Do I Need A Lawyer To Set Up An EMI Scheme?

No, there isn't a rule that says you must use a lawyer to set up an EMI scheme. You can technically prepare documents, agree a valuation with HMRC, grant options and make the online notifications yourself.

But EMI schemes are one of those areas where small wording errors can create big problems later. If the option rules don't match your cap table, if the company doesn't qualify, or if you miss an HMRC deadline, your team may not get the EMI tax treatment everyone expected.

So the better question is: how much risk are you comfortable taking with your equity? If you're using options to hire, retain or motivate key people, it's worth getting the structure right from day one.

Do I Need A Lawyer To Set Up An EMI Scheme?

No, you don't legally need an EMI scheme lawyer, but most startups will benefit from one if the options matter to the business. An EMI scheme is both a tax arrangement and a legal promise about future shares, so the option deed and scheme paperwork need to line up with your company documents, shareholders agreement, company constitution and growth plans.

The legal side usually covers questions like:

• What class of shares will employees get if they exercise their options?
• When do options vest, and what happens if someone leaves?
• Can options be exercised before an exit, or only when the company is sold?
• Do your articles of association allow the shares to be issued?
• Will existing shareholders need to approve the option pool or disapply pre-emption rights?
• How will options affect your cap table and future fundraising?

You may be comfortable handling some admin yourself, especially if you've set up share options before. But if this is your first scheme, or you're granting options to senior hires, co-founders, contractors or overseas team members, tailored advice can save a lot of awkward clean-up later, especially for edtech companies or fast-growing teams.

A template can be a useful starting point, but EMI documents work best when they're tailored to your company, your investors and the deal you're offering your team.

What Is An EMI Scheme And Who Can Use One?

An EMI scheme is a UK tax-advantaged share option scheme for qualifying companies and employees. In plain English, it lets you give employees the right to buy shares in the future, often at today's agreed value, if certain conditions are met.

EMI stands for Enterprise Management Incentives. It sits within the UK employment-related securities rules and is reported to HMRC through the Employment Related Securities online service.

To use an EMI option scheme in the UK, both your company and the option holder need to qualify. Key company conditions include:

• For EMI options granted on or after 6 April 2026, most qualifying companies must have gross assets of £120 million or less.
• For EMI options granted on or after 6 April 2026, most qualifying companies must have fewer than 500 full-time equivalent employees.
• Your company must carry on a qualifying trade, or be preparing to do so.
• Your company must have a UK permanent establishment.
• Your company must not be under the control of another company, unless the EMI rules allow the group structure.

There are also individual and scheme limits. An employee usually needs to work at least 25 hours per week for your company, or at least 75% of their working time if less. Each individual can hold unexercised EMI options over shares worth up to £250,000 at grant. For EMI options granted on or after 6 April 2026, the total unexercised EMI options granted by most companies must not exceed £6 million.

The previous £30 million gross assets limit, 250-employee limit and £3 million company options limit still matter for options granted on or before 5 April 2026, and different rules may apply to specified Northern Ireland companies.

Some trades are excluded, such as certain financial activities, property development and leasing. If your business is close to the line, check eligibility before promising options to anyone.

How Do You Set Up An EMI Scheme?

You set up an EMI scheme by checking eligibility, agreeing the share valuation, preparing the option documents, approving the grants, then reporting them to HMRC. The order matters because you don't want to grant options first and discover later that the company didn't qualify.

A practical process usually looks like this:

1. Check EMI eligibility: Review your company's trade, assets, employee numbers, group structure, option limits and the working time status of each option holder.
2. Check your company documents: Look at your articles of association, shareholders agreement, investor consents and any existing option pool arrangements.
3. Decide the commercial terms: Work out the option pool size, who gets options, the exercise price, vesting schedule, leaver rules and exercise triggers.
4. Agree a valuation with HMRC: Many companies ask HMRC's Shares and Assets Valuation team to agree the unrestricted market value and actual market value before grant.
5. Prepare and approve documents: Put the EMI plan rules, option agreements, board approvals and shareholder approvals in place.
6. Grant the options: Each option holder signs their agreement, and you record the grant date and number of shares carefully.
7. Notify HMRC: For EMI options granted on or after 6 April 2024, you generally need to notify HMRC by 6 July after the end of the tax year in which the grant was made.

Say Maya runs a SaaS startup with 12 employees, gross assets of £1.2 million and ordinary shares worth £1 each agreed with HMRC. She grants Priya 20,000 EMI options at an exercise price of £1 per share, vesting monthly over 4 years with a 12-month cliff. If the documents say Priya can only exercise on a sale, Priya doesn't become a shareholder straight away, but she may share in the sale proceeds later if the company is sold and her options have vested.

What Documents Do You Need For An EMI Scheme?

You usually need EMI plan rules, individual option agreements, board minutes, shareholder approvals and valuation records. You may also need changes to your articles of association or shareholders agreement if your current company constitution doesn't work for option shares.

