EMI Schemes

Enterprise Management Incentive Schemes

Enterprise Management Incentive (EMI) schemes provide flexible, tax efficient incentives for independent, qualifying companies with less than 250 employees. Particularly beneficial to growing businesses looking to attract, incentivise and retain high quality employees, EMIs are HMRC approved and present excellent tax benefits.

At HCB Solicitors, our corporate and commercial law experts are renowned for their in-depth knowledge, innovative thinking and highly specialist advice on the full scope of employee incentives and share plans. We have advised numerous companies across a variety of industry sectors on selecting and compiling the schemes that best suit their specific commercial needs and their vision for the future of their businesses.

Benefits of EMIs to Employees

Incentivised employees who feel a true part of the organisation they work for tend to be loyal, long-serving and focused on helping to grow the business.
Under an Enterprise Management Incentive scheme, any employees may be granted the right to buy shares up to the value of £250,000, with the price fixed on the date of grant. No tax or National Insurance contributions are payable on either grant or exercise of the option, providing the exercise price meets or exceeds market value at the date of grant.

Should the value of the shares rise above the exercise price, then the value of the scheme will increase for the employee. Although Capital Gains Tax will apply on gains, this is generally reduced via taper relief and is less than the top band income tax and National Insurance contributions which are often due on unapproved schemes.

Qualifying for an Enterprise Management Incentive

EMIs are subject to various qualifying criteria. The company offering the options under the scheme can be unlisted or listed on a stock exchange but must be independent, with fewer than 250 employees and with assets of not more than £30 million at the date of grant. The schemes are particularly useful to companies worth between £1 million and £25 million.

The company is also required to conduct a ‘qualifying trade’ with the intention of turning a profit. Generally if a business trades within the financial or legal sector, deals in property development, land or leasing, it will not qualify, neither will it if it collects licence fees or royalties, although there are variations to these rules.

Our experts will be able to advise whether your company meets the qualifying criteria. If you do not qualify then we can advise you on alternative employee incentive schemes.

EMIs Make Strong, Effective Incentives

Shares can be with or without restrictions, must be fully paid up and can be non-voting.

By placing performance conditions on the grant and exercise of the options, EMIs can prove excellent short or medium term incentives. They can also be combined with other schemes, such as a Founder Share Scheme.

If you are looking to strengthen and secure your team as a foundation for growing your business, an Employee Management Incentive scheme could prove highly beneficial. For expert advice on setting up and managing an EMI, get in touch with the commercial specialists at HCB today. We can also review any existing share schemes you have in place to ensure they are meeting your commercial objectives and provide advice on share buyback procedures should an employee be departing.