Selling Your Creative Business – EMI Opportunities

24 June 2024

In this series, Joe Lythgoe and Ayesha Chanda from our M&A team, talk to experts from across Lewis Silkin - sharing their top tips and valuable insights – about selling creative businesses.

During this episode in the series, Joe and Ayesha chat to Michael Birchall, an Associate in our Employee Incentives team, to discuss EMI options and key considerations on an exit.

Key takeaways:

Popular among companies in the creative sector, EMI options offer significant flexibility and unparalleled tax advantages, especially for the employees receiving the options. Broadly speaking, the employee pays no tax at the time of the grant of the option, and any gain in the value of the shares between grant of the EMI option and exercise by the employee will fall within the more tax favourable Chargeable Gains Tax regime (as opposed to income tax). The exercise of EMI options also results in a corporation tax deduction for the employer.
For a company to be eligible to grant EMI options, they must meet certain statutory requirements. It’s always better to have certainty at the outset that a company qualifies to grant EMI options, as opposed to getting a nasty surprise after the options have been granted. The terms of EMI options usually provide that to the extent the option does not qualify as an EMI option, it will continue to exist but as a non tax-advantaged option.
Under the applicable statutory requirements, EMI options cannot be granted if it is anticipated that a sale may occur in the near future. Therefore, if you are thinking about selling your business soon, you should make sure that any EMI options are granted to the right people as soon as possible and well before any negotiations with a potential buyer or any heads of terms are signed.
EMI options can easily go wrong, so if you have EMI options in place and are thinking about selling your business in the near future, then get your paperwork properly checked out as soon as possible.