Q&As

Is it possible to grant an EMI option which can be exercised on an exit but which also allows the board, with the approval of the shareholders, additional discretion to permit exercise in other circumstances?

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Published on LexisPSL on 10/05/2017

The following Share Incentives Q&A provides comprehensive and up to date legal information covering:

  • Is it possible to grant an EMI option which can be exercised on an exit but which also allows the board, with the approval of the shareholders, additional discretion to permit exercise in other circumstances?
  • Case study

Case study

Such discretion would be useful in relation to a family-run company, in the event that there is a deterioration in the health of the current majority shareholder, who is also the managing director, and it becomes necessary for the optionholder, who is to become the replacement managing director, to acquire shares in order to facilitate the running of the company. Can the future managing director be granted an EMI option which covers this eventuality?

Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (‘Schedule 5’) sets out the requirements which must be met in relation to the terms of EMI qualifying options. These contain no restrictions on the circumstances in which EMI options may be permitted to be exercised, except that the option must be capable of being exercised within ten years from its

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