The EMI rules are now well established and popular; the most recent data is that 11,700 companies currently have awards of EMI options over the company’s shares in place as a staff reward.
The key purpose of an EMI option is to incentivise the employee to help grow the company. Both the existing shareholders and the EMI option holders will then share in the growth of the value of the company, typically at a future exit or other realisation event.
However, realising an exit sometimes take longer than first anticipated. Inevitably with the elapse of time, the original details of plans may not be fully remembered, or key staff involved in the arrangements may have left the company. As these plans age, it can therefore be easy to miss that EMI share options lose their tax advantages 10 years after the date of grant. Many EMI options will lapse at that point; others will convert to unapproved options.
As a consequence of the long term nature of these schemes, some of these EMI option plans will inevitably be either hitting their ten year anniversary and/or may have undergone a disqualifying event, often without notifying the employees of a possible entitlement to exercise.
We can help the employer review any older EMI plans and consider whether options are still meeting your commercial needs and whether they are now exercisable or could become exercisable before their 10th birthday.
For older plans or plans that have undergone a disqualifying event, we can discuss ways of managing employee communications and refreshing the reward structure for employees
For further information, please contact Kate Culley (tax senior manager):
T: 01752 301010