By David Cammack, Managing Director, Forward Law. Last updated 17 October 2026.
A Company Share Option Plan allows you to give employees options to buy shares in your business at a price set when the options are granted. If the company grows in value, employees can benefit from that growth, with favourable tax treatment where the relevant conditions are met.
CSOP is worth considering if your business does not qualify for Enterprise Management Incentives (EMI). It can also be suitable for some employees who do not meet EMI’s working time requirements.
Forward Law’s CSOP lawyers help you assess whether a CSOP is appropriate, agree how it should work and put the documents and reporting arrangements in place. We confirm the scope and fixed fee before starting work.
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Watch: David Cammack explains how a Company Share Option Plan works, what we do to set one up and our fixed fee (46 seconds).
How a Company Share Option Plan works
An option gives an employee the right to acquire a specified number of shares in the future. They do not become a shareholder simply because the option has been granted.
For a CSOP, the exercise price must be no less than the shares’ market value at grant, determined under the applicable valuation rules. Each participant can generally hold unexercised CSOP options over shares worth up to £60,000, measured at the relevant grant dates.
You decide how employees earn their entitlement and when they can exercise their options, within the statutory requirements. For example, options might vest over several years, depend on performance targets or become exercisable when the company is sold.
Qualifying options exercised between three and ten years after grant generally benefit from relief from income tax and National Insurance on the gain. Certain earlier exercises can also qualify, including in specified leaver and takeover circumstances. Capital gains tax may arise when the shares are subsequently sold.
The scheme therefore needs to bring together your commercial objectives and the conditions for tax relief.
When a CSOP may be suitable
A CSOP may be worth considering where:
- Your company falls outside EMI’s size limits or carries on activities that prevent it from qualifying for EMI.
- You want to include employees who do not meet EMI’s working time requirements.
- You want to introduce share options for selected employees or a wider group across the business.
- You are preparing for investment and need to agree the option pool and document proposed awards.
- You have made commitments about equity and now need to establish how those commitments can be implemented.
CSOP is not automatically available whenever EMI is unavailable. There are separate requirements relating to the company, the shares and the participants, including restrictions affecting certain ownership structures.
We check those requirements before recommending a scheme. We also review any existing options or equity promises, because a new plan needs to take account of commitments already made.
What our CSOP service covers
Advice on the scheme structure
We start with your current ownership structure and what you want the scheme to achieve.
That includes deciding how much equity to allocate, who should participate and whether to retain part of the pool for future hires. We then work through vesting, exercise and leaver provisions, explaining the practical consequences of the available approaches.
For example, you may want employees to earn their options over four years but only acquire shares when the company is sold. We can consider that structure alongside the CSOP tax rules and your existing shareholder arrangements.
Scheme rules and company approvals
We prepare the CSOP rules and the board and shareholder approvals required to adopt the plan and grant options.
We also review the articles of association and any shareholders’ agreement to identify provisions that affect the scheme. If amendments or investor consents are needed, we explain these and confirm the work involved.
The documents should make clear what employees are entitled to and what happens if circumstances change.
Share valuation
The share valuation determines the minimum exercise price and how much of each participant’s £60,000 limit an award uses.
Our specialist valuation partner prepares the valuation for a fixed fee and seeks HMRC’s agreement to it before the options are granted. The valuation is prepared once the scheme documents are settled, because it depends on the rights attached to the shares and the terms of the scheme. We coordinate the two, working with your finance team as needed.
An agreed share value does not, by itself, establish that the whole scheme meets the CSOP requirements. Eligibility and the terms of the options must be checked separately.
Option grant documents
We prepare the option agreements, grant communications and acceptance arrangements, together with the relevant corporate records.
Each grant should accurately record the number of shares, exercise price and applicable conditions. We also help you maintain an option register so that awards, lapses and exercises can be tracked.
HMRC registration and reporting
CSOPs must be registered with HMRC through its Employment Related Securities service, usually referred to as ERS, and self-certified as meeting the statutory requirements.
We guide you through registration and self-certification. Annual returns are generally due by 6 July following the end of the relevant tax year, including a nil return where required. We usually work alongside your accountants, who submit the annual returns with the company’s other HMRC filings, and we give them the scheme information they need.
