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Ask an expert: Deferred payment arrangements for employee shares

Question: Our client is a company which would like to allow employees to acquire shares to help them build up a stake in the company but does not want them to have to pay the full purchase price immediately. It has asked if it can give the shares to employees but defer payment. What are the tax issues?

Answer: Shares can be issued on a partly paid or nil paid basis or existing shares can be purchased on deferred payment terms. In both cases the intention is that the full market value of the shares will be paid but not until such time as a specified event occurs (for example an exit) or other performance conditions are satisfied. Typically the shares offered to...

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