Designing an EMI share option scheme
- A share option scheme is designed to motivate and reward your key employees.
- The Enterprise Management Initiative is a tax efficient HMRC "approved" share option scheme that is ideal for smaller companies.
The problem with share option schemes is that they can become quite complicated. It is not uncommon to find that both the employer and participant do not fully understand the terms of a scheme.
The additional problem is cost. The employer will need to review and almost certainly amend its Articles as well as agreeing scheme rules and an option agreement.
- Employers have a tendancy to offer employees shares that carry so many restrictions that they often have little capital value in the event of a take-over.
- If an employee realises that his share options are of low value it can have a negative effect on his relationship with his employer.
Our new guide to Designing EMI Share Options Schemes is written specially for the smaller employer: we take you step by step through setting up a share option plan and explain the various problems and possibilities with each feature, from setting share rights and restrictions, leaver provisions and valuation considerations, to examining the tax consequences whilst also considering the value of the benefit as a reward in the employee's hands.
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