Grant options under a share scheme

An employee share scheme starts with the board setting shares aside and adopting the scheme's rules, such as an EMI or CSOP plan. Each grant is then made under those rules and counted against the pool. Record the three in the same order and the cap table shows how much of the pool is left before anyone promises the next grant.

Keep the board resolution and the scheme rules to hand: the names and figures come from them.

Reserve the pool

1. Open the company and choose Share Classes in its sidebar. Open the actions menu at the end of the class the options are over.

   

2. Choose Reserve shares….

   

3. In Reserved for, type the scheme's name exactly as the resolution gives it, then enter the Shares reserved, any Default exercise price and the Reserved from date. Choose Reserve shares. Reserved shares are not issued and nobody holds them, but they stop counting as available to issue.

   

Adopt the scheme

1. Choose Cap Table under Securities in the company's sidebar. In the Option schemes panel, choose Adopt a scheme….

   

2. Enter the Scheme name exactly as you named the reserved pool: a scheme claims any pool already set aside under the same name. Choose the Tax treatment, such as the Enterprise Management Incentive (EMI), and the date it was Adopted.

3. Add the Default exercise price, the Exercise window (months) a leaver has to exercise vested options, and a summary of the Leaver provisions. Leave the window blank if the rules say nothing; 0 means options lapse on the last day of employment. Choose Adopt scheme.

   

4. The panel lists the scheme with the shares Reserved, those Granted and the Pool left.

   

Grant options

1. Choose New holding at the top of the cap table.

   

2. On Holder, search for the employee and choose them. New person adds someone who is not in IQ Entities yet. Choose Next.

   

3. On Position, choose the Share class, set Type to Options and enter the number of options in Shares held.

4. Under Award terms, enter the Grant date, when the options Expires, the Exercise price per share and the Tax type. In Granted under, choose the scheme. Leave it unset only for a one-off grant made outside any scheme, which is counted against the class rather than a pool. Choose Next.

   

5. On Vesting, choose Add a vesting schedule. The schedule starts as Time-based, vesting Monthly over 48 months after a 12-month cliff; set Vesting starts and change what the grant agreement says differently. Add another schedule when part of the grant vests on performance, or choose Instalments I state under Frequency for a series no cadence describes. You can also skip this step and add vesting later. Choose Next.

   

6. Check the Review, add the award agreement under Supporting documents if you have it, and choose Add holding.

   

7. The grant is counted against the scheme: Granted goes up and Pool left goes down. A grant beyond the pool shows Over-granted by in red.

   

On the holdings ledger, each award shows Add vesting until it has a schedule, and how many options have vested once it does. Click it to see what has Vested, what is Unvested and the Next vest, and to choose Add a schedule.

Adjust awards in bulk

A rights issue, a recapitalisation or a change of tax treatment can move every outstanding award on the same day.

1. Tick the awards to change on the holdings ledger, or tick none to work on them all, and choose Bulk adjust.

   

2. Choose what to change: Exercise price, Expiry or Tax treatment. For a price, Apply a factor multiplies each award's own price, which is what an anti-dilution clause states; Set one price gives every award the same price.

3. Give the Reason. It is recorded on each award's own audit trail. Check the preview of each award before and after, then choose the button, which counts the awards it will change, such as Adjust 1 award. Holdings the change cannot apply to, such as issued shares, are left alone and counted at the top.

   

Tips from practice

• Name the pool and the scheme identically, from the adopting resolution. A pool with a slightly different name stays unattached and the scheme shows nothing reserved.
• Options count toward the Fully diluted figure on the cap table but not toward the issued shares. See Read a company's cap table.
• When options are exercised, record the allotment of the new shares. See Record an allotment of shares.
• To see what a new pool or a top-up does to each holder before the board agrees it, model it first. See Model a funding round.