A cost-effective and tax-advantageous option for both employers and recipients.
Traditionally, ordinary shares are used when issuing EMI options, but there are many benefits to issuing EMI options over a growth share class. Here we’ll explain the step-by-step process from authorising a growth share class to creating the EMI scheme.
Before we get into the steps, we’re assuming that you already have:
- An HMRC-approved valuation for an EMI scheme
- A growth share class and hurdle valuation
- Adopted Vestd’s Articles of Association
- Or have bespoke articles that allow growth share classes
If not, please contact Customer Success or read our guides on EMI valuations and growth shares.
To begin, you’ll need to remove the conditionality from your growth share class. Go to Share capital > Share classes and select the growth share class you wish to use for your EMI scheme.
In the share class details, the conditionality should be set to ‘Yes.’ To change this, click Update details and change the conditionality to ‘No.’
Once the conditionality is removed, create a new option pool. Go to Share schemes > Share pools > Create a new option pool.
From here, give the option pool a reference (name), enter the pool size, and select the share class as Vv (voting) or Vn (non-voting). This creates the growth share option pool for your EMI scheme.
Once you’ve entered the details for the option pool, click Next. You’ll then be taken to a summary page where you can review and edit the option pool details, before submitting the authorisation of the pool. Depending on your company’s Articles of Association, the relevant directors and shareholders will be notified to sign the resolution to authorise this option pool.
When the pool has been authorised, it will be set live on the Share pools page.
Now the growth share option pool is live, you can create your EMI scheme. Go to EMI > Options scheme > New EMI template.
The platform will walk you through each question as you set up your scheme, but if you need extra support please get in touch.
When you're asked to set the exercise price, enter the company's nominal value.
If you’re unsure what your company's nominal value is, click Save & exit and go to Share schemes > Share pools to find the option pool you’re using for this scheme (the reference you gave it when creating the pool). Then click on the pool’s reference to see its nominal value.
To get back to creating your scheme, go to EMI > Option schemes and click Continue on the scheme that’s in progress.
You’ll have a few more questions to answer before getting to the scheme summary page.
This is a chance to review all the details before confirming and creating the option scheme. Don’t worry if you click confirm and need to change something later, you can still edit the scheme as long as any options haven’t been issued.
Once confirmed, start adding recipients to the scheme. First, make sure you select the growth share option pool you recently created.
Then enter the vesting start date (this can be in the past, for example when the recipient started employment) along with the recipient’s details and the number of shares.
Click Save as draft and add another and repeat the process until you’ve added all the scheme members (You can always come back to add more people).
When everyone is added, click Send invites in the top right corner to see the list of recipients.
If everything looks correct, click Send invites to email each recipient to accept their options.
Once they have accepted the invitation, they will be able to view their agreement summary with all the details of the scheme, including their exercise price and hurdle rate.
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'