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An overview of EMI schemes

Published on 15 January 2018 | Modified on 14 December 2022

Written by Stacey Bennett
EMI Schemes

Benefits of EMI Schemes

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.

Practical Requirements of EMI Schemes


In order for a company to be able to grant EMI options to its employees, it must:

  • Hold gross assets of no more than £30million;
  • Employ fewer than 250 full-time employees;
  • Have a permanent establishment in the UK either in the form of permanent premises, or, via an appointed agent that is authorised to conclude contracts on the company’s behalf;
  • Not be a subsidiary of or controlled by another company;
  • Be a bona-fide trading company (i.e. not a non-trading company, such as, a holding company); and
  • Not engage, to a substantial extent, in any ‘excluded activities’ (list at Paragraph 16, Schedule 5 of Income Tax (Earnings and Pensions) Act 2003).

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:

  • Work for the company for at least 25 hours per week, or if less, at least 75% of their total working time; and
  • Not hold more than 30% of the issued share capital in the company.

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.


The Scheme Rules and Individual Option Agreement Documents

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 Alternatively you can visit our Corporate and Commercial services page here for more information or fill in this form to receive further information.


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