CSOPs are approved by HMRC, and therefore attract favourable tax treatment for both the company and the employee provided certain qualifying conditions are satisfied. The qualifying conditions relate to both the company, and the proposed option holder.
CSOPs can be subject to performance conditions, which means that employees will be motivated to ensure the conditions are achieved and their options are therefore capable of exercise. The company also has discretion in relation to which employees participate in the scheme.
Herrington Carmichael have assisted a UK leading sustainable forestry and harvesting company in implementing a CSOP.
This included the implementation of a new company structure, whereby employees were offered a share of the company to benefit from past and future growth, and responsibility for company performance. The scheme involved offering employees the option to a buy a percentage of the company’s shares, including the release of options in multiple tranches, to allow involvement of future employees in the scheme.
The CSOP allowed employees to own shares in the company, and therefore receive dividends, or sell their shares and realise the increase in value since acquisition.
The scheme successfully assisted the company in achieving profit targets, whilst also managing cash flow.
