The following Share Incentives practice note Produced in partnership with Simon Adams of RSM UK Tax and Accounting Limited provides comprehensive and up to date legal information covering:
The opportunity to subscribe for or purchase shares nil or partly paid has been and continues to be a commonplace means of broadening share participation.
The underlying rationale is typically to allow individuals to hold shares in the company like other shareholders and possibly to have similar rights, but to defer the payment for those shares. This gives a commercial solution and may give tax advantages but also gives the individual potential liabilities with the subscription price.
Such arrangements are similar to an option, so that payment of all or some of the purchase price need only be made at a later date or on the occurrence of certain events, such as a company sale or a listing, or when the company issues a call for the unpaid amount.
The key distinction from options is that individuals acquire the shares at the outset. The terms of nil paid shares can be structured to suit commercial needs and these will need to be provided for in the company’s articles of association, including:
payment of outstanding amounts set to an agreed schedule
provisions for when an individual’s relationship with the company comes to an end
establishing certain dividend or voting rights
Companies wishing to issue partly paid shares need to ensure the company law requirements for the issue of shares, particularly those not
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