Employee Share Scheme - leaving company, worthwhile holding onto shares?

TheGame7

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Sooler

For best ways to sell see Martin's article

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1117533386,21726,

TheGame7

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bowlhead99

Yes, there are any number of stockbrokers who will sell paper shares for you.

Generally if you don't want to sell immediately but you want the broker to be looking after your shares so you can sell instantly whenever you want (and not have the risk of losing the certificate - which would give you an admin cost and a delay to get a new one): they will register the shares in their own name as a "nominee". This means they hold thousands of shares for lots of different people but they register you all on their system so you can have electronic or telephone access to dealing on your piece of the account.

If selecting a stockbroker you should be aware that different brokers may specialise in different types of markets and offer different services (eg with advice or execution only, by phone or post or online, etc) at different prices.

For example Hoods have a headline £7 per trade online service, but you can't use it to deal all international stocks - something like the top 300 overseas ones are available online as they can be dealt through the 'CREST' system, all the other ones would be done by the broker on the phone. So you could probably get them to hold in a nominee account to make for a quick and easy sale, and collect dividends etc - but may not be able to place 'sell it now' orders online at the cheap rate - would need to phone and pay their standard commission.

It sounds like after you get the certificate Mellon will contact you and may offer themselves as brokers.

TheGame7

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bowlhead99

TheGame7 wrote: »

Mellon?

Well you told me that "Following the withdrawal by Certificate the shareholder will be contacted by Mellon Investor Services." so perhaps you can sell through them. Mellon are a massive north american based financial institution (bank/custodian etc) who may offer you the ability to sell your shares in exchange for a dollar cheque when you decide to get out further down the line.

And also, are you saying that only if the company I have shares in fall under the top 300 in the 'CREST' system will it be £7 a sale?

US shares are quoted on the New York exchanges whereas Hoodless being based in the UK will have nearly all their business dealt within the UK/Ireland. 'CREST' is the system in the UK and Ireland that settles the trades and so the brokers in this country are 'on' the system and use it to do the buys and sells.

It stands to reason that if the buys and sells you want to do are for shares that can be traded on the main system that the broker uses, they let you do nice cheap online buys and sells (Hoodless: £7 a go). Other share deals that don't fit into that system will have to be executed in a different way, manually by the broker and will cost more.

Now, because there are a lot of UK investors dealing in shares of big overseas companies (Microsoft or Coke in the US, Volkswagen in Germany etc), CREST have set some of these up on their system so the UK brokers can deal in the 'equivalent' of a Microsoft share on their own system, even though real Microsoft shares are traded in New York. This means that as well as all the UK shares, Hoodless can trade in the 'equivalents' of 300 overseas shares just as easily, so you can buy and sell those for the same low price.

Basically if you have 'real' foreign shares its unlikely you will be able to trade them with the same cost even if Hoodless advertise "Trade over 300 of the top USA and European shares at our amazing flat rate fee of just £7!"

Any broker will be able to tell you their rates for buying or selling a particular share (sometimes it will be a % of the shares' value, or sometimes a flat rate for different values, like £5.95 up to £500 of shares, £12.50 up to £5000 or whatever).

And how do I go about converting from paper to electronic?

You would fill in a form to open up a trading account with your broker, giving your personal details etc, and then later (or at the same time) send them your certificates which they would arrange to put in your account

And how will tax work on it all? US and UK.

As mentioned by your HR manager you can complete a form to tell the US authorities that you are not a US resident. When the company sends you a dividend they withhold US tax on the dividends, but as stated by the HR manager if you complete the form they only take 15%.

From a UK perspective the authorities will not know you have received the dividend income but you should tell them by completing a tax return. As the amount of overseas taxed income will be under a few hundred pounds you can complete the short one rather than a big one. You tell them how much income you have received and you'll be liable for tax on it (but they give you a credit of, I think, 10%).

Further down the line you will sell the shares, hopefully for more than they are worth now, and if you do you'll be liable to capital gains tax that year. If you make a loss you will have a credit against other capital gains you've made (like other shares, second properties etc...). But even if you have a net gain in a year you get a £9000 annual allowance before you have to pay tax (like with income from employment and interest and dividends you get a £5000+ allowance before paying tax). Again the UK authorities won't know you have made the gain so you should tell them on a tax return. But on this size of investment with the allowances you get its unlikely there would actually be any capital gains tax to pay.

What other costs would be involved while I simply just hold on to them?

If you simply hold onto the certificate yourself there is no cost, it's just a piece of paper sitting in your house confirming that your name is on the register of shareholders of some american company. Of course there is a risk that the shares go down in value.

If you lodge it in an account with a broker and are not actively buying or selling any other shares with them, or don't have more than a few thousand pounds of shares, some brokers will charge an inactivity fee every quarter, for the hassle of having an account set up for you and you not doing anything with it. If you don't actually want to sell the shares for a long while, find a broker that doesn't charge an ongoing fee, or just keep hold of the certificate yourself.


Wow, this has turned out to be a long post but will leave you with this thought, which I gave to a family member who had the same decision to make last year:

At the end of the day your decision at the moment is do you want to have £xxx in your bank account now, or do you want to have an investment of £xxx in this particular company. The shares may be worth £500 or £2500 in a couple of years time, investing in shares is a risky business, so it would be foolish to base your 'shall i keep the shares or not' decision on whether the fees to sell in a couple of years time are £7 or £27 or some other nominal amount.

Looking at your personal wealth and the risks you take and the investment returns you want, does it make sense for you to have £x cash in bank, £x invested in ISAs, £x invested in funds, £x invested in big 'blue chip' UK shares, £x invested in riskier smaller UK company shares, £x invested in this specific US company valued in dollars..?

When you think about it like that, you often end up with a different answer than if you take the attitude 'well i didn't have the cash before, it is like free money, might as well keep them and see if they go up'. Good luck with your investing!

TheGame7

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TheGame7

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