Share options fraud ?

Nullnvoid

I have an options agreement with a former employer and i have just discovered that the exercise price is not the same as the actual share price at time of signing.

For example the share price at the time was £2 as they sold actual shares for that price before I signed but my agreement states I can buy the shares for £0.003

As I understand it the exercise price must match the share price on the date of signing which clearly it does not.

I dont know what that means for me though. Does it mean i wont be able to purchase them for £0.003, is the agreement fraudulent since they were aware the exercise price was wrong, is the agreement void. Help I'm so confused.

They have done this with other employees with a mixture of unapproved options and EMI options. They also haven't sent these documents to hmrc.

Sorry if this is the wrong forum section.

- Null

74jax

When you took out the option agreement, how many shares were you buying? 
Now you are excersising the option, how many shares are they giving you? 

Illusionary

There's no overriding requirement for the exercise price to match the market value at grant. However, the amount of the discount is generally treated as taxable income, not receiving the same tax advantaged status as the growth in value between grant and exercise (which can instead be treated as capital).

Of course, you should check the detail of the specific scheme rules of your employer's scheme, as these can impose further conditions.

Nullnvoid

74jax said:

When you took out the option agreement, how many shares were you buying? 
Now you are excersising the option, how many shares are they giving you? 

85,000

Illusionary said:

There's no overriding requirement for the exercise price to match the market value at grant. However, the amount of the discount is generally treated as taxable income, not receiving the same tax advantaged status as the growth in value between grant and exercise (which can instead be treated as capital).

Of course, you should check the detail of the specific scheme rules of your employer's scheme, as these can impose further conditions.

So I can buy the 85,000 shares at £0.003 per share (£255) but I will pay income tax and NI on £2 (or whatever price is  now) minus £0.003 per share ? Sorry I have a learning difficulty and these terms and numbers dont often make sense to me.

Illusionary

Nullnvoid said:

74jax said:

When you took out the option agreement, how many shares were you buying? 
Now you are excersising the option, how many shares are they giving you? 

85,000

Illusionary said:

There's no overriding requirement for the exercise price to match the market value at grant. However, the amount of the discount is generally treated as taxable income, not receiving the same tax advantaged status as the growth in value between grant and exercise (which can instead be treated as capital).

Of course, you should check the detail of the specific scheme rules of your employer's scheme, as these can impose further conditions.

So I can buy the 85,000 shares at £0.003 per share (£255) but I will pay income tax and NI on £2 (or whatever price is  now) minus £0.003 per share ? Sorry I have a learning difficulty and these terms and numbers dont often make sense to me.

Broadly yes, but it would be worth checking with your employer's HR as the nuances of how the scheme is set up can make a difference.

SiliconChip

If you do as @Illusionary suggests and contact your (ex)-employer you should be very careful not to use the word fraud or imply it in any way.

Illusionary

SiliconChip said:

If you do as @Illusionary suggests and contact your (ex)-employer you should be very careful not to use the word fraud or imply it in any way.

Oh, absolutely. I don't think that there's any reason at all to suspect that here.