An Enterprise Management Incentive (EMI) option is granted to an employee to acquire shares in the company for a set ‘exercise price’. HMRC has issued new guidance on EMI Option Agreements, governing the details it must contain if the shares within the scheme are in any way restricted.
Previously, it was considered acceptable for the EMI Option Agreement to include a section that stated that the shares were subject to any restrictions laid out in the document that specifies the regulations of the company’s operations.
Though, HMRC has now determined that this section is no longer applicable. They have issued guidance stating that for options granted after 17th August 2016, any information about restrictions that the shares are subject to must be set out within the EMI Option Agreement itself. If the EMI Option Agreement doesn’t do this, HMRC has said that it will take a closer look at the at the time when the option was granted, taking into account evidence that the restrictions had been brought to attention.
Restrictions that are typically applicable to shares granted under EMI Option Schemes include restrictions on transfer, pre-emption rights and drag-along provisions.
Clients granting future EMI options should therefore ensure that the EMI Option Agreement now contains details of any restrictions on the shares, and for any options that have been granted since 17th August 2016, we recommend employees are now notified in writing of any restrictions that attach to the shares covered by the grant.
Should you require further information on this or any other matter relating to EMI Share Option Schemes or other types of employee benefit schemes, please contact our Head of Employment and Corporate Support, Nick Jones on 0117 906 9254 or at firstname.lastname@example.org.
Article based on the 18 April 2017 update posted by Taylor Wessing.