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 EMI scheme to ensure that it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and to examine whether more companies should be able to have access to the scheme. This suggests that the government may be considering less restrictive eligibility criteria for companies who wish to offer an EMI scheme, therefore potentially increasing the number of companies who qualify to operate EMI schemes. See News Analysis: Spring Budget 2020—Tax analysis.

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 option

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