Insights From the FMco Team

Key Employment Engagement Programme

Requirements of the Key Employee Engagement Programme [KEEP]

The employee/ director

• Must be full time employee/ director (30+ hours per week) of the qualifying company throughout the entirety of the relevant period

• Their employment/office must be capable of lasting at least 12 months from the date the KEEP options are granted

• Cannot hold a material interest (15%) in the qualifying company

• Must hold the options for 12 months prior to exercise (limited exceptions)

The qualifying company

• Must be - incorporated in the State or in another EEA State and resident in Ireland, or resident in another EEA State and carrying on business in Ireland through a branch or agency

• Must exist wholly or mainly for the purpose of carrying on a “qualifying trade” on a commercial basis with a view to the realisation of profit

• Must be a micro, small or medium-sized enterprise (“SME”) within the meaning of the Annex to Commission Recommendation 2003/361/EC

• Must be an unquoted company none of whose shares, stock or debentures are listed in the official list of a stock exchange or quoted on an unlisted securities market of a stock exchange, other than on the Enterprise Securities Market of the Irish Stock Exchange or on any similar or corresponding stock exchange in an EEA country or a country with which Ireland has a double taxation agreement;

• Must not be regarded as a company in difficulty for the purposes of EC Commission Guidelines on State Aid

• Must not issue qualifying share options with a market value exceeding €3,000,000

The share options

• The shares which may be acquired by the exercise of the share option must be new ordinary fully paid up shares in a qualifying company

• The share options must be granted at the market value of the same class of shares at the date of grant

• Must be subject to a written contract of agreement setting out the relevant details

• Must be within the maximum permitted limit in terms of overall awards in the year; in any 3 consecutive years of assessment; and annual emoluments

• Must not be exercisable within 12 months from the date of grant

• Must not be exercisable more than 10 years from the date of grant

Current position

The total market value of all shares in respect of which qualifying share options have been granted by the company to an employee or director must not exceed–

1. €100,000 in any one tax year,

2. €250,000 in any 3 consecutive tax years, or

3. 50% of the annual emoluments of the employee or director in the year in which the qualifying share option is granted.

Changes on the way

Finance Act 2018 introduced changes to the definition of a “qualifying share option”, but the changes are subject to a commencement order by the Minister for Finance.

These changes once implemented will mean that the total market value of the share options granted to any one employee/director cannot exceed the following:

1. €100,000 in any one year of assessment,

2. €300,000 in all years of assessment, or

3. 100% of the qualifying individual’s annual emoluments in the year of assessment in which the qualifying share option is granted.

Overall this scheme is designed to allow employees participate in possible future sale of the business in a tax efficient manner.

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