The family run business was established by Ralph Vincent in 1973, who was later joined by his sons Stuart and Alec who run the operation today, and we have been working with them since 2009. Stuart looked to us for guidance to achieve their objective. After reviewing numerous options we recommended the HMRC approved Enterprise Management Incentives (‘EMI’) Scheme which provides for granting to employees the right to acquire shares in the business in the future at a pre-determined price. The benefit to the employee is that they do not have to commit to the purchase today yet are motivated to increase the value of the company so that they can purchase shares in the future (within a 10-year period), and any increase in value is not treated as a taxable benefit to the employee.
For example, say that today the company is valued at £3 million. Participating employees are granted an option to buy shares in the business any time within next 10 years, based on that initial valuation. This motivates employees to works hard to increase the market value of the company so that within say 8 years the company is worth £10 million. At this point they have the right to buy shares in a £10 million company for the price of shares in a £3 million company, and they won’t be taxed on the increase in value (although they will suffer capital gains tax should they sell their shares.)
We successfully implemented the share scheme, and it has proved very successful in driving the quality of their service delivery, improving employee motivation and retention, and ultimately in maintaining excellent relationships with existing and new clients.