The Enterprise Management Incentive or ‘EMI’ is an HM Revenue & Customs approved share option employee incentive scheme aimed at small entrepreneurial companies that meet certain conditions. It has been designed to assist such companies to recruit and retain high quality employees.
The scheme offers attractive opportunities for equity participation by employees, in recognition of the fact that smaller companies may not be able to match salary levels paid elsewhere. The EMI is also flexible enough to allow for the option share to be geared to future capital growth and performance targets to be used in the scheme. So long as the options keep qualifying for EMI status, throughout the period of ownership, the employee should be able to take advantage of income tax and NI reliefs.
To qualify for an EMI scheme companies have to meet various requirements, including that they must:
The advantages of EMI schemes include:
Implementation of an EMI scheme is reasonably complex. A share valuation will need to be undertaken with this then being agreed with HMRC in advance of the options being granted.
Once any valuation has been agreed with HMRC, which would generally take around 30 days, the process of drafting the required legal contracts and plan rules can be undertaken.
We have implemented many EMI schemes and are experts in business valuations and scheme implementations. We can also draft all the legal documents as part of the process negating the need for a solicitor.