Can a UK Limited company (with standard articles) issue options?


2

I am about to start a limited company, myself and the other initial shareholders wish to be able to grant options to individuals who contribute significantly.

We understand that we can't issue shares because in the event that we get venture backing and the shares become worth something, then a grant of shares becomes immediately taxable, which might make it impossible for someone to accept them.

Are any amendments to the standard articles required to allow options to be issued?

The articles allow the creation of arbitrary classes of share with arbitrary conditions to be exercised at the option of the company or shareholder or both, but it seems that this doesn't allow options on shares to be issued?

(Or, if anyone knows of a UK private limited company that definitely has an options pool, then I can get their articles from Companies House, and have a look...)

UK Stock Options

asked Aug 27 '11 at 20:09
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James
121 points

1 Answer


2

My company, Resolver Systems, has an options pool. I don't recall having to do anything with the mem and arts to arrange that (it was a while back) but we did have to get advice to set up an EMI scheme. This is a legal structure that makes options issued with a strike price above the company's current valuation (eg. share price at last investment round) non-taxable at the time of issue. Your accountant can probably sort it out for you -- I think we paid about £2k to get everything arranged for grants to ten people. You have to fill in a form each year to tell HMRC about new grants/exercises/lapsed options, but it's pretty simple and once the scheme's up and running you can probably do it yourself.

answered Aug 27 '11 at 22:57
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Giles Thomas
1,540 points
  • Hmm okay. I was hoping not to have to pay hundreds or thousands of pounds for a lawyer, when that sort of money could be invested in something useful. – James 13 years ago
  • It may well be doable without an accountant -- we figured that our time would be better spent on the product, but then we were reasonably well-funded at the time. Check out the HMRC website -- the page is http://www.hmrc.gov.uk/shareschemes/emi-new-guidance.htmGiles Thomas 13 years ago
  • Ah, thanks for the link! – James 13 years ago

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