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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Enterprise Management Incentives (EMI): Requirements relating to options: Types of shares that may be acquired

The option must be a right to acquire shares that are part of the ordinary share capital of the company, and:

  • are fully paid up, and
  • not redeemable.

Ordinary share capital is defined in section 989 Income Tax Act 2007 and in relation to a company, means all the company’s issued share capital (however described) other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company’s profits.

It does not matter whether the shares in question are called “ordinary”.

A company’s articles of association should make it clear whether the shares are fully paid up and not redeemable. Shares are not fully paid up if there is any arrangement to pay cash for them at a future date. Shares are redeemable if they are to be redeemed for cash. Some shares are redeemed at pre-determined dates or events. There may also be conditions that allow shares to be redeemed at the request of the company or the shareholder, (Paragraph 35).