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EMI Scheme - options over existing shares

EMI Scheme - options over existing shares

A client is looking to grant EMI options over existing shares. The legislation states that the shares are to be fully paid up and not redeemable. Nowhere does it mention the fact the options have to be in relation to newly issued shares. Our client is looking to grant the options over shares held by an existing shareholder. Would this be ok providing the shareholder was agreeable? I'm assuming it would be bearing in mind the shareholder would have his own CGT implications to consder.

Any help/guidance appreciated.


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21st Jan 2011 11:39


Can't see any problem with it in theory. Seen it in practice once but that was when acting for a client on an acquisition so can't help too much but there are obvious practical issues surrounding having a further party involved in the process, and would there be some sort of disposal on the part of the option grantor?

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21st Jan 2011 12:33

Seen it once as well.

The scheme had already been set up so we didn't touch it. I did however raise the question of whether the other tax issues had been taken into account.

As James mentioned there will be CGT issues although the terms of the options may mean that this would have been the same. ie the options are only realised if the company is to be sold anyway.

I also questioned the IHT issues arising on the shares and possibly no BPR. the other question is what happens to the options if the current shareholder dies. Taking these factors into account it may be easier to just grant options over new shares.

Never got round to getting the answer due no budget on the job.

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By PennyC
21st Jan 2011 12:34

It is possible

But it is the shareholder, not the company, that grants the option in that case. And why would that shareholder want to grant an option - assuming exercise price is current market value, if share price falls, option is unlikely to be exercised. If share price increases, shareholder is doing himself out of that increase in value.

So yes, possible, but uncommon.

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