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Financing purchase of share options

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  1. #1

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    Financing purchase of share options

    i have accumulated a number of share options under my company's share option scheme that i wish to exercise (as the share price looks good and anyway i plan to leave the company).

    The problem is i do not have sufficient funds for the purchase.i need a 6 figure sum (which is approx 8 times my monthly salary) not a huge amount.After i exercise the option i plan to sell the shares immediately and repay the loan.

    i have good credit record .

    My question is what options do i have to take a loan for this purpose? Will banks lend for this? Private finance companies(any suggestions)?Do brokers lend for this purpose?(i have an account with DBS Vickers)

    Additionally generally speaking if an employee leaves a company do the share options scheme subscribed to become void?(none of the paperwork i have addresses this point)

    Finance not my field obviously so any advice much appreciated as to how i can do this


  2. #2

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    Every share option scheme I have ever been involved with has a mechanism for you to exercise and sell immediately without any third-party loan being involved. And I find it hard to believe that your contract or the share option scheme details don't specify what happened when you leave the company. Are you sre that the options are already vested? There is normally a gap of one to several years between the options being granted and you being able to exercise them (the whole point being that they are tools to persuade you to stay with the company).

    You are aware also that gains of the exercise of share options incur tax? (At the point you exercise the option, not when you sell the shares.)

    Last edited by PDLM; 06-04-2010 at 04:14 PM.

  3. #3

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    [

    QUOTE=PDLM;584883]Every share option scheme I have ever been involved with has a mechanism for you to exercise and sell immediately without any third-party loan being involved.
    The problem is I dont have the money at present to purchase the shares though(if i did i wouldnt need a third party loan) - i presume i need to buy them before i can sell them .( the only money that i have ever paid was $1 payed at the time the aceptance form was signed)

    so for instance: several years back i payed one dollar for 56000 shares at .71 (subscription price per share )for total amount payable is $43680

    so now i need that $43680 right? to buy the shares.Well i havent got the money so i am asking where is the best palce for a loan for this purpose

    And I find it hard to believe that your contract or the share option scheme details don't specify what happened when you leave the company.
    i am asking generally do these offers lapse when leaving a company?,as mentioned i cannot find it in the paperwork i have.

    Are you sre that the options are already vested?
    i have no idea what this means -

    There is normally a gap of one to several years between the options being granted and you being able to exercise them (the whole point being that they are tools to persuade you to stay with the company).
    yes i am within the dates that i can exercise to purchase according to the papers i have- this is fine

    You are aware also that gains of the exercise of share options incur tax? (At the point you exercise the option, not when you sell the shares.)
    [/QUOTE]
    Yes i knew this- thankyou for the link though

  4. #4

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    No - you're misunderstanding. The people managing the share option scheme normally do the exercise and sell without you needing to provide them with cash - they simply give you the net proceeds. If the shares which you can buy at 0.71 can be sold for 1.00 then they will simply give you 0.29/share minus some small fees for processing the transactions.

    Options generally lapse either when or very soon after you leave the company, but it may depend on whether you resign or are made redundant or are dismissed for cause.

    "Vested" means that you are able to exercise the options. This is normally one or more years after the options were first granted.

    Last edited by PDLM; 06-04-2010 at 05:05 PM.
    hongkong7 likes this.

  5. #5

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    PDLM is absolutely correct. Every ESOP (Employee Share Option Program) operates such that the conversion to shares and subsequent sell of the shares is done by the issuing company i.e. in this case your employer.

    You do NOT need to fund the conversion of the options into shares. They should be handling all this for you and just give you the net proceeds.

    hongkong7 likes this.

  6. #6

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    Thumbs up Idle Bank Accounts

    I have several HK,USA and BVI Companies with active bank accounts in Hang Seng,HSBC HK.HSBC Beijing openned back in 2001 and 2002.All linked to internet banking
    As a result of recent crisis most of the accounts are idle now.
    I can not sell the companies as the bank accounts will be automatically closed.
    If you have non-criminal ideas of how to use them you can become my partner and to use both the companies and the accounts accounts.

    Regards

    Jeoff


  7. #7

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    Quote Originally Posted by Jeoff:
    I have several HK,USA and BVI Companies with active bank accounts in Hang Seng,HSBC HK.HSBC Beijing openned back in 2001 and 2002.All linked to internet banking
    As a result of recent crisis most of the accounts are idle now.
    I can not sell the companies as the bank accounts will be automatically closed.
    If you have non-criminal ideas of how to use them you can become my partner and to use both the companies and the accounts accounts.

    Regards

    Jeoff
    and you happen to be in Nigeria no?

  8. #8

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    Why would anyone want to do this when the effort involved in setting up a company and an associated bank account is trivial (and certainly no greater than the effort to take over or buy into your companies and get the corresponding bank account access)?


  9. #9

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    Quote Originally Posted by Jeoff:
    I have several HK,USA and BVI Companies with active bank accounts in Hang Seng,HSBC HK.HSBC Beijing openned back in 2001 and 2002.All linked to internet banking
    As a result of recent crisis most of the accounts are idle now.
    I can not sell the companies as the bank accounts will be automatically closed.
    If you have non-criminal ideas of how to use them you can become my partner and to use both the companies and the accounts accounts.

    Regards

    Jeoff
    Jeoff come on i am stupid re financial matters but not that stupid, hey how's the weather in Lagos?

  10. #10

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    Thanks PDLM and Katanga i will approach HR about the options proceedure however one further point i didnt mention may be relevent

    The shares are for Singapore company traded on the sing stock exchange (i am not a sing resident ) but i work in hk and contract signed here


    does that make a difference in that i may have to stump up the money first to purchase the shares?

    i just want to be fore- armed with info about this as one of the company managers is probably going to make things as difficult for me as possible

    thanks again


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