Glossary of terms

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A

Allotment: The process by which newly created shares are received by, or given to shareholders who have subscribed or applied for them.
Annual General Meeting: A meeting to be held within six months of a public company's accounting reference date and within nine months of a private company's accounting reference date. The business of the meeting includes certain resolutions being put to shareholders for their approval, such as the re-election of directors, approval of the Annual Report and approval of a final dividend. Shareholders are able to gather to ask the Board of Directors questions pertaining to corporate health and strategy. Proper notice must be given to shareholders with regards to the meeting time, location and resolutions to be considered.
Annual Report and Accounts: A record published every year by companies, detailing financial, strategic and governance matters. It provides an overview of how the company has performed during the year.
Approved Share Options: Share options approved by Her Majesty's Revenue & Customs.
Award: When shares are allocated to eligible employees participating in a share plan.

B

Beneficial Shareholder: A shareholder who has a beneficial entitlement to shares held by a third party, such as a nominee or a trustee in relation to a Share Plan. In some circumstances, beneficially-owned shares may be subject to forfeiture.

C

CREST: The centralised electronic settlement system for securities traded on the London Stock Exchange. Shares are held and traded electronically rather than in certificated form.
Certificated: When shares are held in paper form through a share certificate. A share certificate is a written document and serves as evidence of ownership of the number of shares held.
Contribution: Money deducted from an�employee's salary and paid into a share plan. This can include monthly Save As You Earn (SAYE) contributions which are paid into a savings account, or contributions to a share plan which are used to purchase shares on a regular basis.
Corporate action: Any action brought about in a company (either by the company or an external party) that results in a change affecting its structure�of ownership.

D

Dividend Re-Investment Plan DRIP: A plan whereby a shareholder can elect to have their dividends re-invested to buy additional shares in the company.
Dividend Shares: The dividends re-invested in plan shares on behalf of employees, subject to a limit of £1,500 per year. These shares are often issued as part of a Share Incentive Plan (SIP) and are subject to a holding period of three years, during which employees will not be permitted to sell them unless they leave the relevant employment.
Dividend: The distribution to shareholders from a company's current period profit or its distributable reserves.

E

Ecommunications: Electronic communications, which can include emails, web portals and the publication of information on a website. Some companies allow shareholders to elect to receive and submit company communications (such as annual reports or proxy cards) electronically rather than through the post, saving time, paper and costs.
Executive Share Option Scheme: A plan under which the employee is granted the right, but not the obligation, to buy a fixed number of shares at a fixed price, for a set period of time in the future, subject to certain conditions, which are set out at the time of the grant being satisfied.
Exercisable Period: Following the vesting period, this is the timescale during which participants can exercise their options. The length of this period will vary from plan to plan and should be set out in the plan rules.
Exercise: The process of arranging for options granted under an option plan to be paid for, enabling the shares under option to be transferred to the employee.

F

Final Dividend: A dividend proposed by the directors of a company, to be approved by its shareholders.
Forfeiture: Shares granted to employees as part of a share plan may be subject to forfeiture if they are not held for a qualifying period, or the employee leaves the company; such conditions will usually be outlined in the plan rules.
Free Shares: Shares given to employees for free. These shares may have certain conditions attached, and may have to be forfeited in certain circumstances, such as when an employee leaves before a qualifying period has been served. These shares are often issued as part of a Share Incentive Plan (SIP) or a Long Term Incentive Plan (LTIP).

G

General Meeting: A meeting of the company where business requiring shareholder consideration is put to the shareholders of the company for approval in the form of resolutions. Shareholders are able to gather to ask the Board of Directors questions in relation to the items of business being considered. Proper notice must be given to shareholders with regards to the meeting time, location and resolutions to be considered.
Grant: An issuance of an award such as a share option to selected employees. The grant may include certain conditions that will be set out in the plan rules.

H

HMRC: Her Majesty's Revenue & Customs, responsible for collecting tax on behalf of the UK Government.

