Enterprise Management Incentives (EMI): Eligible employees: Material interest
An employee is not eligible if he has a material interest in the company whose shares are under option, or, if that company is a parent company, in any group company. A material interest is either:
- beneficial ownership of, or the ability to control directly or indirectly, more than 30% of the ordinary share capital of the company, or
- where the company is a close company, possession of or entitlement to acquire rights that would give 30% of the assets, if the company were to be wound up, and make them available for distribution among the participators.
An employee has a material interest if:
- he alone has a material interest in the company,
- he, together with his associates, has a material interest in the company, or
- any associate of his has a material interest in the company, see ETASSUM53060 for the meaning of “associate.”
If an employee acquires a material interest greater than 30% after he has been granted an EMI option, the option he holds will not be affected but he will not be eligible for the grant of any more EMI options.
When testing whether an employee has a material interest, all shares over which the employee has an option have to be taken into account, except shares that are under EMI option, (Paragraph 29).
If any of the company’s shares are held by the trustees of a Schedule 2 SIP then, provided that the shares have not been appropriated to the employee or his associate, these shares are not taken into account in determining the shares to be attributed to the employee or his associate for the material interest test. These shares are still counted as part of the ordinary share capital of the company, (Paragraph 30).