EMI share options – are online platforms like Vestd a good bargain-basement way of setting up your option scheme?

This is an update from my blog from two years ago – I have reviewed the various providers again so that I could refresh the information given.

The platform approach (such as Vestd and SeedLegals) is something I wanted to look at so that I could decide on whether we set up our own platform and whether it would really add value for clients. I have decided that it would not do so and we are therefore continuing our current approach of offering both a competitive fee and a fully bespoke service for each individual client. Every company and therefore every EMI scheme is different, and I do not like a ‘one size fits all’ approach. It is vital that a company gets its share option scheme right, as options are typically the principal incentive for employees, and HMRC is a very strict judge.

We were the first firm to publish our fixed fee for setting up an EMI scheme. The reason we did this in 2015 was to provide openness about what sort of cost clients (many of them early stage companies) were committing themselves to, so they knew immediately whether it was affordable.

Before establishing my firm, I worked in CFO and CEO positions in software, transport and manufacturing. During that time, I set up a few option plans for my businesses and even back in 2003 we paid £6,000 (!) for an EMI scheme. When I decided to offer a ‘one stop service’ at £2,995 to set up an EMI scheme, I believed that it was a competitive and fair price, and it still is. I have no interest in overcharging entrepreneurs who are striving to grow their companies.

I enjoy talking with founders, CEOs, MDs and FDs about their business models and strategies, and about their option scheme needs, to make sure that the schemes fit with their requirements and that shareholder and employee interests are aligned.

There is a lot of flexibility in designing an option scheme and it’s common for directors to have an idea of the structure they want but end up somewhere else that works far better. There are potential legal traps and minefields to avoid as well. I question whether a simple platform with a help desk can provide the right service for such an important matter as your employees’ option scheme. A number of clients have come to us having tried the platforms but found the experience unsatisfactory, with sales teams clearly just reciting a script and not having the profound knowledge of the schemes as specialists do.

We have refreshed our survey of the various platforms to extract their costs and to list what is actually covered by their fees. Vestd and Granted charge a monthly fee (paid annually though) and these fees can rack up so we also provide a typical cost over three years. There can be a lot of add-on costs to the base prices. I believe the results speak for themselves. While the platforms look cheap upfront, the reality seems to be very different – they are not.

The worst outcome would be for a company to set up a scheme using one of these platforms and then on a sale of the business find that HMRC rejects the EMI tax benefits for employees because something is wrong or omitted.

Finally, if you would like to use a platform to help manage your cap table and share options, including providing visibility to employees, we highly recommend Capdesk which is an excellent service. See https://www.capdesk.com/