EMI valuations for EMI schemes
EMI valuations for EMI schemes

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

  • EMI valuations for EMI schemes
  • Restricted shares and EMI valuations
  • Why do you need to obtain an EMI valuation?
  • EMI valuation process for a public company
  • EMI valuation process for a private company

Restricted shares and EMI valuations

Restricted shares are shares which are subject to any restrictions described in sections 423(2)–(4) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). See Practice Note: What are restricted securities?

There are two types of market values in respect of restricted shares which may be required for enterprise management incentives (EMI) purposes:

  1. actual market value (AMV)—this is the market value of a share taking into account any restrictions and risks of forfeiture, and

  2. unrestricted market value (UMV)—this is the market value of a share ignoring any restrictions and risks of forfeiture. Where the shares are restricted, this will be the higher of the two values

For EMI purposes, the AMV is used when determining whether income tax and National Insurance contributions (NICs)—employee’s and employer’s will be payable on the exercise of the options. For further details on the tax treatment of an EMI option, see Practice Note: Enterprise management incentives (EMI)—income tax and NIC treatment of options.

The UMV is used to calculate whether the EMI options are within the individual limit of £250,000 and the company limit of £3m. For further details of these limits, see Practice Note: EMI—limits on EMI options.

A company may sometimes take the view that certain restrictions do not depreciate value and that therefore the UMV and the AMV are