Know-how guides

Recruitment and retention – EMI share options

Enterprise Management Incentive schemes (or ‘EMI Schemes’) are revenue approved share option schemes. They are especially aimed at small but growing companies and are designed to help with the recruitment and retention of high calibre individuals who might otherwise be attracted to work for more established businesses offering higher salaries.

The Basics

The right to buy (or ‘the option’) is often exercisable only after a period of employment. This can be anything up to 10 years after the date of grant. The idea is to incentivised staff to remain with the business for a minimum period of time.

Employees are granted the right to buy shares in their employer at some time in the future but at today’s prices. The effect of this is that the employee benefits from any growth in value of the business between the date of grant and the date of exercise.

The right to buy shares can be subject to almost any condition. This makes them very flexible indeed.

The requirement to meet specific performance targets can be used as a pre-condition to the right to exercise.  The advent of a trade sale is sometimes used as the trigger point to enable the employee to share in the proceeds of a disposal. This is sometimes favoured where the controlling shareholders prefer not to relinquish any degree of control.

The Tax Benefits

No income tax is chargeable on the granting of the options.

Provided the purchase price payable for the shares is ‘market value’, no income tax or national insurance is payable on the acquisition.

On a disposal of the shares, the employee will pay capital gains tax on any increase in value.

The company can also benefit from tax relief on its corporation tax liability.


The options must be granted for the purpose of recruitment and/or retention of key employees. Broadly the company must carry on a qualifying trade mainly in the UK and must not have gross asset of more than £30 million. If the company is a parent company then other conditions apply.

The employee to whom the option is granted must also meet certain criteria. The main one being that their minimum working time commitment to the company is not less than 25 hours per week, or if less, 75% of their weekly working time.

Establishing a Scheme

A scheme comes into being though a number of documents, the main one being the rules governing the EMI option. Often the company will also need to review its articles of associations to ensure that they incorporate appropriate rules to control the transfer of shares.

Part of the process involves agreeing the current market value of the shares with the revenue. The EMI options must also be notified to the revenue following their creation.

Disclaimer: This blog is for general information and general interest only. It is not to provide legal advice on any general or specific matter, and no such advice is given. Should you like to discuss the points raised in this article, please do not hesitate to contact the author.