How might an EMI plan benefit your company?
You can provide your key employees with a financial reward, the value of which is directly determined by the success of your business and which may be taxed at a significantly lower rate than a cash bonus.
You can encourage commitment from your key people by stating that they may only exercise their option if they stay with the company.
What happens if a participant leaves?
If you want to use your EMI plan to encourage participants to stay with the company, you could:
- stipulate that unexercised options will lapse if an employee leaves; or
- allow them to exercise if they were leaving only for “good reasons”; or
- allow options to be exercised in stages, after certain time periods had elapsed.
Employees whose options lapse will never enjoy any benefit from holding their option.