Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Employees’ share scheme definition

What does Employees’ share scheme mean? A company programme that encourages or enables employees to acquire or hold equity or debt securities of the corporate group, typically via options, share awards or savings plans (for example EMI, CSOP, SIP or SAYE), and often operated with an employee benefit trust. In the UK, “employees’ share scheme” is defined in Companies Act 2006, s 1166. It covers bona fide employees or former employees of the company, any subsidiary, the company’s holding company or any subsidiary of that holding company, and also their spouses, civil partners, surviving spouses or civil partners, and minor children or step‑children. These...

Employees' share schemes under the Companies Act 2006: definition, corporate law exemptions, UK Listing Rules approval, FSMA exclusions, EBT drafting and tax-advantaged scheme eligibility

Published by a LexisNexis Share Incentives expert

Practice notes

Importance of the definition of employees' share scheme in Companies Act 2006

When putting in place an employee share incentive, it is common to design and draft it so that it qualifies as an ‘Employees’ share scheme’ for the purposes of the Companies Act 2006 (CA 2006). The reason is that several CA 2006 constraints do not apply to such schemes, allowing companies to rely on relevant exemptions when operating their employee equity arrangements.

In practice, the carve-outs most frequently used relate to CA 2006 provisions on:

the Allotment of Shares and the granting of options over shares
share pre-emption rights
financial assistance requirements (subject to specified conditions)
the transfer of treasury shares
the buy-back of a company’s own shares

There are also consequences of a scheme being an employees’ share scheme under the UK Listing Rules.

Care is needed to avoid unintentionally compromising the bona fide status of an employees’ share scheme by including individuals who are not within the definition. For example, a scheme created for the benefit of employees should...

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Web page updated on 21/05/2026

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