Enterprise Management Incentive Scheme (EMI)

A well-established, tax-advantaged share option scheme (sometimes referred to as a plan), an Enterprise Management Incentive (EMI) plan that is tailored to the unique needs of your business can help retain and incentivise the key people integral to the future success of the company.

An EMI is often also a helpful recruitment tool, as talented individuals can be attracted to organisations that offer the scheme as an additional incentive over and above salary and more standard incentives.

As a share option plan, the EMI offers selected participants (frequently, your key personnel) the opportunity to purchase shares at a specified time and at a price agreed at the time the options are granted.

When tailoring the scheme to the needs of the business, individual performance and retention conditions can be built in, to help ensure rewards are only distributed when important corporate objectives have been met.

Any full-time employee of a qualifying company may be granted tax-advantaged share options over shares with a market value of up to £250,000 at the time of the grant, subject to an overall company limit of £3 million. The shares must be in an independent trading company that has gross assets of no more than £30 million and with fewer than 250 employees.
The Enterprise Management Incentive (EMI) is the most flexible, generous and tax advantaged share option scheme available in the UK, offering a potential tax rate of as low as 18% on any gains.

Since the EMI plan was introduced in 2000, the experienced RM2 team has worked with organisations of different sizes and varying complexities across all sectors to design and implement these schemes, helping to:
- Motivate participants to work beyond short-term goals.
- Reward participants on a tax-advantaged basis (including the application of Business Asset Disposal Relief on the sale of the shares).
- Protect current shareholders from immediate dilution and loss of control.
- Promote long-term retention of key employees.
- Encourage company growth by linking awards to performance conditions.
- Provide a framework to include new participants, if required.
- Attract and recruit talented candidates to companies.
- Minimise financial risk for participants.
To join an EMI scheme, the employee must:
- Be an employee of your company or a subsidiary of your company.
- Work for you for at least 25 hours a week or 75% of their working time (therefore, a part-time employee can qualify so long as they don’t spend more than 25% of their time working elsewhere).
- Not hold any more than 30% of the company’s shares at the time the options are granted.
At RM2 we believe in adopting a consultative approach to building share plans. We work closely with clients to understand precisely what they intend to achieve with their EMI scheme.

For more than two decades this approach has ensured we deliver an effective service that helps our clients meet their defined corporate objectives, whilst helping shape their future growth strategy.

Do you know about other share schemes RM2 can help you with?

There are many different share schemes to choose from that may be better suited to your needs. View the full range of share schemes available.

See all share schemes

David Manning
Finance Director, Denmaur Independent Papers Limited

RM2 provided thorough and relevant advice in setting up the company’s EMI scheme. The follow-on administrative services in running the scheme have been carried out in a friendly and very efficient manner. We are very pleased with the service.

How we can help with Enterprise Management Incentive schemes

RM2 is one of the UK’s leading employee ownership consultancies, specialising in the design, implementation and maintenance of all types of employee share schemes, including EMI.

Few can match our unrivalled experience and decades of knowledge dealing with every possible scenario, which has ensured we are regarded as market leaders in tailoring employee share schemes to meet the needs of businesses.

The team here at RM2 will also produce plan rules, share option agreements, together with associated documentation such as shareholder resolutions and board minutes. We can also draft the FAQs for employees and help with the necessary employee communications, so the benefits are clearly explained, along with the defined objectives.

We will also work with you to agree the share value with HMRC. Once the valuation is agreed, the team will arrange and assist with the grant process, with registration of the plan and option grants with HMRC, which is required to ensure EMI tax status.

Critically, we are one of the few consultancies that aims to build a strong relationship with you through undertaking the necessary ongoing share plan compliance and administration support. This ensures the EMI plan remains compliant and can develop to match your changing needs.

Our highly experienced team are well positioned to guide your company through every stage of the EMI implementation process, take a look at our implementation process:

- The design will flow from your objectives, so you can be more precise about what you hope to achieve, the better.
- What is your business plan, and what do you need from your employees to execute this plan successfully?
- Do you want to focus people on an exit? Do you want to reward all employees as a team?
- Do you have just one key recruit in mind?
We will ask you lots of questions, shaped by our experience, to allow us a full understanding of your objectives, before we advise on a plan.
- At this stage, you will need to decide on any rights and conditions to attach to both options (such as performance conditions and leaver provisions) and the shares under option (such as votes and dividends).
- But don’t worry, we’ve done this hundreds of times and we’ll recommend features for you.
A key decision will be the amount of equity you want to set aside for your EMI scheme. And again, we can help you with an indicative valuation and some equity modelling to deliver real peace of mind.
- Once the design and modelling are complete, we will work through your company structure and identify what changes need to be approved by shareholders.
- We will then prepare resolutions to be passed and work with you to obtain approval from shareholders.
- At the heart of an EMI share scheme is the set of rights and restrictions attaching to shares, and these are set out in the articles of association.
- We will prepare amendments so that these rights and restrictions strike the right balance between delivering value to employees and protecting the interests of other shareholders.
- We will prepare a valuation and agree this with HMRC.
- The share valuation can have an enormous impact on how employees are motivated and the tax treatment of the shares.
- Agreeing the valuation prior to the grant of the options will provide certainty for individuals and company on future tax treatment.
- It will also guarantee that you have this step clearly evidenced for any future due diligence work if your company is sold.
- Communicating information about your share scheme to all the participants is vital to its success.
- We always provide all our clients with easy-to-follow notes that explain your scheme in simple terms, but we can also provide further help and guidance on how you can effectively promote your scheme to more individuals within the business.
- Once your plan is implemented it will need to be administered to ensure it remains compliant.
- Amongst other things, you must file a share plan annual return with HMRC, or you can be subject to fines.
- It’s also very important to keep track of all option grants and lapses, including managing leavers.
- If you choose RM2 to undertake this important role for you, you can be confident that your scheme is in the capable hands of one of the most experienced Compliance teams for share schemes in the UK.

Why choose RM2 as your Enterprise Management Incentive advisers?

Specialised Expertise

We have the most experienced team of advisers dedicated to private and smaller listed company employee share schemes in the UK.

Quality Advice Tailored to your Business

We understand that a ‘one-size-fits-all’ approach to an EMI will rarely meet a client’s objectives, so we will work in partnership with your business to create a bespoke plan tailored to your goals.

Multidisciplinary Team

Our team consists of a wide range of skilled professionals (including solicitors, accountants and share plan administrators) to help guide you through the EMI set-up process and ensure that your final plan is being managed effectively.

Consultative Approach

At RM2, we believe in taking a consultative approach to building share plans by finding out precisely what our clients are looking to achieve. This helps us to deliver a professional and effective service that helps clients meet their specific goals and plan for the future.

Support throughout the process

We are well positioned to guide your company through every stage of the share scheme implementation process, from strategically planning the design of your Enterprise Management Incentive Scheme to administering it according to the UK government’s guidelines and providing ongoing compliance and administrative support.

Meet the team

Caroline Parker

Director / Operations Manager

Stuart Hale

Senior Consultant

Sarah Anderson

Director

Get in touch for a free Enterprise Management Incentive consultation

Get in touch