An overview of EMI schemes
Benefits of EMI Schemes Enterprise Management Incentive or EMI schemes can be an extremely...Back to News and Events
Enterprise Management Incentive or EMI schemes can be an extremely effective way for small and medium sized businesses to attract and retain talented employees.
The EMI scheme is a share option scheme which allows companies to grant their employees options to acquire ordinary shares. These options are usually exercisable at some future time such as the sale of the business. Alternatively, they can be contingent on qualifying criteria, such as an employee working at the company for a specified time.
The price of the shares is fixed at the date that the option is granted. If this price is equal to or greater than the market value of the shares, any increase in value up to the exercise of the option will not be subject to Income Tax or national insurance contributions.
In order for a company to be able to grant EMI options to its employees, it must:
In addition, the grant of the option must be for the purpose of recruiting or retaining the employee. It must not be as part of a scheme for tax avoidance. Ordinarily, this can be dealt with by including a clause confirming the purpose of the grant. This can be included either in each employee’s option agreement, or in the EMI scheme rules document.
In order for an employee to be eligible to receive EMI scheme options, they must:
It should be noted that the total market value of unexercised EMI option shares held by an employee at any time cannot exceed £250,000.00.
EMI options must be underpinned by a written option agreement between the company and the employee. If multiple employees are to be granted options it is sensible to produce a set of overarching rules for the scheme, in a single document. Each individual employee’s option agreement can then be kept much shorter. This is achieved by explicitly incorporating the rules contained within the main rules document, rather than having to include the relevant rules in each agreement.
For assistance in setting up an EMI scheme, contact Luke Pritchard in our Corporate and Commercial department on 01270 625478 or by email at Luke.Pritchard@poolealcock.co.uk. Alternatively you can visit our Corporate and Commercial services page here for more information or fill in this form to receive further information.