Your lawyers handed you a share option scheme. Nobody handed you a plan for running it.
Every July, without fail, there's a last-minute scramble across the country as companies race to meet the ERS annual reporting deadline, the requirement to file your employment related securities returns with HMRC by 6th July. For most, it's an unwelcome reminder that a share option scheme isn't a document you file away and forget. It's a living obligation and HMRC's deadline is a forcing function where that obligation surfaces. Miss it and you're looking at financial penalties and a due diligence nightmare. Scrape through it in a panic every year and you're signalling that nobody actually owns the scheme.
The mechanics of ERS reporting are straightforward enough. By 6th July each year, you need to file an annual return through HMRC's Government Gateway for every registered scheme you operate, whether that's EMI, Unapproved, CSOP or otherwise. Each scheme gets its own separate return, covering every reportable event during the tax year; exercises, lapses and the rest. If nothing happened under a scheme, you still need to file a NIL return. If you made EMI grants during the year and haven't yet notified HMRC, those notifications need to go in too. Take screenshots as proof of submission.
None of that is complicated. The problem isn't the task, it's that it falls on whoever happens to be holding the ball in early July and is now frantically piecing together what happened across the tax year.
But the real cost of a poorly maintained scheme doesn't show up on 7th July. It shows up in a data room. When you're fundraising or fielding acquisition interest, one of the earliest and most predictable due diligence requests will be to demonstrate that your share option scheme is clean. That means producing a complete and accurate ERS filing history, consistent records of every grant and exercise and an option ledger that actually reconciles with your cap table. Investors and acquirors have seen enough share option scheme disasters to know that messy filings are rarely an isolated problem. They're a signal that the scheme wasn't properly designed, that nobody owned it operationally and that there may be discrepancies between what was filed with HMRC and what was actually issued.
At best, that creates friction and delay at precisely the moment you need the process to move quickly. At worst, it becomes a valuation issue or a reason to walk away entirely. The companies that breeze through equity due diligence aren't the ones with the most sophisticated schemes. They're the ones that treated reporting and record-keeping as part of the scheme from day one.
It’s a perfect example of where more care and consideration at the design and creation of the scheme would have made vital improvements to overall equity experience further down the line. At scheme inception, it’s common to think the hard part is over when you’ve received your scheme rules. But there’s so much more to a successful scheme, one which can power your talent strategy and sail through diligence.
So what does running a scheme actually mean in practice? It means providing your employees with the education and support they will inevitably request. It means having a clear award framework with principled decisions about who gets options, on what terms, in what quantities and when. It means someone in the business (Finance, HR, Legal, Operations) has explicit ownership of the scheme and its data, not a vague assumption that someone else is handling it. It means documented processes for every key event; new grants, leavers, exercises, and of course annual reporting. And it means an employee experience that actually communicates the value of what's been awarded, because options that aren't understood do not drive retention and incentivisation. Most companies get the legal documents on day one and mistake that for completion. For a share option scheme to be successfully designed, implemented and maintained, you have to look further.
The best time to get this right was day one. The second best time is now. equiCraft works with companies to design, implement, maintain and optimise share option schemes that hold up under scrutiny. If July 6th caught you off guard this year, together let's make sure it doesn't next year.
Your lawyers handed you a share option scheme. equiCraft will hand you a plan for running it.