To grant options the directors' of the company need to provide permission to the other directors' to grant options on behalf of the company.
As well as passing a directors' resolution a shareholders' resolution might be needed. This can arise in the case where the articles of association have been changed as part of a funding round and provisions have been included that mean the company needs to ask the permission of shareholders before granting options.
Check that the company meets the criteria to be a qualifying company.
This is step is not mandatory but is highly recommended. Essentially you pitch a UMV and AMV value per share to HMRC and two weeks later hopefully HMRC respond with written confirmation agreeing to the valuation.
Decide which employees will get what. Key clauses include:
As well as other clauses such as:
Options are usually signed as a deed. This means there needs to be four signers who need to be coordinated:
92 days after grant HMRC need to be informed. To learn more about how this is done see our docs page.
Before grant it is a good idea to have a conversation with the employee about their option(s). Depending on the situation you may wish to engage with employee(s) collectively or individually.
An advantage of TechFranklin EMI is that employee(s) can educate themselves by studying the TechFranklin docs and blogs.
Check that the employee meets the qualifying employee conditions. These can be summarised as being a full time employee or if part time the company is where they spend over 75% of their working time.
If it turns out an employee is not qualifying their option still works legally, the difference is the option is taxed under PAYE instead of Business Asset Disposal Relief.
If the company has employee option or shareholder holders then by 6 July after the end of the tax year the company needs to notify HMRC of the employee option and shareholders. Failure to do this does not impact EMI but it is a compliance failure which can subject the company to HMRC penalties. To learn more see HMRC's guidance.