When is the best time to create an EMI share option scheme?
In theory, as quickly as possible, ideally before the company has built up any value. The sooner you start, the more likely it is that employees will be granted options linked to a low share price, meaning they will receive a better return when they exercise their options at a later stage, once the company has grown and become more valuable.
If the scheme is created after the company has been running successfully for several years and been through one or more investment rounds, the valuation of the shares when the options are granted will be higher, so the maximum reward employees will receive when they exercise their options is likely to be lower than would have been the case if options had been granted at an earlier stage.
But it is important to consider the fact that although EMI schemes offer significant financial advantages, they also cost money to establish and run. For this reason it would be wise to consult an expert adviser such as Barnes & Scott in order to determine the optimum time to set up such a scheme and to negotiate the best valuation with HMRC. Barnes & Scott usually suggests clients only set up EMI schemes after they have been trading for at least one year and have established a level of traction and growing value that justifies setting up a scheme.