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Enterprise management Incentives – cessation of the time-limited exception to the working time requirements

What are the key changes to the Enterprise management incentives?

Legislation in Finance Act 2020 was introduced to modify the usual working time regulations for EMI purposes. The normal rules are that EMI participants must meet:

  • a minimum commitment of 25 hours working time per week, or
  • if less than 25 hours, 75% of their working time

subject to a small list of exceptions, (such as illness or maternity/paternity leave).

The legislation in Finance Act 2020 modified these rules to give effect to a time limited exception to the working time requirement for employees who were furloughed or working reduced hours only as a result of the Covid-19 pandemic.

Additional legislation was introduced in Finance Act 2021 to modify the rules further so that employers could continue to issue new EMI share options to potential participants who were furloughed or were working reduced hours so as to still be able to take part in the scheme.

These measures however are time limited and will be ceasing on 5 April 2022 and the normal working time rules will operate and the exceptions granted due to the pandemic will be removed. This is important to note for the grant of new share options and to ensure that no disqualifying events take place following this date. In addition, on a future sale of a company with EMI options/shares in place, any due diligence work will need to ensure that no disqualifying events took place during the period 19 March 2020 to 5 April 2022.

For further information please contact either Donna Kenyon or Vivienne Day.

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