Retaining key members of staff in this current climate can prove challenging!
The Enterprise Management Incentive Scheme (EMI) is a HMRC fully approved scheme which allows a company to grant share options to key employees.
This gives the key employees an opportunity to buy/acquire shares in the company at a future date for a value agreed and set at the time the option is granted. This enables the key employees to benefit from the uplift in value in the shares from the date of grant to the time when the shares are sold.
The purpose of EMI is to incentivise and reward key members of staff in small and medium sized enterprises (SMEs). The share options can be linked to specific performance targets and conditions, of either the individual or the business. This can encourage the employees to help grow the business and deliver a bigger value in the shares as they are incentivised to benefit in the event of an exit.
One of the main advantages of EMI is the favourable tax treatment it offers. When the employee exercises their EMI share options, any increase in value in the shares is subject to capital gains tax rather than income tax. Also, if certain conditions are satisfied the employee may be eligible for Business Asset Disposal Relief (BADR), which can further reduce the capital gains tax liability on sale of the shares.
EMI Schemes have specific eligibility criteria and limitation. Both the company and employee must meet certain requirements, such as size of the company, type of business, employees working hours and level of shareholding. Its important to take advice on suitability and your specific requirements before embarking on EMI.
We can advise you on criteria and suitability and work closely with you and your chosen solicitor, to deliver a tailored EMI scheme that fits with your business goals and enabling you to incentivise and retain those key members of your team.