EMI Share Scheme Communications for UK Startups: Templates, Grant Letters and FAQs

The Goal of Your EMI Scheme Communication

Launching an Enterprise Management Incentive (EMI) scheme is a significant milestone for any UK startup. As a type of share option scheme, it is a powerful tool for aligning your team with long-term goals. However, the communication surrounding it often creates more confusion than clarity, undermining its value. For founder-led businesses in SaaS or Deeptech without a dedicated finance team, the challenge is translating complex legal and tax rules into something the whole team can understand and get excited about.

The ultimate goal of your communication is to build trust and ensure employees appreciate the value of their options. This requires a framework built on Three C's: Clarity, Compliance, and Context.

• Clarity: You must translate complex terms like vesting, strike price, and exit scenarios into plain English. This addresses the common pain point of making EMI scheme rules understandable for everyone, from an engineer to a sales lead.
• Compliance: All communications must be carefully worded to avoid crossing the line into regulated financial advice. The reality for most pre-seed to Series B startups is more pragmatic: you need to explain how the plan works without recommending it as a personal investment.
• Context: It is vital to frame share options as a long-term incentive, not a short-term cash bonus. Employees need to understand that the value is potential and tied directly to the company's collective success.

Stage 1: Announcing Your EMI Scheme with an Employee Communication Template

Your first communication sets the tone for the entire scheme. The aim is to introduce the concept to the company without overwhelming them with details. Announce what the scheme is, why you are introducing it, and what the next steps will be. Keep the initial email concise, celebratory, and forward-looking. This is about the ‘why’ before the ‘how’.

All-Hands Announcement Email Template

Subject: An exciting next step: Introducing Our Company Share Option Scheme

Hi Team,

I’m thrilled to announce that we are launching an Enterprise Management Incentive (EMI) Share Option Scheme for our employees.

This is a huge step for us. We've always said that our success is a team effort, and this scheme makes that a reality. It gives you the opportunity to own a part of the company you are helping to build and to share in our future success.

Over the coming weeks, eligible team members will receive personal grant information. We will also share more detailed explainers and hold sessions to answer your questions.

For now, thank you for all your hard work in getting us to this point. We’re excited to take this next step with you.

Best,

[Founder Name]

Stage 2: The Grant Letter and EMI Scheme Explanation Pack

After the initial announcement, the next step is providing individual employees with their specific grant details. This involves two key documents: the Formal Option Agreement, which is the legal contract, and a Plain-English Explainer Pack, which is the communication tool. It is critical to distinguish between them; the explainer aids understanding, but the agreement is the binding document.

What founders find actually works is providing these two documents together. The explainer pack demystifies the legal language and pre-empts common questions. It should be clear, simple, and visual where possible. Crucially, it must include a disclaimer to avoid providing financial advice. A key fact to remember is that under UK law, providing advice on the merits of acquiring a specific investment is a regulated activity.

Template: Plain-English Explainer for Employees

1. Your Grant at a Glance

• Number of Options Granted: [Number]
• Type of Shares: [e.g., Ordinary Shares]
• Strike Price (Exercise Price) per Share: [£X.XX]
• Grant Date: [Date]
• Vesting Schedule: [e.g., 4-year period with a 1-year cliff]

2. Key Terms Explained Simply

• Share Option: The right to buy a set number of company shares at a fixed price in the future.
• Strike Price: The fixed price you will pay per share when you exercise your options. We explain more about this in the FAQ.
• Vesting: The process of earning your options over time. Your options vest according to the schedule above. If you leave before they are fully vested, you may forfeit the unvested portion.
• Cliff: A period at the start of your vesting schedule, typically one year, during which no options vest. If you leave before the cliff, you do not receive any options.
• Exercise: The act of buying your vested shares at the strike price.
• Exit: An event where the company is sold or has an IPO, which is typically when you can sell your shares.

3. 'What If' Scenarios

• If you leave on good terms (Good Leaver): Typically, you will have a set period (e.g., 90 days) to exercise any options that have vested by your last day.
• If you are dismissed for cause (Bad Leaver): You may forfeit all your options, both vested and unvested.
• If the company is acquired: The acquiring company will usually accelerate the vesting of your options, allowing you to exercise and sell them as part of the deal.

This document is for informational purposes only. Please refer to your Formal Option Agreement for the full legal terms and conditions.

Template: Standard Financial Advice Disclaimer

This document and any related conversations are intended to explain how the company’s EMI scheme works. They do not constitute financial, tax, or legal advice. The decision to participate in the scheme and exercise your options is a personal one. We strongly recommend you seek independent professional advice before making any decisions.

Stage 3: Ongoing Communication with a Living FAQ

Communication should not stop once the grant letters are sent. Questions will arise as the company grows, employees change roles, or new funding is raised. Create a central, accessible ‘living FAQ’ document that you can update over time. This becomes the single source of truth for all equity-related questions.

This FAQ should address key queries such as when options can be exercised, what happens upon leaving, and potential tax implications. For example, you should explain that Entrepreneurs' Relief is a potential tax consideration for employees upon the sale of shares, which can significantly reduce their Capital Gains Tax. It is also the right place to explain a 'disqualifying event,' such as the company growing beyond the size limits for an EMI scheme, which can alter the tax status of the options.

Example FAQ Entry

Q: What is the strike price and why isn't it zero?

A: The strike price, or exercise price, is the price you will pay for each share when you decide to buy them. It is not zero because, to be tax-compliant, HMRC requires the option strike price to be set at the market value of the shares at the time the options are granted. This ensures the scheme qualifies for its favourable tax treatment. Your potential financial gain comes from the growth in the company’s value over and above this strike price.

Practical Takeaways for Founders

Successfully communicating your EMI scheme boils down to the ‘Three C’s’ framework: Clarity, Compliance, and Context. Your goal is to help your team understand the scheme, not just present them with legal documents. This means translating complexity into simple terms, carefully managing the line between explanation and advice, and consistently reinforcing the long-term nature of equity.

By using templates for your announcement, creating a plain-English explainer pack, and maintaining a living FAQ, you build a scalable communication process. This not only helps employees appreciate the value of their grants but also ensures the administration of your scheme remains robust. See our guide on dilution planning when expanding option pools. All communications and scheme administration must remain compliant with HMRC and Companies Act disclosure requirements. An informed team is an aligned team, and clear communication is the most effective tool for making your EMI scheme a central part of your company culture. For a broader overview, see the share option schemes hub.

Frequently Asked Questions

Q: What is the difference between a share option and a share?
A: A share represents direct ownership in the company. A share option is the right to buy a share at a fixed future price, known as the strike price. You do not own the share until you ‘exercise’ the option by paying that agreed price, which converts your option into an actual share.

Q: Why can't the company give me financial advice on my options?
A: In the UK, providing advice on specific investments is a regulated activity. To remain compliant, the company can explain how the EMI scheme works but cannot advise on whether it is a good personal investment for you. We always recommend seeking independent professional advice for your personal circumstances.

Q: What happens to my options if I leave the company?
A: This depends on your employment contract and the scheme rules. Typically, 'Good Leavers' have a limited time, such as 90 days, to exercise any vested options. 'Bad Leavers', who are dismissed for cause, often forfeit all their options, both vested and unvested. Check your option agreement for specifics.

Q: What are the main tax benefits of a UK EMI scheme?
A: The key benefit is tax efficiency. You typically pay no Income Tax or National Insurance when you are granted or when you exercise your options. When you later sell the shares, you pay Capital Gains Tax on the profit, which is often at a lower rate than income tax, especially if you qualify for Entrepreneurs' Relief.