Which events can disqualify EMI options?
There are a number of events that can result in disqualification of the option. But in most circumstances disqualification can be avoided if the option is exercised within 90 days of the disqualifying event.
- the company coming under the control of another entity, so becoming a subsidiary company
- the company no longer meeting the trading activities requirement (this is unusual, but possible in some scenarios: for example, a fintech company that decided to seek a license for banking activities, meaning it was now engaged in a non-qualifying trade)
- the employee leaving the company, or no longer working enough hours per week to meet the eligibility requirements (perhaps the most common of these scenarios)
- a variation in the terms of the option (for example, if an option was altered from vesting on exit only, via share sale or IPO, to vesting over a set period of time; or if either the exercise price of the option or the number of options granted was changed)
- a conversion of shares into a different class, such as preference shares
- the grant to the employee of further share options that would mean the employee holds unexercised options worth more than £250,000