Global Share Option Plans
UK
Securities laws and regulation
Exchange control
Company law
Employment law
Plan communications
Data protection
Governing law
Tax treatment
Non-employee options
Other
Securities laws and regulation
Red flags
What are the key securities laws and regulatory obligations or restrictions in relation to granting options, exercising options, selling resulting shares or other relevant events? For example, would a prospectus or any filings be required?
Response
Securities law filings: There are no general securities law filing requirements in relation to the grant or exercise of options, or the selling of resulting shares, provided these are not offered to the public.
Prospectus: A new regime for public offers and admissions to trading (POAT) will be in place from 19 January 2026. The grant of non-transferable options should not fall within the general prohibition on making a public offer under the POAT regime. There are also a number of available exemptions, including de minimis thresholds and an exemption for offers to directors or employees where certain details of the offer are provided (which remain similar to the EU Prospectus Regulation in respect of the relevant exemptions available).
Regulatory: Employee share schemes are exempt from most key UK financial regulations including, in particular, the restriction on financial promotions. A different exemption would need to be used for non-employee options (including options granted to PEO employees – see more below). Non-employee options generally also need to be granted under a sub-plan or standalone scheme separate to the employee plan.
Exchange control
Red flags
Are there any exchange control restrictions, notification/filing, or approval requirements related to the exercise of options or sale of shares?
Response
There are no UK exchange controls in relation to the grant or exercise of options, or sale of the resulting shares.
Company law
Red flags
Are there any red flag company law and corporate governance considerations, for example, shareholder approval requirements or financial assistance restrictions?
Response
For private companies, there are no general corporate governance requirements that apply to the grant of options, unless the company has voluntarily chosen to follow a corporate governance code (other than in regulated sectors such as financial services).
Subject to the company's constitutional documents and/or any agreement with shareholders/investors, certain consents or approvals may be needed.
Employment law
Red flags
Are there any material employment law issues to be aware of, for example the requirement to consult employees?
Response
There are generally no employment law issues related to the grant of options to UK employees. There is no general requirement to consult employees on the terms of employee share schemes (subject to the terms of any works council agreement or similar).
Companies may grant and administer options for UK employees on a discretionary basis, provided such discretion is not applied in a discriminatory manner.
Plan communications
Red flags
Are there any requirements for the communications, for example, a translation into any language(s), and if so, which?
Response
There are no legal requirements to provide a document or information in a language other than English.
Data protection
Red flags
What are the key data protection requirements, if any?
Response
Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided, or a plan should include details on how to access a company's privacy notice.
Wider data protection obligations include registration with the ICO, reporting, data security and record keeping.
Governing law
Red flags
Will governing law and jurisdiction clauses be effective?
Response
In general, the governing law and jurisdiction clauses are likely to be effective, but the UK courts may also claim jurisdiction for questions which relate to a UK employment.
Tax treatment
Red flags
What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example tax on grant, filings or notifications?
Response
Tax on grant: The grant of options to UK employees does not normally give rise to any UK tax liabilities.
Tax on exercise: The exercise of options by UK employees will generally give rise to an income tax liability, normally calculated by reference to the difference between the market value of the shares on the date of exercise, less any exercise price paid to acquire the shares. Depending on the circumstances, there may also be an obligation to pay UK social security contributions, in the form of employee and employer National Insurance contributions (NICs), with income tax and NICs withholding.
Tax-favoured plans: There are a number of employee tax-favoured plans. EMI and CSOP are tax-favoured option plans commonly used by private companies. There are qualifying conditions for the company, type of shares, option terms and eligible option holders, as well as limits. Subject to these, both plans enable tax-free exercise of options, with the full gain on a subsequent sale of the shares potentially benefiting from the (currently lower) rates of UK capital gains tax.
Tax elections: On acquisition of restricted shares by an employee (including on exercise of an option), a UK tax election is usually recommended to be entered into between the employee and employer within 14 days of acquisition. This prevents potential employment tax liabilities arising in future under the UK 'restricted securities' tax regime.
Reporting requirements: By 6 July following the end of each tax year, companies must notify the UK tax authority of certain events relating to employment-related shares, options and other types of securities. There are also registration and notification requirements for tax-favoured plans.
Non-employee options
Red flags
Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?
Response
A non-employee adviser should seek independent tax advice, as a tax liability can arise on the grant of options, depending on the circumstances and value of the options. Note that non-employees cannot be granted tax-favoured options.
It will not be possible to rely on employee share scheme exemptions from a number of UK financial regulations, company law and listing requirements, so another exemption will normally need to be used (for example the one-off exemption from financial promotion restrictions). In addition, non-employees should not be granted options under an employee share scheme, and it is advisable to grant these under a sub-plan or standalone scheme separate to the employee plan.
Options may be granted to PEO/employer of record (EOR) employees, but this can give rise to penal tax and regulatory issues in the UK. Specialist advice should be taken before granting any options.
Other
Red flags
Are there any material employment law issues to be aware of, for example the requirement to consult employees?
Response
A UK sub-plan is recommended for UK employees – and for regulatory reasons this may be required.
