When Gary Thornhill founded a new tech start-up, he wanted to encourage the right people to be by his side. In order to do so, he decided to offer share incentives in order to recruit the key talent needed to drive the business forward.
As a start-up, Gary was at risk of losing his potential employees to larger businesses – by offering share incentives, he would be able to secure the employees he wanted; if the business succeeded, his key team would benefit. This would also embed a long-term growth culture focussed on goals. He also wanted the share scheme to be tax-efficient.
At this point, Gary turned to Tim Ward, Head of Corporate in Cheltenham, for sound legal advice. Tim and the team worked with Gary to identify which scheme would be right for the business, what proportion of the company would be subject to the option arrangements, what would happen if an option holder left the business, and how to measure success.
The team concluded that an Enterprise Management Incentive (“EMI”) option plan was the right way forward. The EMI scheme was subsequently used as a key part of the company’s recruitment negotiations. New employees were able to build up meaningful stakes in the business on meeting certain milestones but without impacting on the founder’s overall control. A negligible buy-in cost was implemented for new recruits, meaning they could acquire shares over time, with returns taxed at only 10%.
Following the successful implementation of the scheme, Gary said: “ Tim, thanks for your work on this over the last couple of years. A top-rate professional job and you made it easy for us. You are my best experience to date of commercial lawyers by a mile.”