Share Option Agreement EMI (UK)
Share Option Agreement for EMI and non-tax-advantaged options in the UK.
SHARE OPTION AGREEMENT (UK)
Enterprise Management Incentives (EMI) and non-tax-advantaged options
Note: This template grants a share option to an individual over shares in a UK company. It supports two routes. The EMI route is the tax-advantaged scheme under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003, and is the standard choice for a qualifying company. The non-tax-advantaged route is used where the company, the individual, or the shares do not meet the EMI conditions, for example where the grantee is a consultant or non-executive director rather than an employee. Choose the route at Clause 2.3 before completing anything else, because it affects several later Clauses. Complete every yellow field and complete Schedule 1.
0. PARTIES
This Share Option Agreement (the "Agreement") is made on [grant date] between:
(1) [full legal name of the company], a company incorporated in England and Wales with company number [company number of the company] whose registered office is at [registered office address of the company] (the "Company"); and
(2) [full name of the option holder] of [home address of the option holder] (the "Option Holder").
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, the following words have the following meanings:
"Articles" the articles of association of the Company in force from time to time.
"Business Day" any day other than a Saturday, Sunday, or public holiday in England and Wales.
"Control" has the meaning given in section 719 of the Income Tax (Earnings and Pensions) Act 2003.
"Disqualifying Event" an event that is a disqualifying event in relation to the Option under sections 533 to 536 of the Income Tax (Earnings and Pensions) Act 2003.
"EMI Code" the provisions of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 and the related provisions of that Act.
"Exercise Price" the price per Share payable on exercise of the Option, as set out in Schedule 1.
"Exit" a Sale or a Listing.
"Grant Date" the date stated at the top of this Agreement, being the date on which the Option is granted.
"Group" the Company and any company that is for the time being a subsidiary of the Company within the meaning of section 1159 of the Companies Act 2006.
"Listing" the admission of any of the Company's share capital to trading on a recognised stock exchange.
"Option" the right granted by this Agreement to acquire Shares on its terms.
"Option Shares" the number of Shares over which the Option is granted, as set out in Schedule 1.
"Sale" the sale or transfer of, or the grant of rights over, shares in the Company as a result of which a person, together with persons acting in concert with that person, obtains Control of the Company.
"Shares" ordinary shares in the capital of the Company of the class described in Schedule 1.
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About this template
What is this template?
This is a specialist equity incentive agreement containing specific provisions for HMRC compliance and EMI tax status. It includes a dedicated schedule for performance conditions and an exercise notice form, and it is not a simple share purchase agreement.
When should you use it?
Use this when granting future rights to shares in an English company to incentivize staff. Use a Shareholders Agreement instead if the individual is becoming an immediate owner with voting rights.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 2 | Grant of the Option | Establishes whether the option follows the EMI route under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003. |
| 3 | Exercise Price | Specifies the price per share payable in cash, which must be stated to satisfy paragraph 37(2)(d) of Schedule 5. |
| 4 | Vesting | Conditionality of share acquisition on the Option Holder remaining an employee or director according to the schedule in Schedule 1. |
| 6 | Lapse of the Option | Defines expiry triggers, including a mandatory maximum 15-year statutory limit for EMI qualification under paragraph 36 of Schedule 5. |
| 7 | Leavers | Sets a 12-month exercise window for good leavers and personal representatives, while causing unvested portions to lapse for bad leavers. |
| 8 | Exit and Change of Control | Requires the Company to provide a minimum 10 Business Day notice period for conditional exercise before a Sale or Listing. |
| 10 | Tax and National Insurance | Makes the Option Holder responsible for all income tax and employee National Insurance contributions arising from the grant or exercise. |
| 12.7 | Governing law and jurisdiction | Submits all disputes to the exclusive jurisdiction of the courts of England and Wales. |
Who it's for
- a UK company granting tax-advantaged equity incentives to full-time employees and directors
- a UK startup issuing non-tax-advantaged share options to consultants or non-executive directors
- issuing ordinary shares that are fully paid up and not redeemable to staff
How long it runs and how it's signed
Law it's drafted under
England & Wales note
This version is drafted for England & Wales. Scotland and Northern Ireland differ on some points — for example notice periods and tribunal procedure. Tell GitLaw where you hire and it adjusts the draft.
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