What is an Enterprise Management Incentive scheme?
An Enterprise Management Incentive (EMI) scheme is a structure that allows companies to offer selected employees the opportunity to buy shares in the business at a specific time and set price per share.
An EMI allows conditions such as performance and continued service to be built in to the scheme, so that rewards will only be distributed when appropriate.
A company that qualifies to set up an EMI scheme can grant any individual full-time employee up to £250,000 worth of tax-advantaged share options and can grant up to £3 million worth of these shares in total.
To set up an EMI, a company must:
- Be permanently established in the UK.
- Be independent (i.e. not majority owned or controlled by another company).
- Have gross assets of less than £30 million.
- Employ fewer than 250 people full-time
- Hold more than 50% of the share capital of any companies it acts with (e.g. joint partnerships).
- Exist solely or mainly for the purpose of carrying out a qualifying trade (read more about qualifying trades).
Find out more about Enterprise Management Incentive (EMI) schemes.
How long does it take to set up an employee share scheme?
Most employee share incentive plans can be set up within 12 weeks. Generally, the key factor governing progress is the timing of the client's internal decisions, such as the dates of board meetings. If shareholder approval is required this may extend the timescale, particularly if there are large numbers of shareholders.
How much does it cost to set up an employee share scheme?
Again, this will depend on various factors, including the type of scheme and the complexity of the existing share structure. We will agree pricing at the outset so you can effectively budget for the creation of your employee share scheme.
For more information see Employee Share Scheme Costs.
What voting rights do employees have with an employee share scheme?
Employee shareholders can have full voting rights, restricted voting rights or no voting rights, depending on how you wish your employee share scheme to operate.
Which employees should be included in an employee share scheme?
An employee share scheme can be open to all employees or only to certain key employees. It is common to offer share options to people in certain key roles, to high performers and to those who have completed a number of years’ service with the business.
What are the tax advantages of an employee share scheme?
An employee buying shares in a business through an Enterprise Management Incentive (EMI) scheme will not need to pay Income Tax or National Insurance as long as the shares are not being offered for less than their market value (at the time they were initially granted).
You may also qualify for Entrepreneurs’ Relief if you sell your shares, allowing you to reduce your Capital Gains Tax liability.
What happens to an employee’s shares if they leave the business?
Employees will normally be required to sell their shares internally if they leave the business. However, other options can be put in place if you wish to allow employees to retain shares in certain circumstances, for example, when they retire.
Speak to us about employee share schemes today
For advice on the many different types of share scheme and how each can be tailored to match the needs of your business, please get in touch.
Call – 020 8949 5522 Email – email@example.com