Home » Glossary

Glossary

Company Share Option Plan (CSOP) A tax-advantaged discretionary share option scheme which is traditionally used for selected directors, executives and senior management, but can be also offered on a wider basis. As the plan can be set up so that employees participate with no actual outlay of cash, benefiting if the share price rises, it can be used to involve all employees, including the low-paid and part timers.
Employee Benefit Trust (EBT) A discretionary trust that owns shares on behalf of employees for the purpose of attracting and retaining key staff.
Employee Ownership Trust (EOT) A trust created under the Finance Act 2014 that owns at least half of a company’s shares for the benefit of all employees. Owners who sell to an EOT enjoy complete exemption from capital gains tax.
Enterprise Management Incentives (EMI) A tax-advantaged discretionary share option scheme designed for fast-growing SMEs, with gross assets not exceeding £30m at the time the options are granted.
Growth shares Shares of a special class which only acquire a capital value if the value of the whole company exceeds a specified threshold.
Joint Share Ownership Plans (JSOPs) A discretionary scheme under which shares in a company are jointly acquired by an employee and an employee benefit trust.  The value of the trust’s interest in the shares is normally fixed at the starting price, while the employees enjoy the growth.
Long-term incentive plan (LTIP) The general term for a scheme, typically used for executives, in which conditional share awards and/or options (with an exercise price of zero) are granted and where vesting is conditional on achieving performance conditions, tested over a period of more than one financial year.
Save As You Earn (SAYE) Sharesave A tax-advantaged all-employee share option scheme. Employees use their salary to save up to £500 a month and after three or five years can choose to buy shares at what is usually a heavily discounted price.
Share Incentive Plan (SIP) A tax-advantaged all-employee share gifting and share purchase scheme. There are four ways employees can acquire shares under a SIP depending on which the company decides to offer: free shares of up to £3,600 per tax year; partnership shares bought by employees out of their salary before tax deductions; matching shares where the company can gift up to two free shares for each partnership share; and dividend shares in which further shares can be bought with the dividends from free, partnership or matching shares.
Share option The right to buy shares at an agreed price at a time in the future or sometimes immediately.
Drag and Tag Rights which may affect employee shareholders, among minority shareholders in general, when a majority shareholder buys or sells shares in the company.
Drag along rights A term used when a buyer makes an offer to acquire the majority stake in a company.  The majority shareholder is given the right to force or ‘drag along’ other minority shareholders, which would include employee shareholders, to join by selling their shares at the same price, terms and conditions.
Tag along rights A contractual obligation allowing a minority shareholder, such as an employee shareholder to ‘tag along’ when a majority shareholder sells his or her stakes in the company.  The minority shareholder may choose to join the transaction and sell at the same price and in the same circumstances as under the Drag.