Employee Reward Schemes
Queries on employee reward mechanisms are typically around Employee Benefit Trusts (EBTs) and Employee Ownership Trusts (EOTs).
EBTs are effectively a warehouse for the entity’s own shares and an extension of the sponsoring entity. The accounting is therefore similar to if the sponsoring entity had purchased its own shares but no capital redemption reserve is created as shares are not cancelled.
Entities may also need to consider interactions with FRS 102 Section 26 on Share-based payments.
EOTs facilitate employee ownership of an entity. The existing shareholders sell their shares to a TrustCo with the amount paid usually being a creditor owed by TrustCo to the old shareholders. The entity then makes distribution to TrustCo so it can pay of the debt.
Audit Exemption
Audit exemption has remained a popular topic and the default position is that all UK companies require an audit.
There are four audit exemptions that may be available to entities (section references to Companies Act 2006):
- Small stand-alone company - s477
- Small member of a small group – s479
- UK parent guarantee for any sized company – s479A
- Dormancy – s480
Tied in with this topic is company size which applies a ‘2 year rule’ for both entry and exit of the small companies regime as well as certain companies being excluded from the regime under s384.
Mergers and group reorganisations
These can take many different forms therefore it is not just the consolidation procedures that need to be considered. There may be a share for share exchange and merger relief under CA06 if the requirements are met in the parent company accounts. This is different from merger accounting which is a consolidation technique.
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