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 10% 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:
To join an EMI scheme, the employee must:
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.
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.
We work hard to be as proactive as possible when monitoring your scheme’s performance and can help improve any equity-based arrangements. RM2 has a well-earned reputation for its friendly, open and reassuring approach, which will allow you to implement and manage your EMI scheme, safe in the knowledge we’re always on hand to support you.
“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.”
David Manning
Finance Director
Denmaur Independent Papers Limited
We have the most experienced team of advisers dedicated to private and smaller listed company employee share schemes in the UK. |
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. |
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. |
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. |
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. |
If you are interested in creating a Enterprise Management Incentive Plan for your company or would like to chat about other employee share schemes that may be available to you, get in touch today to enquire about our free consultations for businesses.
Our consultations, which can take place over the phone or via video call and allow you to ask an experienced member of our team questions about EMIs, our services, and the relevant set-up costs. The cost will vary depending on numerous factors, such as the size and complexity of your business and likely plan features.
Ask about our free consultations for businesses by calling us on 020 8949 5522 or by filling out the form below to request a call back from our team.