Introduction


cord's share option scheme

cord's Share Option Scheme exists to empower the people building cord, by enabling them to own a part of the company itself.

Share option schemes are complex by nature and they can be tricky to explain. This guide is to help everyone feel fully informed. It is written in a clear and straightforward way.

At cord, we have two types of schemes: EMI scheme (for people based in the UK) and an International scheme (for anyone based outside of the UK). The two scheme's mirror each-other - but there are some small differences for tax purposes.

Who has built this scheme?

cord's share option scheme has been built by Orrick. We've been fortunate to work with Ian Shaw who is one of the top employee share scheme lawyers in the world.

You can watch some of his talks in the resources below.

How is it managed?

Capdesk is the software we use so everyone can view and sign their share option agreements in a simple, easy way - and is used by many of the companies using cord like Accurx & Privitar

Table of Contents

What you need


Read the 3 sections below

  1. Overview Is an overview of the key concepts
  2. What you need to do Details what you need to do at the various different stages
  3. Tax Runs through some of the tax implications

The 3 core docs you need

  1. An simple overview of the scheme This doc

  2. Your share option agreement via Capdesk (or share promise letter)

    Co-Hire_Ltd_-EMI_Final.docx

  3. A copy of the relevant scheme rules and cord's Articles of Association via Capdesk

    Co-Hire_Ltd._-Scheme_Rules(Employee_and_Former_Employee).pdf

Useful external resources

  1. Index ventures guide to share options
  2. Vestd guide to share options
  3. Seedcamp: share options series
    1. Part 1
    2. Part 2

<aside> 🎓 This notion doc isn't professional financial or legal advice. If you are in any doubt about your tax position, it's best to seek professional advice from an accountant.

</aside>

Section 1: Overview

What are share options?

An option is a contract to buy an underlying asset


Share options are a way of giving employees the ability to own a part of the company - without paying unnecessary taxes.

Share option schemes are used by almost every company in the world who want their employees to own part of the company they are working for.

An option, as defined by Wikipedia, means the following:

<aside> 📎 “an option is a contract which gives you the right to buy an underlying asset at a specified strike price.”

</aside>

Say cord has 100 shares. When you join cord, you get 10 share options as part of your compensation package. Each share options has right to buy 1 of the 100 shares, at a fixed price. Let’s say that price is £1. So if you want to get your 10 cord shares, you will pay £10 and then you will hold 10 shares in cord. Now, let’s say cord sells the company to Google for £1,000. Since you have 10 options, you can pay £10 for your 10 shares, and since cord just sold, you will get £100. Effectively, you will make a £90 profit – pretty sweet!

EMI scheme or International scheme

Share options exist to give employees access to shares in a tax efficient way. But tax rules differ country by country, so as well as creating a scheme for people based in the UK - we've also created a scheme for people based outside of the UK too.

Highlights

cord's Share Options

How does cord calculate its share options? How do share options accrue? What are refresh grants?


Calculating share options

We recognise that cordians make different contributions under different circumstances at different times.

However, when deciding how many shares options to issue every employee, we use a matrix system that is quantifiable and clear

Here is the full write up:

Calculating share options

Vesting

Instead of giving you all of your share options on day one, they accrue them over time. This process is called vesting and it begins from your date of employment.

The industry standard right now is 4 years, but at cord, employees’ stock vests over 6 years. This allows us to be more generous with the options we give to cordians - and helps us communicate that we’re looking for employees who want to join cord for the long term.

A cliff is a period at the beginning of the vesting period where your equity does not vest monthly, but instead vests at the end of your first year. At most companies, including cord, this cliff happens at one year.

So, what does this mean? 16.6666667% of the shares over which an option is granted will vest on the first anniversary of the date of grant (known as a "cliff"). Options will vest thereafter in 60 equal tranches on the last day of each calendar month.

Refresher grants

At the end of your 6 year vesting period, cord offers refresher grants. Just because your original share options have fully vested, doesn't mean you have nothing further to contribute. Far from it - these grants are equally as important.

This will be discussed with you a few months before your 6th year anniversary.

Hypothetical Scenarios

How much would 1000 cord shares be worth (Total number of shares as of August 2023)?

How do you make money from shares?

There are two ways to make money from shares/share options - by receiving profits (dividends) or by selling shares.

  1. Dividends (not without going public)

    cord is a start-up / growth stage company. We re-invest all the money the company makes - to fuel our growth and increase the number of people doing their best work. We are focussed on the long run - for the long term. We believe this provides huge value to both the people who use cord - and cord's shareholders. Companies tend to start paying shareholder dividends when they are very large. When growth is not as important.

  2. Selling them (in the future)

    Although we are not planning on selling cord any time soon, there are strategic ways that cord can enable shareholders to sell their shares in the future. It's worth knowing what scenarios might play out.

FAQs