Nil paid shares and partly paid shares—practical considerations
Published by a LexisPSL Share Incentives expert

The following Share Incentives practice 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
  • The company's articles of association
  • Additional shareholder approval requirements may apply
  • Consumer credit considerations
  • PPS plans for public companies should only extend to employees
  • Advantages and disadvantages of using a PSS
  • Tax
  • More...

Nil paid shares and partly paid shares—practical considerations

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. In regard to the differences between nil paid and PPS:

  1. PPS 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 PPS) 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

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