EMI share option rip-off?

chukkypete

Hi there, I a new & totally confused...

I was given some share options in a ltd company (not quoted) as an incentive, and told I could exercise these if the company was sold.

Well they have sold the company, and have a vague letter saying that I have to buy the shares for 9k & the new company will give me 16k...

This sounds fine except they want to charge 3.4k Fees.

When I rang, they said that 'every shareholder has to pay a part of the fees for selling the company'

My argument is that
A: there is no mention of fees in our agreement
B: I only had options, not shares when the company was sold, so why should I pay this level of fees?

I need to know if the fees are valid, & who requlates EMI option schemes, is it the FSA?, I know the IR

Thanks in advance.

cloud_dog

Without knowing all the ins and outs of your share options you might find that the 'fees' are in fact tax and NI payments. If the scheme wasn't an 'accredited' scheme, for the sake of the Inland Revenue, then tax and NI payments might be liable.

Normally when you excercise options with a Ltd company you would be sent shares to the value of the difference between the grant and excercise price, minus any tax and NI if applicable.

As it appears your options are 'in the money' it doesn't make sense for you to send money so they will return money. As I said as far as I am aware (although I am not an expert) I would have thought you would complete the form requesting cash and they would pay the difference, minus tax and NI if applicable.

Have you asked what the 'fee' is for as I do not think your terminology is probably correct.

cloud_dog

chukkypete

Thanks for the reply....

It is an approved scheme, & they said Tax/NI would be deducted as well as the fees...

I asked what the fees were for & they said they were to cover the legal costs of selling the company...

I don't think I should have to pay for these..

cloud_dog

Your right it doesn't sound right.

Costs of selling the company should be borne by the company, which may affect (dillute) the SP but should not require additional funding. Very strange.

I'm sorry, but I'm not sure what to suggest

DRS1

It does sometimes happen - especially when you are selling a private company - that the sellers' fees for selling get spread across all the shareholders including the option holders who exercise their options. By exercising the options you become a shareholder and so it is only right that you bear your part of the fees borne by all the selling shareholders. You may want to ask for a breakdown of the fees to make sure you are only paying your fair share.

As to paying £9k to exercise the options and then getting £16K back, you should ask them if they cannot arrange things the way cloud_dog says - ie just giving you the net proceeds. There are "issues" with this but they can usually be overcome if the buyers and sellers are willing.