How can we help?
To access legal support from just £125 per hour arrange your free no-obligation initial consultation to discuss your business requirements.
Our team can assist you across all areas of employee incentive arrangements, including:
Shadow or phantom shares refer to the payment of a cash bonus on the achievement of set targets; but no actual shares are awarded. Phantom share schemes may be “phantom options”, which entitle employees to payments equal to the share price at the date of exercise less a notional exercise price or “phantom shares” which entitle employees to payment equal to the whole share value as at a date of vesting. Phantom rights can also be structured over any asset, e.g. fund or partnership units.
Our employee incentives solicitors can advise on which of the various employee share schemes might be best for your business.
With a phantom share option plan, we can advise on:
Phantom schemes normally work in very similar ways to more traditional share incentive schemes, but the payout is in the form of cash, rather than shares. The cash bonus awarded under phantom share schemes is typically based on the uplift in company share value. They can be granted on a discretionary basis to employees and non-employee directors and consultants and have no maximum award value, unless the company chooses to cap them for cash-flow reasons.
Employers benefit because staff who are awarded phantom share rights are motivated to increase the value of the company but without shareholders giving up a shareholding in the business. Instead, the employee obtains a right to receive cash upon set conditions, as opposed (for example) to an EMI, which provides an option to receive shares.
Phantom share rights may be offered (as opposed to share-based incentive schemes) to avoid exceeding shareholding dilution limits or to avoid minority shareholdings which may impact the active running of the company.
Such arrangements do, however, require the ready availability of liquid cash in order to pay employees what they are owed when the rights pay out.
For more information, don’t forget to read our FAQ: Phantom share schemes article.
For the employer, cash paid in the form of a bonus should be deductible for corporation tax purposes and can reduce the corporation tax owed for the year.
For the employee, on granting of the phantom share option, no tax is payable. However, the scheme is less tax advantageous than HMRC tax advantaged arrangement or non-tax advantaged share acquisition arrangements such as growth/hurdle shares as tax and national insurance must be paid on the cash bonus being received.
For a general introduction to employee share schemes, don’t forget to read our advice, What are employee share schemes and how do they work?
We specialise in start-ups and high-growth companies, so we have a wealth of experience advising on and administering a variety of share acquisition arrangements.
Our corporate solicitors are all recruited from top 100 UK law firms or large international businesses, and most have more than 10 years post-qualifying experience. Find out more about the senior solicitors who can help you here:
Our three transparent pricing packages are designed to give you the widest possible access to high-quality legal advice, whatever the size and nature of your business:
Straightforward access to senior solicitors at a competitive rate.
An affordable solution for businesses needing one-off legal support. Receive ‘City’ partner-level expertise at a fraction of ‘City’ prices.
Have legal peace of mind for £189 per month with additional support from £125 per hour.
A monthly subscription legal support package specifically designed for start-ups and smaller businesses.
Providing you with priority access to a dedicated panel of highly experienced solicitors.
Fully account managed quarterly subscription service for businesses with more complex legal needs.
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.
Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.
We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.