Joint share ownership plan (JSOP) meaning

What are JSOP awards? Jointly owned shares are exactly what the term suggests: shares held together by an employee or director and another party — either a company investor or, more typically, the trustees of an employee benefit trust (EBT). Joint share ownership arose as a substitute for other share incentive arrangements, for example share options, restricted shares or performance share plans (frequently delivered via nil cost options). Under a joint share ownership plan (JSOP), the value received equals the uplift in the share price after grant (usually plus a ‘carrying cost’). Consequently, a JSOP operates like a market value share option, albeit with a distinct tax outcome. In essence, the plan focuses value on growth arising after grant, rather than existing value at the time of award for participants today. Commercial rationale The JSOP model offers a number of commercial strengths when set against alternative award structures. These include: Compared with share options or performance share plans where share acquisition is deferred: ...

Implementing a joint share ownership plan (JSOP) is largely the same as adopting any other share scheme, except that where new shares are created, the share interest is issued at once rather than, as with an option, at a future point. The shares are also held jointly by the employee and a third party, as co-owners in law. Why establish a JSOP? Although JSOP awards offer an advantage comparable to a market value share option for recipients, when arranged and operated correctly and consistently, any profit realised under a JSOP award should fall within capital gains tax rather than income tax and National Insurance contributions. For more commercial reasons for JSOPs, see the Practice Note: Introduction to JSOPs—Commercial rationale. Who is the joint owner? The employee beneficially holds shares together with a third party (in substance, as ‘tenants in common’). Shares are commonly held jointly by an employee or director and a third party, either an investor in the company or, more frequently, the trustees of...

Basic structure of a JSOP The basic structure of joint ownership features two holders: the employee participant, who takes the growth interest, and the co-owner, who retains the remaining interest in the shares. In most cases, the co-owner is the trustee of an employee benefit trust (EBT) set up by the company, either expressly to support the jointly owned share arrangement or as a general employee share ownership trust. For this practice note, it is assumed that the co-owner is an EBT trustee. For wider background on joint share ownership plans (JSOPs), see Practice Note: Introduction to JSOPs. Funding the acquisition of the jointly owned shares The EBT trustee is usually funded by the company. There are multiple ways to finance this, and each method brings different consequences and considerations. Contribution The most straightforward option is for the company to make a contribution by way of gift to the EBT. This is the simplest route because it removes the need for loan documentation and avoids...

To: [ insert name of participant ] We write regarding the agreement that we entered into on [ date ] with you and [ insert name of the Company whose shares are under the JSOP award ] (the Company), under which we both jointly acquired shares in the Company with you thereunder (the Deed)...

To: [ insert name of Trustee ] I write in connection with the agreement dated [ date ] between you and me and [ insert name of the Company whose shares are under the JSOP award ] (the Company), pursuant to which we jointly acquired Shares in the Company (the Deed). Further to clause 6.1 of the Deed, the Company has confirmed that [ all of OR insert percentage of ] my Participant’s Interest in the Shares has Vested. Accordingly, I exercise my Sell Right under clause 6.2 of the Deed and require you to join me in the sale of [ all of OR insert number representing the percentage of the Shares which have vested ] of the Shares. Please arrange that sale at the earliest practicable opportunity and thereafter distribute the resulting sale proceeds in accordance with clause 6 of the Deed. My share of the proceeds should be remitted by cheque/by bank transfer to the following account: [ insert account details ]....

This Deed is entered into on the [ insert ] day of [ insert month ] 20 [ insert year ]. Parties [ Insert name ] of [ address ] (the Participant); [ Insert name of company ], a company incorporated in England and Wales (registered number [ insert]), whose registered office is at [ insert address ] (the Company); and [ Insert name of trustee ], incorporated in [ insert jurisdiction ] with registration number [ insert ] and with a registered office at [ insert address ], as trustee (the Trustee) of the [ insert name of trust ]. Background (A) The Company wishes to incentivise certain executive directors and employees within the Group by permitting them to acquire interests in its shares and has provided recommendations to the Trustee in connection with this. The Participant is an executive director or employee of the Group...