An Introduction to Enterprise Management Incentive (EMI)

The scheme allows employers to grant share options to key employees, in a tax-effcient way, as a reward for their efforts, and/or to retain and incentivise key employees long term. EMI schemes can provide employers and employees with significant tax benefits and are much more flexible than other tax-favoured share arrangements.

A number of EMI schemes are “exit-based” with the share options exercisable on a sale or flotation of the company. Most ownermanaged companies prefer this type of arrangement, since the option holders do not become shareholders until shortly before the sale of the company. This also rewards the employee option holders with a share of the sale proceeds (taxed at beneficial capital gains tax rates).

Having share options can sometimes be more feasible and attractive to employees. They might even be more incentivising if EMI options are such that they provide exercisability upon target achievement. Also, companies may prefer not to provide shares outright to employees to avoid complications in the event of employees leaving the company.

Companies offering EMI share options must be involved in qualifying trades. Excluded trades include:

• Banking
• Farming
• Shipbuilding
• Legal services, and
• Property development.

Having ownership in the company you work for – not just professional but financial – can mean a lot to some employees. co.uk to learn more about eligibility, qualifying conditions, and the benefits of EMI schemes.

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