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The risks and challenges of using online platforms for employee share option schemes 

You’ve already set up and begun to establish your business, bringing together a valued team of employees, and now you want to take the next step by incentivising your team further using the significant tax and strategic benefits of an Employee Share Option Scheme (ESOS). So, what’s the best route to set up your ESOS?

A key question for you is whether to obtain bespoke tailored advice from an experienced lawyer or use an ESOS online platform. We always recommend using lawyers instead of online platforms to save you time and money in the future. We list the reasons for using a lawyer over an online platform below.

What are employee share scheme platforms?  

There are various platforms on the market, each one offering a paperless service that enables a pool of employee shares to be created, and for a scheme to be created and managed going forward using standardised templates. As you’d expect, it all happens online, and the platform will also provide guidance and assistance as you go along (including employee access).

This may seem like the most feasible option at first, however, online platforms can introduce issues down the line for your business, leading to unnecessary costs which you could have spent on getting actual legal advice from an experienced lawyer.

What are the pros of using a lawyer over an employee share scheme platform?

You’ll properly understand the documentation and so will your employees

We frequently advise clients who come to us after using online platforms to create documentation for their ESOS. As the platforms are template based, they cannot always provide a simple set of documents to suit company needs.  Instead the platforms generate multiple versions of documents  which are opaque and difficult for employees to understand.

A lawyer will be able to help you understand these documents, making sure the rewards and benefits for your employees are maximised.

You’ll get correct documentation tailored to your business needs

We see inconsistencies in template documents which will create operational problems down the line and on a value creation event. Errors in Enterprise Management Incentive (EMI) schemes are a particular headache on a transaction.

This is a particular problem for EMI options because it is difficult to make post grant changes to the option terms without affecting the overall tax efficiency.

A lawyer will make sure your documentation is correctly drafted and tailored to suit your individual business needs, factoring in any future events your business might go through. This can save you time and money overall, which can be better spent on growing your business.

You’ll get tailored legal support to suit your situation and goals

Every business is different, and online share scheme platforms don’t offer legal advice that factors this in.

Online templates are rarely tailored to individual requirements. One of our clients hadn’t been told about the implications of an employee leaving after they’d joined the ESOS and become a shareholder.

At this point, specific protections need to be built into the governing documents, to protect the future success of the business. Working after the event to create those protections, once the employee has become a shareholder, is complex and time consuming. As with most legal issues, these are best dealt with by a lawyer before the problem comes up.

Added to which key documents, such as shareholder authorities, investor consents, and permissions for a new round of options or equity, can often be overlooked by the platform.

What should be my first step to implement an employee share scheme?

A skilled, specialist lawyer will help you avoid those pitfalls, and by involving them early on in the process, you can save time and money in the future. As an expert in the subtleties and complexities of ESOS creation, a specialist lawyer will help you successfully plan ahead for your business, and manage risks more effectively too.

If you’re planning to set up an ESOS for your business, our team will be happy to help. Contact us by submitting our short contact form below and a member of our team will be in contact. You can also take a look at our article What are employee share schemes and how do they work?’ which provides a helpful guide, as well as some useful information, on the various routes and benefits available.

What next?

Please leave us your details and we’ll contact you to discuss your situation and legal requirements. There’s no charge for your initial consultation, and no-obligation to instruct us. We aim to respond to all messages received within 24 hours.

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