Nil paid shares and partly paid shares—practical considerations
Nil paid shares and partly paid shares—practical considerations

The following Share Incentives guidance note provides comprehensive and up to date legal information covering:

  • Nil paid shares and partly paid shares—practical considerations
  • What are nil paid shares and partly paid shares?
  • Why would a company implement a PPS arrangement?
  • Company law considerations
  • Advantages and disadvantages of using a PSS

What are nil paid shares and partly paid shares?

When shares are issued, their subscription price is normally paid in full at that time. Nil paid and partly paid shares (PPS) operate instead so that at the time the shares are issued, either all of the subscription price or a part of it remains unpaid at that time, with the balance remaining outstanding and not being payable until a later date, when the company calls for it to be paid, as follows:

  1. PPSs are where a part of the subscription price is paid at the time that the shares are issued, and

  2. Nil paid shares are where none of the subscription price is paid at the time that the shares are issued.

In summary, the participant is allotted shares in the company, and in return they agree to pay market value for the shares at the acquisition date, but pay nothing for them (in the case of nil paid shares) or pay a nominal amount for them (in the case of PPSs) and agree to pay the remainder when the company calls for it on a future date or future event. If structured and documented appropriately, the result should be that there is no tax to pay when the participant acquires the shares, and any growth in value after they

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