EMI—corporate events and rollover

If there is a corporate event for a company which has been offering options granted under the enterprise management incentives (EMI) legislation, a number of issues will need to be considered. Depending upon the terms of the transaction, it can trigger an EMI disqualifying event, which can have significant tax implications—for both the participant and the company.

In addition, if the relevant transaction involves the acquisition by another company, the existence of EMI options over the target company’s shares will be relevant to the process and structure of the transaction, and it will be necessary to have a full understanding of the terms of such options when planning and documenting the transaction.

It should also be noted that the EMI legislation provides an ability for replacement EMI options to be granted to existing EMI option holders following a takeover of the original EMI company in a manner which preserves the beneficial tax status of the original EMI options. The replacement EMI options are 'equivalent' rights to the old option but relate to shares in the acquiring company. This is known as an EMI rollover.

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