I

Indicative value: An indication of the current value of a shareholding, based on a recent share price valuation. The source of the valuation depends on how the company's shares are listed.
Interim Dividend: A dividend payment that is not a final dividend, i.e. it does not require shareholder approval.
International Payment Service: A facility, offered by Capita Registrars Limited and Travelex, which allows shareholders to receive dividends in their own currency.
Investment: When money is deposited into something, with the expectation of getting a return (i.e. more money back than originally put in).
Investor code: A unique 11 digit code which is shown on all Capita communications to individual shareholders. This number is important and should be kept confidential, as it can be used to access information about a shareholder's share plans and shareholdings.
Issued share capital: The total nominal value or number of the company's shares, including those held by the company in treasury, which have been issued and have not been redeemed or cancelled.
Issuer: A company that issues shares.

J

Joint Ownership Equity Plan: A Joint Ownership Equity Plan (JOE) is generally reserved for senior executives of a company. The employee acquires a joint interest in a share along with the trustee of an employee share ownership trust. The employee is entitled to any growth in the value of the shares above a certain value.

L

Letter of Indemnity: A letter, usually arranged through the registrar, requesting the replacement of a lost share certificate. The registrar will charge a fee for this letter, and there may be the need to pay for indemnity cover depending on the value of the shares represented by the lost certificate.
Long Term Incentive Plan: Under a Long Term Incentive Plan (LTIP) participants are typically provided with free shares after a period of time (usually a minimum of three years) subject to certain conditions such as remaining in employment throughout the period and the company meeting certain performance conditions. This plan is also known as a Performance Share Plan.

M

Matching Shares: Shares employers can give employees for free, to match a predetermined quantity of partnership shares bought by the employee. For example, for every ten partnership shares bought by the employee, one matching share is given to them by the employer. The employer can give up to two free shares per partnership share bought. These shares have a holding period of at least three years from the date of award (this can be up to five years if the company chooses) and are often issued as part of a Share Incentive Plan (SIP).
Maturity: This term is used to describe the time it takes for a plan to mature/come to an end. For example, three, five or seven years.

N

Nominee: A company that holds shares in another company on behalf of investors. The nominee will be the name recorded on the register of members rather than those of the underlying investors.
Notice of Meeting: This is required to be distributed to shareholders prior to a general meeting of the company, detailing the resolutions for consideration, time and location of the meeting.

O

Online voting: A facility, offered at the issuer company's discretion, which allows shareholders to vote online in respect of AGM resolutions and other such matters, provided the class of shares owned give the shareholder the right to vote. For example, if the shareholder owns ordinary shares in the company, they will have voting rights.
Options Plan: A share plan which gives the employee the right, but not the obligation, to buy shares at a certain share price. When the vesting period ends these options can be bought at the pre-determined share price subject to the fulfilment of any conditions set out when the options were granted.
Options: The right, but not the obligation, to buy/sell shares at a fixed price.
Ordinary Shares: The most common class of share representing the owner's interest in the company. They are voting shares excluding preferential rights.

P

Partnership Share Agreement: The contract an employee will enter into with their employer and trustee, when they join a Share Incentive Plan (SIP) or similar share plan.
Partnership Shares: Shares bought from an employee's pre-tax salary, often issued as part of a Share Incentive Plan (SIP). If the SIP is HMRC approved, the shares bought are subject to a limit of the lower of £1500 per annum or 10% of the employee's salary. These shares are free of income tax and National Insurance contributions provided they are held in the plan for at least five years.
Permission to deal: Some companies will require the employee to seek permission to buy or sell their shares. It is the employee's responsibility to check with their HR department and obtain the relevant permission before doing so.
Plan Rules: The rules that govern a share plan offered by an employer to its employees.
Preference Shares: Generally non-voting shares. Dividends to preference shareholders, which are usually fixed, have to be paid before dividends on ordinary shares. Preference shares have a higher priority over ordinary shareholders in the event a company is liquidated.
Proxy vote: When a shareholder appoints a representative (which can be the chairman of the company) to vote on their behalf at general meetings of the company.

