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Optimizing EMI Share Schemes for Compliance and Strategic Success: A Case Study

Optimizing EMI Share Schemes for Compliance and Strategic Success: A Case Study

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The Challenge

A venture-stage biotechnology company leveraging AI-driven data to develop precision therapies encountered significant compliance risks following a Delaware flip. After a recent funding round, the company discovered discrepancies within its Enterprise Management Incentive (EMI) share scheme.

Specifically, the company had inadvertently issued replacement EMI options with incorrect grant dates and exercise prices, rendering them non-qualifying under HMRC regulations. Left unaddressed, this issue could have triggered unfavorable tax treatment for employee option holders, created unexpected tax liabilities at exercise and potentially undermined employee trust and investor confidence.

With employee incentives and company reputation at stake, the organization needed to swiftly resolve these compliance concerns while preserving the long-term strategic value of its EMI scheme.

FD’s Approach  

Frazier & Deeter (FD) adopted a structured approach to address the company’s challenges, broken down into the following phases: 

  • Initial Assessment: Conducted a thorough review of EMI option grants to identify discrepancies and confirm disqualification under HMRC rules.
  • Consultation and Coordination: Partnered with the company’s legal advisors to implement corrective actions, including properly re-granting EMI options in line with regulatory requirements.
  • Preparation and Filing: Prepared and submitted all necessary filings to HMRC within the applicable deadlines to secure compliance and protect tax benefits for employees.
  • Ongoing Support: Provided continuous communication and support to the company, addressing any additional queries and ensuring all filings were completed accurately and on time. 

The Outcome

  • Compliance Rate: Achieved 100% compliance with HMRC regulations for the replacement EMI options. 
  • Timely Filings: All required notifications were submitted before the deadline, avoiding any potential penalties. 
  • Strategic Advantage: The company is now better positioned to manage future EMI option grants and ensure ongoing compliance with regulatory requirements. 
  • Operational Efficiency: Streamlined processes for handling EMI options and regulatory filings, reducing the risk of future discrepancies, enhancing operational efficiency and positioning the company for continued growth and success. 
  • Investor Confidence: This compliance also bolstered investor confidence and maintained employee trust by demonstrating a commitment to fair and transparent compensation practices. 

Frazier & Deeter successfully addressed the company’s challenges with their EMI share schemes, ensuring compliance with HMRC regulations and avoiding potential penalties. The structured approach, effective coordination with the legal partner and timely filings were key to the project’s success. 

Need support with EMI compliance or share scheme strategy?

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