Enterprise management incentive schemes: some common pitfalls

While enterprise management incentive schemes can provide substantial benefits for option holders, diligence exercises can uncover a range of issues leading to increased costs or even disqualification.

In the midst of the ‘Great Resignation’, and strong competition for talent, it has become key for businesses to look at different methods of retention for key members of staff and to attract new senior team members. Enterprise management incentive (EMI) schemes are not new, and we assume here that readers are familiar with the EMI benefits and qualifying conditions. In our experience, EMI comes up a lot on due diligence exercises (it is the most popular HMRC approved share plan). With the potential upside for individual option holders – namely, beneficial tax treatment on exercise and on any capital growth – come a raft of potential stumbling blocks for both the company and for the option holders themselves.