What it costs to set up a CSOP
Our fixed fee for setting up a CSOP is £2,250 to £3,000, depending on the number of participants. The valuation is a separate fixed fee of £1,500 through our valuation partner. This covers preparing the valuation and seeking HMRC’s agreement to it.
We agree the scope and fee before work begins, and our proposal makes clear what is included. If the agreed work takes longer than we expected, our fee stays the same. If your instructions change the scope, we discuss any revised fee with you before carrying out the additional work.
Forward Law is not currently VAT registered, so we do not add VAT to our fees. If that changes, VAT will be added at the standard rate.
How we set up your CSOP
We begin with a discussion about the business, the proposed participants and any relevant investment or sale plans. We review eligibility and the existing company documents before agreeing the main commercial terms with you.
Once the structure is settled, we prepare the scheme documents. Our valuation partner then prepares the valuation on the basis of those documents, so that the valuation and the rights attached to the shares are consistent.
After the necessary approvals are in place and HMRC has agreed the valuation, the options can be granted. We then help complete the registration and reporting arrangements and explain the ongoing administration.
How long does it take?
A typical CSOP takes five to ten weeks from start to grant. We prepare the scheme documents first. The valuation then takes seven to ten days, and HMRC usually takes two to six weeks to agree it. Once it is agreed, signing and the grants take about a week, and we register the scheme in the week after.
The timetable depends on the company’s structure, how quickly the required information and approvals are available and HMRC’s response to the valuation.
We agree a timetable at the outset. If you want to grant options before a funding round or another planned event, let us know early so that we can consider the timing and valuation implications.
Who will handle your CSOP?
If you are looking for CSOP solicitors or a law firm to set up your plan, it helps to know how Forward Law works.
Forward Law is a legal consultancy. Your CSOP is handled by David Cammack, our managing director and a practising solicitor with more than 30 years’ experience as a commercial lawyer, including at several leading firms. David advises on all types of share scheme and works directly with you, from the first discussion through to the grants and HMRC registration.
David is authorised and regulated by the Solicitors Regulation Authority in his own right. Forward Law is not a firm regulated by the SRA.
What we need from you
To get started, we will usually ask for:
- Your current shareholding and option records, often referred to as the cap table.
- The articles of association, shareholders’ agreement and relevant investor consent requirements.
- Details of existing options and any promises or commitments to award equity.
- The proposed participants, intended awards and your initial thoughts on vesting.
- Relevant financial information and a contact who can assist with valuation questions and HMRC access.
You do not need to have decided every term before speaking to us. Part of our role is to help you work through those decisions.
Support as the scheme develops
After the initial grants, you may want to add employees, make further awards or deal with someone leaving. A funding round or sale may also require decisions about outstanding options.
We can advise on those changes and prepare the necessary documents. Before changing an award or permitting an exercise, we consider both the scheme rules and the tax position.
Keeping the option register and company records up to date also makes it easier to answer questions from employees, accountants and prospective investors.
Frequently asked questions
Where the company and employees qualify, EMI will often be the starting point because of its higher individual option limit and flexibility.
CSOP may be suitable where EMI is unavailable, but it has its own eligibility conditions. Wanting to include more employees does not, by itself, mean you need to move from EMI to CSOP.
We compare the schemes against your company’s circumstances, the proposed participants and what you want the awards to achieve.
The exercise price must be no less than the market value of the shares when the options are granted, worked out on the basis the CSOP rules require.
We recommend agreeing that value with HMRC before grant. Our valuation partner prepares it and seeks HMRC’s agreement, and we keep the supporting records.
The exercise price is then recorded in the option agreement, so the employee knows what they must pay to acquire the shares.
The scheme rules determine whether options lapse, remain available or can be exercised when someone leaves. They also set out what happens on a takeover or other specified event.
Permission to exercise under the documents does not necessarily mean the exercise qualifies for tax relief. Although certain statutory exceptions allow favourable treatment before the third anniversary, the reason for exercise and the relevant deadlines need to be checked.
We explain these distinctions when designing the scheme and can advise when a particular situation arises.
Talk to our CSOP lawyers about setting up a plan
If you are considering share options for your team, we can help you assess whether a Company Share Option Plan is suitable and what would be involved in setting it up.
Book a free 45-minute discovery call to discuss your plans. We can then provide a proposal setting out the work and the fixed fee.
