementation, the types of awards granted pursuant to such a plan and the tax treatment of such awards.

This Practice Note focuses on the requirement to consult the Takeover Panel in certain circumstances where the trustee of an EBT acquires shares in a company. It looks at the Takeover Panel’s role, the specific requirements which are relevant under the Takeover Code, and the factors which the Takeover Panel takes into consideration when determining whether the Takeover Code requirements have been triggered.

This Practice Note covers the application of the Investment Association (IA) Principles of Remuneration to employee benefit trusts (EBTs). It details the key messages that the IA Principles of Remuneration provide generally and then details the specific IA guidelines relating to EBTs. Finally, this Practice Note analyses the consequences for companies of noncompliance with the IA remuneration principles.

This Practice Note details the main differences between offshore employee benefit trusts (EBTs) and onshore EBTs. The Practice Note considers what makes an EBT either offshore (not UK tax resident) or onshore (UK tax resident), covers the notification and registration requirements associated with setting up and EBT, and includes a high level comparison of the income tax and capital gains tax (CGT) treatment of both onshore and offshore EBT.

This is a summary of the main steps that are required in order to establish an employee benefit trust (EBT). This Practice Note examines the potential issues when identifying who the settlor, trustee and beneficiaries of the EBT will be and examines the necessities of obtaining approvals for the establishment of the EBT and drafting the necessary documentation. Finally the Practice Note looks at the alternative methods of funding the EBT.

This Practice Note introduces the basic concepts of an employee benefit trust (EBT). The Practice Note also provides an overview of the importance of the written trust deed and outlines the basic tax and accountancy treatment of an EBT.

This precedent set of board minutes can be used by private and public listed companies to approve the establishment of a new employee benefit trust (EBT). The board minutes also seek to approve the initial use of the EBT and have optional provisions to approve the trustee of the EBT acquiring shares from the company to satisfy options/awards granted to its beneficiaries and to approve entry into related other documents that may be proposed in connection with the establishment of the EBT..

This Precedent set of board minutes can be used by a company to approve the establishment of an employee ownership trust (EOT), in preparation of a controlling shareholding in the company being acquired by the EOT.

An employee benefit trust (EBT) is generally terminated by the perpetuity period (normally 125 years) coming to an end, the sponsoring company being wound up or the trustee resolving to terminate the EBT. These are precedent minutes of a meeting of the board of directors of the sponsoring company pursuant to which the company approves the termination of the EBT.

This is a precedent deed of termination entered into by the settlor company and the trustee of relevant employee benefit trust, pursuant to which an employee benefit trust can be terminated.

This is a Precedent loan agreement between a group company and the trustee of an EBT pursuant to which the group company loans money to the trustee of the EBT for a specific purpose — to acquire shares in the company or a group company.

An operating agreement generally sets out the terms upon which the trustee agrees to satisfy existing and/or future awards granted under an employee share scheme using shares held or to be held under the terms of an employee benefit trust (EBT). This is an example precedent operating agreement that legislates how the company and the trustee will operate, and how the trustee of the EBT will be funded.

This is a precedent trust deed to establish and regulate an employee benefit trust for the provision of benefits to certain employees and former employees and their dependants.

Pursuant to the legislation governing employee shareholder shares contained in section 205A of the Employment Rights Act 1996, the employee must receive advice from an independent adviser as to the terms and effects of the proposed employee shareholder agreement with the company. This is a precedent letter from an independent adviser to the employee formally recording initial oral advice given to the employee by telephone or in a meeting. This Precedent has been drafted in conjunction with Jeremy Glover of Reed Smith. As of 1 December 2016, no new employee shareholder status arrangements can be entered into and still benefit from the tax-advantaged status, and therefore it is now unlikely that any new arrangements will be set up. Any employee shareholder share arrangements implemented prior to this date remain unaffected. This Precedent is for illustrative purposes only as it reflects the position up to 1 December 2016. This document has been archived and is no longer maintained.

Although the trustees of an employee benefit trust (EBT) are independent and can exercise the powers of the EBT as they see fit, they must act wholly in the best interests of the beneficiaries and may be guided by the relevant company to undertake certain actions to that end. Most operating agreements between the company and the trustees of the EBT will require that the company notifies the trustees of any proposed grant of share options or share awards by the company where it is intended that shares held or to be acquired by the trustees of the EBT will be used to satisfy such awards. This Precedent is an example letter the company would write to the trustees notifying them that the company is proposing to grant options/awards and requesting that the trustees agree to satisfy such options/awards at a later date.

If a trustee of an employee benefit trust has agreed to satisfy share awards or options, the trustee will need to be notified of when the awards vest or when the options are exercised. This precedent is an example of a letter the company would write to the trustee notifying them that awards have vested or options have been exercised and requesting that the trustee transfer the shares to satisfy the awards/options in line with the trustee’s previous agreement.

As trustees of an employee benefit trust (EBT) are independent from the company, each time the company wishes the trustee to grant and satisfy awards/options, it must request in writing for the trustee to exercise its discretion to agree to do so. This letter is an example of such a written request. The letter is written with particular care to avoid, as far as possible, potential early tax charges pursuant to the disguised remuneration legislation contained in Part 7A of the Income Tax (Earnings and Pensions) Act 2003.

Section 218 of the Inheritance Tax Act 1984 creates an obligation for any person, in the course of a trade or profession, other than the profession of barrister, who has been concerned with the establishment of a non-UK employee benefit trust (EBT) to notify HMRC of the EBT’s establishment within three months where such person knows or has reason to believe that the settlor was domiciled in the United Kingdom (with effect from 6 April 2025, where such person knows or has reason to believe that the settlor was a long-term UK resident) and that the trustees of the settlement are not or will not be resident in the United Kingdom. This is a precedent letter providing such notification to HMRC.

This precedent is for a trustee of an EBT to be able to delegate specific powers which it has under the relevant trust deed in relation to a proposed takeover or other significant share sale transaction. It provides limited authority to an individual attorney to effect the sale. Generally the trustee will want to limit the scope of the attorney's powers to what is strictly necessary to enable the sale of the EBT shares to the buyer.