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EMI option revalue after 60 days penalty for delay

Is there a penalty for missing the 60 day cutoff point for revaluing EMI options ?

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Is there a penalty for missing the 60-day cutoff point for revaluing EMI options? Valuations are only valid for 60 days.

EMIs

Valuations for EMIs are valid for 60 days from the date of the agreement. You may be able to extend this agreement period for a further 30 days by writing to SAV. Include written confirmation that no significant events have happened since the original valuation or are likely to happen in the period for which you’re asking for the extension.

 

Thanks,

Margaret

Replies (11)

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By gbuckell
04th Sep 2018 10:31

There are no penalties for failing to issue options within 60 days. It is just that, as you say, the valuation is no longer valid and so, if you still plan to issue the options, you should apply for an extension assuming the conditions are satisfied.

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By [email protected]
04th Sep 2018 12:06

Thanks. I was unclear on my question. If the option valuation on 1 Jan is £10 and circumstances change (e.g. capital is raised) on 1 April, is there a fine if new valuation is requested 1 Aug rather than by 1 June (within 60 days)?

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Replying to [email protected]:
By Ruddles
04th Sep 2018 12:31

No. You've completely misunderstood the significance of the 60-day time limit.

When were the options granted in this case?

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By gbuckell
04th Sep 2018 13:15

I agree. There are no penalties except for failing to notify the grant of options once granted.

If, as in your example, sometime happened to change the price, whether within the 60 days or not, one would need to agree a new value

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By [email protected]
04th Sep 2018 13:16

yes, I've come to this second hand and am not across the whole process. I think the question is coming from the fact that it seems costly 9company pays outside provider) to have to value every 60 days. Do you have to value every 60 days regardless? The company is hiring new employees every few months so issuing options every few months and will probably raise funds once every year.

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By [email protected]
04th Sep 2018 13:16

yes, I've come to this second hand and am not across the whole process. I think the question is coming from the fact that it seems costly 9company pays outside provider) to have to value every 60 days. Do you have to value every 60 days regardless? The company is hiring new employees every few months so issuing options every few months and will probably raise funds once every year.

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Replying to [email protected]:
By Ruddles
04th Sep 2018 14:00

You don’t have to agree a value at all if you don’t want to. Not to be recommended in most cases but since it’s voluntary it follows that there can be no penalty for not doing so.

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By gbuckell
04th Sep 2018 13:26

You only need to value when you are proposing to issue options. Whether the value is the same as for options issued earlier is a question of fact. If more than 60 days have elapsed there is no guarantee. Re-applying for a valuation need not be costly if the facts are the same. But issuing options every few months will pile up costs - better to do it at longer intervals - say once a year.

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By [email protected]
04th Sep 2018 14:04

Thanks Gbuckell, This is now clear. What about if we issue options without revaluing, .i.e. we assumed price would not have changed so don't revalue before issuing the options.

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Replying to [email protected]:
By Ruddles
04th Sep 2018 14:28

No immediate consequences. If and when the options are subsequently exercised you may then have to have a discussion with HMRC as to the share value at date of grant but in my limited experience of similar situations HMRC are generally prepared to accept 'expired' valuations provided that they are not too out of date and that there has been no material change in circumstances.

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By [email protected]
04th Sep 2018 19:11

Thanks Ruddles. That clarifies the issue for me.

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