I have a client who has asked me to liaise with their lawyers on setting up an EMI scheme. They are a small closed company - 3 directors, who are looking to offer 2 employees a couple of share options that can be exercised should the company be sold. The lawyers have quoted £4k-£5k for this. The same lawyers also set-up their original shareholders agreement for £3.5k. My client and I weren't expecting it to be this much, but then I haven't had experience in these schemes before so can't benchmark it against anything. Would it be worth me advising client to shop around or is this a pretty standard charge? Thanks
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It depends where you are in the country and how complex the clients requirements are but it sounds a bit steep if the client is just looking for standard terms and given that the same lawyers have already done the shareholders agreement. Don't forget you will also have to factor your cost of preparing and agreeing valuation with HMRC etc. You could get another quote for comparison and if it still seems high see if the original lawyers will come down a bit, better to keep with the same legal firm if possible as they have the client history.
I agree - sounds steep
We deal with city centre lawyers on such matters and we consider them to be expensive. However, their costs for drafting scheme rules and option agreements typically come to only half of the amounts quoted above. Then of course come our own fees for reviewing the legals, valuing the shares, negotiating with - and notifying - HMRC, etc.
Fixed cost
I've previously set up an EMI scheme but went to city solicitors and I think I paid around £4k-£5k (but it was a lot of years ago). Much of the service was simply using boiler-plate text and I felt it was a bit expensive.
I now need to set up another, so have the same issue as you Nthorne09. I've done some trawling the internet today. I found this site offering a set price of about £3k depending on the number of employees.
http://millconsultancy.co.uk/emi-share-option-schemes/
Does anyone have any experience of this type of fixed price service?
EMI Scheme
Goringe Accountants do a full setup of an EMI scheme including valuations, shareholders agreements etc usually starts from £5k+VAT - which covers the cost both of the accountants and the lawyers.
They have just hired an in-house EMI Scheme expert that has a vast knowledge and experience in advising SME businesses in Enterprise Investment Schemes. He recently wrote a compete guide to EMI Scheme & EMI Options article - worth checking out.
We advise on and produce appropriate EMI share option schemes on a fixed fee basis, usually for £2,500 plus VAT (for the full service as listed below).
To-date all the schemes we have worked on have been put together without the need for face-to-face meetings, although we would be happy to meet you if you happen to be based near our Sussex office. The aforementioned fixed fee includes the following assistance provided from us:
- Putting together an EMI option agreement or separate EMI option scheme rules and an option certificate (together with a notice to exercise) for each employee, the later more apt if the company intends for several employees to join the EMI option scheme. Such contractual documentation can provide that the grant of EMI options are exercisable either based on time vesting, performance measures or on an exit/sale of the company and will include good and bad leaver provisions to protect the company in the event the employee leaves.
- A review of your articles and making any change(s) required to implement to implement the EMI scheme.
- HMRC share valuation application consisting of carrying out the valuation (to determine the exercise price of the share options), writing a letter to HMRC requesting agreement to the proposed share valuation, compiling supporting documentation and any dialogue or negotiation with HMRC if required.
- Detailed guideline documents for both the client as employer and also the employee, describing the process of granting and exercising the options, explaining the key terms and clearly outlining the tax implications.
- Shareholder resolutions and board minutes approving the terms and implementation of the EMI option scheme and the grant of EMI options.
- Formal notice of the grant of the EMI options to HMRC.
You can find out more, as well as related services here: https://www.jonathanlea.net/2015/what-are-emi-option-schemes-and-how-do-...
The best value by far is SeedLegals. They charge a £1500 flat fee for up to 250 employees: www.seedlegals.com/emi-scheme
Hi,
Did you get the EMI scheme set up in the end? If you still need support on this please let me know. I am CEO of Beyond Governance and we can set this up for you. www.beyondgovernance.com
Thanks