Share schemes issues and considerations

A number of factors will have an impact on the form of incentive scheme that is appropriate for a company. Alongside the relevant company's specific commercial objectives of the scheme (and the likely costs involved in implementing it), the following will be particularly relevant:

1. •

   whether the company is listed or unlisted, and the particular shareholder base of that company

2. •

   the tax treatment of the proposed share scheme, from both the employee's and the employer's perspective and whether a statutory tax advantaged scheme is feasible or appropriate

3. •

   the extent to which the company needs flexibility in operating the scheme, both in relation to the grant of new rights and rights which have already been granted, and the extent to which any discretion should be available to the company when operating the scheme (see Practice Note: Discretions in employee share schemes), and

4. •

   the accounting treatment of the scheme

Practicalities will also need to be addressed as part of the initial consideration of a share scheme—in particular whether newly issued shares will be used to satisfy awards granted under the scheme (therefore diluting shareholders’s