Corporate issues in relation to share incentives
Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS
Corporate issues in relation to share incentives

The following Corporate practice note Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS provides comprehensive and up to date legal information covering:

  • Corporate issues in relation to share incentives
  • Employees’ share schemes and the CA 2006
  • What is an employees' share scheme?
  • Authority to allot shares and grant share options
  • Pre-emption rights
  • Financial assistance
  • Share buybacks
  • Shareholder approval
  • Prospectus requirements
  • Transferable securities
  • More...

This Practice Note focuses on some key corporate issues that arise in the context of share incentives including:

  1. the company law requirements that do not apply (or apply differently) in relation to employee share schemes falling within the Companies Act 2006 (CA 2006) definition

  2. the requirement for listed companies to gain shareholder approval before establishing an employees' share scheme

  3. how the prospectus requirements may be relevant to share incentives

  4. how financial regulation applies in connection with share incentives, and

  5. the relevance of the Market Abuse Regulation, (EU) 596/2014 (as amended) (the Market Abuse Regulation) and share dealing codes to share incentives

This Practice Note is intended to be a summary of the issues relevant to corporate lawyers. If further details are required, the advice of a share incentives specialist should be sought.

Employees’ share schemes and the CA 2006

What is an employees' share scheme?

When establishing a share incentive scheme for employees it is usual for the scheme to be drafted so as to constitute an 'employees' share scheme' falling within the CA 2006 definition. This is because a number of company law requirements do not apply to an employees' share scheme, including certain CA 2006 restrictions:

  1. on the allotment of shares and grant of share options

  2. in relation to pre-emption rights

  3. regarding financial assistance (subject to specified conditions), and

  4. in relation to share buybacks

CA 2006, s 1166

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