ESSUM13000 - Employee Benefit Trusts (EBT): General

Employment Benefit Trusts are frequently used to facilitate the grant of share options and subsequent acquisition of shares through approved share option schemes and Enterprise Management Incentives (EMI). The trust deeds are not considered to be scheme documents and ESSU does not review them as part of the approval process. Where EBTs are used it is important that scheme rules are drafted in such way as to allow for this to happen. If it is intended that an option will be granted by an EBT then it must be provided for in the rules. Similarly if the allotment of shares was intended to be made by an EBT then the rules must provide for this. If the rules only envisage the issue of new shares then an EBT would not be able to satisfy the option by the allotment of shares held in the trust.

A Share Incentive Plan (SIP) requires that a trust be established in a specific form in order to hold shares on behalf of employees. In this instance the trust deed is an integral part of the plan and will be reviewed as part of the approval process (ESSUM28000). The trust established for a SIP cannot be used for other purposes (such as a general EBT) although it could be operated alongside and in conjunction with a separate EBT. In some cases the trustees of a SIP and an EBT will be the same.