Company Shares – An Employee DilemmaWritten on January 3, 2017 by Kirk Rice LLP
The Question:
I left work recently and have received a letter which requires a quick decision about what I do with my company shares in the employee savings scheme and I would like to understand this.
Kirk Rice LLP answers:
Thank you for the enquiry and corresponding letter, I’ll explain what you can do. You were employed by a company listed on the London market and the company shares are readily tradeable. The company shares that have been purchased for you in the employee share scheme are subject to the same Tax and National Insurance treatment as any extra salary or bonus you may have received. Hence, your options appear complicated because these liabilities must be settled by the scheme.
The market value and the dividends of this company will vary and you may feel you understand the potential risks having worked within the organisation. Over the coming months, what you knew and thought may not come to fruition, as the senior management strategy has to meet challenges of changing conditions that you may no longer be aware of. Many investors seek to reduce single company risks by holding a variety of industries, business sectors and covering activities spread over many geographical areas. If you already hold a portfolio of such assets, you should consider whether the addition of this company may help achieve better diversification of risks, or provide an opportunity of profit that is worth the risk. If you need an opinion about whether any listed company shares are worth holding or selling you’ll need to talk to a stockbroker (they are permitted to give such advice). There are a number of broker opinions available on the websites of the popular share dealing services too.
If you do nothing (or instruct the scheme to follow Option 1 in their letter to you) and all the shares are sold, the liabilities and costs are deducted leaving you with the balance as cash.
If you want to continue to hold the shares into the future or control the date of the sale of your company shares, the other options are worth considering. Option 2 enables you to personally pay the costs by cheque and then ALL your shares are passed to you, which is potentially the best long term outcome, if the company and its shares perform well. Option 3 allows the liabilities and costs to be met by selling sufficient company shares, and then transferring the remaining company shares into your ownership and you’ll probably receive a small amount of balancing cash.
I trust this is helpful and you are able to make your decision accordingly within the 21 day period.
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Any reader interested in discussing this topic further can telephone Michael Powell on 01344 875000 or email info@kirkrice.co.uk
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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
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