The UK’s securities laws prohibit certain activities relating to the offer and grant of share options to individuals in the UK unless the company granting the option is either appropriately authorised by the UK regulator (which is generally not the case) or falls within an exclusion from the applicable securities laws. One of the most useful exclusions is for grants made pursuant to an “employee share scheme”, so it is extremely common for companies to grant options to employees using a share option plan which meets the definition of an “employee share scheme” for UK securities laws purposes. A relevant exclusion must still be found for grants to non-employees and specialist advice should be sought ahead of granting options to non-employees.
Aside from securities laws, adopting a share option plan is a good idea if you plan to grant more than a handful of options as it helps to ensure consistency and streamline the administration of the options arrangements. It is possible to use a standalone option deed for each grant (which contains the entire set of rules applicable to that option within one document) and still fall within the “employee share scheme” exclusion, but many companies find this cumbersome and prefer to adopt a main option plan and then sign a short-form option agreement with each individual option holder.
Learn More: UK Founder Series: Incentivise Your Team