Sourcing the shares

One of the critical considerations when implementing an employee share plan is how the shares needed to satisfy options and awards granted are to be made available. The Practice Note: Sourcing shares for share schemes—comparing new issue shares, market purchase shares and treasury shares summarises some of the factors that will influence the decision made.

There are three potential sources of the shares:

1. •

   newly issued shares

2. •

   shares purchased in the market. The shares can be purchased from:

   1. ◦

      existing shareholders

   2. ◦

      an employee benefit trust (EBT), or

   3. ◦

      a public market, and

3. •

   treasury shares

The Practice Note: Sourcing shares for share schemes—comparing new issue shares, market purchase shares and treasury shares examines each of the above methods of sourcing shares looking at the advantages and disadvantages of each.

A limited company may buy back shares in itself, if certain conditions set out in the Companies Act 2006 are met. This is known as a share buyback or a purchase of own shares. For further information, see Practice Note: How to carry out a share buyback

Another alternative is for