Coronavirus (COVID-19) and share schemes – what happens if a holder of EMI options goes on furlough?

Coronavirus (COVID-19) and share schemes – what happens if a holder of EMI options goes on furlough?

In these troubled times, the use of the Government scheme to allow employers to furlough employees under the Job Retention Scheme is becoming more prevalent. This is understandable and in some circumstances will be the only option available. However, before making this decision, the employer and employee need to consider the potential impact of furlough on any EMI (Enterprise Management Initiative) options that have been granted.

There are a number of conditions to be met in order to ensure that the options qualify for EMI status. One of those conditions is that the option holder has to meet the working time requirement. This provides that the option holder must work at least 25 hours per week, or if less, 75% of their working time with the company (or holding company of the employing company if appropriate) which granted the EMI options.

If an optionholder is furloughed, they will no longer fulfil this condition and it is likely that in most cases, the option will lapse.

Guidance and clarification is being sought from Government on this point, and we hope that common sense will prevail and a relaxation of the working time requirement will be introduced for this period. However, as things stand, companies that have issued EMI options and holders of EMI options should think twice before being furloughed.

This is just one practical consideration to be aware of in relation to EMI Schemes.

If you would like to discuss any of the issues raised in this article, would like to learn more about Share Schemes, or have other concerns about the impact of Coronavirus, please contact Michelmores’ Director of Tax, Brian Garner.

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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.