EMI and disqualifying events
EMI and disqualifying events

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • EMI and disqualifying events
  • What are the consequences of a disqualifying event?
  • Consequences of a disqualifying event on a market value EMI option
  • Consequences of a disqualifying event on a discounted EMI option
  • What are disqualifying events?
  • Disqualifying events relating to the company
  • Disqualifying events relating to the employees
  • Disqualifying events relating to varying the terms of the option
  • Disqualifying events relating to the alteration of share capital
  • Disqualifying events relating to share conversions
  • More...

EMI Review: In the Spring Budget 2020, the government announced that it will review the enterprise management incentives (EMI) scheme (see News Analysis: Spring Budget 2020—Tax analysis). On 3 March 2021, the government published a call for evidence regarding a possible expansion of EMI schemes. This seeks views on the current EMI scheme to assess the effectiveness of its targeting and whether more companies should be able to access the scheme to recruit and retain the key talent they may need to grow and scale up. For further information, see Enterprise Management Incentives: call for evidence.

Not realising a disqualifying event has occurred is one of the most common reasons why unintended income tax and National Insurance contributions (NICs) (employer’s and employee’s) may become payable on the exercise of enterprise management incentives (EMI) options. Therefore, EMI eligibility is not just based on a snapshot of the company at the time the scheme is launched but requires ongoing monitoring.

This Practice Note examines the following:

  1. what are the consequences of a disqualifying event:

    1. on a market value EMI option, and

    2. on a discounted EMI option?

  2. what are the disqualifying events:

    1. relating to the company

    2. relating to the employees

    3. relating to varying the terms of the option

    4. relating to the alteration of share capital

    5. relating to share conversions, and

    6. relating to granting options pursuant to company share

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