Here is a useful outline of what the main option documents often cover. This isn't a finished legal document, and a lawyer should tailor it before you use it.

1. Eligibility And Purpose: Explain who can receive options and confirm the scheme is intended to qualify as EMI where possible.
2. Shares Under Option: State the share class, number of shares, nominal value and any rights or restrictions attached to the shares.
3. Exercise Price: Set out what the option holder pays per share and how that price was decided.
4. Vesting: Explain when options become available, including cliffs, monthly vesting, performance targets or board discretion.
5. Exercise Events: State whether options can be exercised at any time after vesting, only on an exit, or in limited circumstances.
6. Leaver Rules: Explain what happens if someone resigns, is dismissed, dies or becomes unable to work.
7. Lapse And Cancellation: Cover when options fall away, such as after a deadline, misconduct or a failed condition.
8. Corporate Events: Deal with a sale, merger, reorganisation, share split, takeover or winding up.
9. Tax And Reporting: Set out what information the option holder must provide and how the company will handle HMRC reporting.
10. Restrictions On Shares: Link to the articles and shareholders agreement so everyone knows what shares can and can't do after exercise.

The supporting records matter too. Keep a clean cap table, signed agreements, valuation correspondence, board minutes and evidence of the HMRC notification. Future investors will often ask for these during due diligence.

What Companies House And HMRC Steps Can Founders Miss?

The steps most often missed are HMRC notifications, annual returns and Companies House filings after shares are issued. These don't feel exciting, but they can decide whether your scheme is clean when you raise money or sell the company.

HMRC Steps

Before granting options, many companies submit a valuation to HMRC's Shares and Assets Valuation team. HMRC doesn't charge a fee for agreeing a valuation, but you'll need to provide enough information to support the numbers. Once agreed, the valuation is usually used for grants made within the agreed valuation window, commonly 90 days.

After grant, you need to register the EMI scheme through HMRC's Employment Related Securities online service and notify the EMI options. For options granted on or after 6 April 2024, the notification deadline is generally 6 July following the end of the tax year in which the options were granted. You also need to file an annual ERS return by 6 July after each tax year while the scheme remains open, even if there's nothing new to report.

Companies House Steps

Granting an option doesn't usually require an immediate Companies House filing because no shares have been issued yet. The Companies House work usually comes later, when options are exercised and new shares are allotted.

At that point, you may need to:

• File form SH01 within one month of the share allotment under the Companies Act 2006.
• Update your register of members and cap table.
• Issue share certificates, usually within 2 months of allotment.
• Update your next confirmation statement if share capital or shareholder details have changed.
• Check whether the person's shareholding affects your persons with significant control register.

If you miss a Companies House filing, it may be fixable. If you miss an EMI notification or grant options on the wrong terms, the tax position can be much harder to repair.

How Much Does It Cost To Set Up An EMI Scheme?

EMI scheme costs depend on how complex your company, cap table and option terms are. A simple early-stage company with one share class and a small number of employees will usually be easier to document than a business with investors, multiple share classes, overseas employees or existing option promises.

The main things that drive cost are:

• Whether your company clearly qualifies for EMI.
• Whether your articles or shareholders agreement need updating.
• How many option holders you're granting options to.
• Whether you need bespoke vesting, leaver or exit-only exercise rules.
• Whether you're preparing a valuation submission to HMRC.
• Whether your accountant or tax adviser needs to model the tax outcomes.

You generally have three options:

• Free template: Cheapest upfront, but risky if the template doesn't fit your articles, shareholders agreement or HMRC reporting requirements.
• Online fixed-fee legal service: Usually gives you tailored documents and clearer pricing before you commit.
• Traditional hourly billing: Can work well for complex schemes, but the final cost may be harder to predict if the matter expands.

When you're comparing providers, ask what is included. Ideally, you want help with the scheme rules, option agreements, board and shareholder approvals, valuation support, HMRC notification guidance and Companies House steps after exercise.

Key Takeaways

• You don't have to use a lawyer to set up an EMI scheme, but legal help is often worth it where equity is a key part of your hiring or retention strategy.
• For EMI options granted on or after 6 April 2026, most qualifying companies must have gross assets of £120 million or less, fewer than 500 full-time equivalent employees, and total unexercised EMI options not exceeding £6 million.
• The previous £30 million, 250-employee and £3 million limits still matter for options granted on or before 5 April 2026, and different rules may apply to specified Northern Ireland companies.
• Your documents need to cover vesting, leaver rules, exercise events, share rights, tax reporting and what happens on a sale or reorganisation.
• HMRC steps matter. For EMI options granted on or after 6 April 2024, the grant notification deadline is generally 6 July after the end of the relevant tax year.
• The safest setup is one where your EMI rules, articles, shareholders agreement, cap table and HMRC reporting all tell the same story.

If you'd like help with EMI scheme documents, share option rules, HMRC notification steps and Companies House filings after exercise, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.