R

Registrar: An organisation that keeps records of all a company's shareholders on behalf of the company. This allows the company to easily track who owns its shares. A registrar is also sometimes referred to as a "Transfer Agent".
Restricted Share Plan: This plan allows for employees to acquire ownership of the shares from the start. However, at that time the shares are subject to certain restrictions, which can significantly reduce their value. They may also be forfeited if performance targets are not met or the employee leaves employment. Over time the restrictions fall away so that at the end of a predetermined period the employee holds unrestricted shares, which will have full value.
Rights issue: The issue of new shares, offered to existing shareholders in proportion to their current shareholding, respecting their pre-emption rights. The price at which shares are offered can be at a discount to the current share price.

S

Save As You Earn SAYE: A plan that allows the employee to save towards buying the shares in their company. At the end of the savings term the employee has the option to buy shares in their company or to take out the savings in cash.
Scrip Dividend Plan: A plan which allows the shareholder to receive new shares in the company rather than receiving cash. Unlike a Dividend Re-Investment Plan (DRIP), where the shares are bought on the market, a scrip involves the issuer company allotting new shares.
Share Account Statement: Shows the number of shares held by a share plan or nominee scheme participant, including recent dividends paid and any transactions made.
Share Certificate: A certificate showing how many shares a shareholder legally owns in the company. This is considered evidence of ownership and is a valuable document.
Share Class: Refers to the type of shares of a company. Different classes of shares offer the holder different rights in respect of voting, distribution of profits and distribution of assets in the event of a company being liquidated.
Share Dealing: Encompasses the buying and selling of shares.
Share Incentive Plan SIP: A plan available to all eligible employees in a company. Often referred to as a "SIP", the shares owned by participating employees are held in trust, and usually on a tax-free basis (if the plan is HMRC approved), for as long as they participate in the plan. This plan was previously known as an "All-Employee Share Ownership Plan" (AESOP). A SIP can have four different types of shares, offered at the discretion of the employer company: Partnership, Matching, Free and Dividend.
Share Plan: A plan, offered by an employer, which allows an employee to buy shares in the employer company (or its parent company, if it is part of a group).
Share Portal: An online service offering shareholders the opportunity to manage their shareholding with a specific company. For example, shareholders can choose how they would like to receive dividend payments, change their address or contact details and sign up for Ecommunications.
Shareholder: The owner of shares in an issuer company. In the UK, this can either be a legal shareholder who holds ordinary shares and appears directly on the Issuer's register of members, or a beneficial shareholder, who has a beneficial entitlement to shares held by someone else (for example, a nominee or a trustee).
Shareholding: The number and type of shares a shareholder holds in the issuer company.
Shares: Each share is essentially a unit indicating ownership, in proportion to each other share of the same class, of that company. Different classes of share may have different rights attached to them, for example the right to vote or to receive dividends.
Summary Financial Report: A condensed report sent to shareholders in place of a full Annual Report and Accounts.

T

Tax Statement: A statement showing how much tax is payable on shares for sale.
Tax Voucher: A shareholder will receive this when dividend payments are made to them. It details the dividend rate, dividend type, the number of shares held, details of any tax withheld and any tax credits applicable.
Transaction history: Shows recent transactions including dividends paid or re-invested.
Transfer: When shares are moved from one plan to another, or from one name to someone else's name, such as a spouse or civil partner.
Trustee: A third party appointed to handle the trustors' investment affairs. Certain share plans, such as a Share Incentive Plan (SIP), require a trustee to hold the shares and any contribution money in trust.

V

Vesting period: The period between the grant of options to an employee and the time at which the options can be exercised, which may include the fulfilment of any conditions set out in the plan rules. Once this period has passed, the options are said to have "vested".