Beyond Borders: Equity for International Teams

Thanks to remote work and digital nomad dreams, hiring globally is the new normal.

Expanding your team across borders gives you access to top-notch talent, on-the-ground market knowledge, and that sweet 24-hour productivity cycle. But (and it’s a big but) keeping a global team engaged takes more than just a solid Slack game.

Equity is one of the most powerful tools for attracting and retaining talent. The catch? There isn’t a one-size-fits-all solution. Different countries have different rules, tax systems, and compliance hurdles.

So, what’s a startup to do?

The Complexity of International Equity

Let’s start with the obvious: UK share schemes like EMI (the Enterprise Management Incentive) are amazing... for your UK-based employees. But your brilliant developer in Berlin and your marketing genius in Mumbai, sadly, won’t qualify.

Sharing equity among distributed teams means understanding different tax regimes, employment rights, and reporting requirements. It’s a challenge, yes, but also a chance to build a solid foundation for global growth.

Growth Shares and Unapproved Share Options: Flexible Solutions

Now for some good news. Growth shares and unapproved share options might just be your best friends in this scenario. These are designed to give employees (and even non-employees) a share in the future success of the business.

Both of these solutions are perfect for rewarding advisors, contractors, and yes, those international hires, depending on your strategic goals.

• Growth shares allow key people to benefit from the value they help create above a set threshold, known as the “hurdle rate.” Once the company’s share price surpasses this hurdle, the growth shares become valuable.
• Unapproved share options give employees the right to buy shares in the future at a pre-agreed price. Both schemes can incorporate time-based vesting (i.e., equity is earned over time) and performance-based milestones if appropriate.

This flexibility makes them a useful option for motivating and rewarding international team members, without immediate tax implications in some (but not all) jurisdictions.

Just remember: always seek professional advice before jumping in, because this isn’t a DIY project.

Legal and Tax Considerations

You knew this section was coming. We’ve already hinted at it, but let’s make it crystal clear: offering equity abroad without understanding local tax laws is like playing Monopoly without reading the rules.

Paying attention to these details upfront helps you avoid potential compliance issues and ensures smoother operations across borders.

Every country has its own quirks when it comes to equity, and that includes tax relief eligibility (or lack thereof) and administrative overheads.

Platforms like Vestd can help manage the UK side of things, and even the US. Gathr can also connect you with trusted service providers who actually know the lay of the land, making this challenge much easier to handle.

Speaking of the US…

American Expansion

Share options (or stock options, as they say in the US) are commonly used by UK companies with US operations since schemes like EMI aren’t recognized stateside.

To award stock options to US taxpayers, you’ll need a 409A valuation. This determines the fair market value of your company’s shares, ensuring compliance with local tax authorities.

Partnering with experienced advisors who understand both UK and US equity frameworks can help you navigate this landscape. Vestd offers not just valuations for EMI, growth shares, and unapproved options, but 409As too.

Clear Communication is Key

You’ve sorted out the technicalities, great. Now it’s time to clearly communicate what equity means to your international team members, ensuring alignment and motivation.

Employees in different countries may have wildly different understandings of equity. For some, it might be the golden ticket to wealth. For others, it’s a vague concept with no immediate value.

Make sure you’re explaining things like vesting schedules, rights to dividends, and what a potential exit could mean for them.

Transparency is everything. A well-informed team is a motivated team, so take the time to break down how their share of success actually works.

The Wrap-Up

Going global is exciting, but rewarding your international team with equity requires a thoughtful approach. By planning carefully, you can offer a share in your success that motivates your team and drives growth across borders.

Just remember: no two countries are the same. Build a strategy that works for your business, communicate it clearly, and partner with the right experts to stay compliant. If you can pull that off, there’s no stopping you.

---

The Vestd team, content, and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax, or financial advice.'