Giving a monthly amount to a friend to save for me in a share scheme - legalities?

fimonkey

A good friend has been offered a great company share scheme and they can pay in up to £500 per month for the next 5 years. After which they can continue with shares, or get their money back, or cash out the shares if they are worth more than their investment.
They can afford £400 pm and have asked me if I want to contribute £100 pm.

If I do this, how can I ensure that in the event of their death, incapacitation, or that our friendship breaks down I at least get my money back? Or is this a risk I just have to take? They do not have a will and nor are they interested in getting one (I know!!!).

Even if I cannot protect myself legally, would an acknowledged email between us setting out the terms and conditions at least give me a leg to stand on with their next of kin if they die? Or if our friendship ended?

They are a really good friend, I would not expect anything to happen - but who knows what the future holds? 

xylophone

Set up a formal loan agreement with the friend?

barnstar2077

Seems like once you give them the money then the money is theirs, you would just have to trust them.  I wouldn't do it myself personally.

Do you already have your own investments, a pension/S&S ISA?

Albermarle

If I do this, how can I ensure that in the event of their death, incapacitation, or that our friendship breaks down I at least get my money back? Or is this a risk I just have to take?

In reality, yes.

Even if I cannot protect myself legally, would an acknowledged email between us setting out the terms and conditions at least give me a leg to stand on with their next of kin if they die? Or if our friendship ended?

Would be a lot better than nothing, also make the payments by bank transfer, rather than cash, so they can be shown to have happened.

penners324

The shares at the end of the scheme become theirs, the tax benefits from the scheme are theirs as well....

The tax complications alone don't make it worthwhile 

refluxer

Yep - shares taken at maturity would be in their name and in my experience, the cash alternative can often be the equivalent of a fairly mediocre interest rate so the main benefit with these schemes normally comes from taking the shares, in which case you're reliant on the share price increasing during the term.

These schemes can often be a no-brainer as an employee but there's no way I'd participate as a friend of an employee in the way you're suggesting, personally.

Malthusian

The friend should be doing everything they can to take up the full share incentive themself. Do you really want to lend money to someone who is so skint they are turning down free money from their employer?
This is arguably abuse of the share scheme as the point is to incentivise the company's staff, not to enrich random third parties. (It could easily be unambiguously abuse depending on what the employee handbook and the terms of the share scheme say.)
If the company rumbled what you were doing they could in theory demand the extra shares back from your friend (after sacking them), leaving none for you.

Daliah

I would not go there. 

Put your £100 into your pension or an S&S ISA in a global, diversified fund. That way, you have no ownership, admin and tax complications, and a much lower investment risk than with a single company share. Whilst your friend's company share scheme might work out great, it might also not work out great.

km1500

You do not say if you are giving them the money in order to help them buy shares for themselves i.e. It is just a loan or if the agreement would be that the shares you pay for belong to you.

If you are just lending them money then this will be fine - all you need is a declaration of trust or loan agreement specifying they need to repay you the money you lent on the terms you agree

If on the other hand the intention is that the shares are yours then this is not advisable as it would be a breach of the terms and conditions of the share scheme I am certain

Malthusian

km1500 said:

If you are just lending them money then this will be fine - all you need is a declaration of trust or loan agreement specifying they need to repay you the money you lent on the terms you agree

If on the other hand the intention is that the shares are yours then this is not advisable as it would be a breach of the terms and conditions of the share scheme I am certain

If the terms of the "loan" are "I agree to pay you whatever the shares are worth" then this is in reality a trust arrangement in all but name.  I.e. the shares are the OP's property either way. I.e. don't go there.
If he is a good enough friend to trust with this wizard wheeze then he is a good enough friend to not try to get him sacked.
At which point you would lose your money, as even trustworthy friends can't repay loans with money they haven't got, because they're on the dole and skint. (Even skinter when they were working for free by turning down free money from their employer.)

fimonkey

km1500 said:

You do not say if you are giving them the money in order to help them buy shares for themselves i.e. It is just a loan or if the agreement would be that the shares you pay for belong to you.

If you are just lending them money then this will be fine - all you need is a declaration of trust or loan agreement specifying they need to repay you the money you lent on the terms you agree

If on the other hand the intention is that the shares are yours then this is not advisable as it would be a breach of the terms and conditions of the share scheme I am certain

Thank you for clarifying. I would be loaning them the money. Of course the shares could not be mine as they are not in my name. 

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

How do I word, or access, a declaration of trust/ loan agreement please?

There is no suggestion that I would act illegally or go against any T&C's.

Thanks for your reply.

In response to another question: 
I do not have any ISA (S&S or cash). I did used to invest a few years ago. With only £100p.m it would take some time to work up a decent amount in an S&S ISA given fees and charges. I would first need to save a decent amount (about £10k) to then invest as lump sum and then start to drip feed.