2 minute watch | March.23.2026
Rebecca Servian, partner in Orrick’s Compensation & Benefits practice, walks through the April 2026 changes to the UK’s Enterprise Management Incentive (EMI) regime and what they mean for companies and their employees.
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We've got some substantive changes coming to the EMI regime.
Why EMI matters now: Exit timelines are a lot less predictable, funding rounds are becoming larger, and companies are scaling even further before an exit or liquidity event. Employees are holding equity for longer in private companies, and that means that we need to implement long-term and flexible incentive arrangements that really stand the test of time – and EMI is still very relevant in that landscape. It's one of the most tax-efficient structures for UK-based employees.
The three April 2026 changes: From the 6th of April 2026, firstly, the gross assets test is being increased from £30 million to £120 million. Next, the employee headcount limit is being increased from 250 employees to 500 employees. And finally, the company option plan limit is being increased from £3 million to £6 million.
Why the gross assets increase matters: Previously, with the £30 million gross assets limit, companies would essentially no longer qualify for EMI simply because they'd become successful. And when they needed it most, they wouldn't be able to roll out equity under an EMI plan to more employees.
Why the employee headcount increase matters: Before, where companies increase their headcount, they would no longer qualify for EMI. Companies now might reach hundreds of employees prior to an exit or liquidity event.
Why doubling the option plan limit matters: Doubling the company share option plan limit is particularly useful as the company's valuation will increase. Obviously, that means that it has less headroom, so it means that a company can continue to grant EMI options into later stages, and it also means that companies won't have to look to potentially less tax-advantaged alternatives as a route forward.
Exercise period extended to 15 years: EMI options are going to be extended in terms of the maximum exercise period from 10 to 15 years. This change can actually be made retrospectively. Where you have EMI options which either haven't lapsed or expired or been exercised, you can go back and make changes to EMI contracts and ultimately allow for them to become exercisable for a longer period, which is great news for companies who haven't yet met their exit targets.
Risks – EMI is not set-and-forget: EMI is not a set and forget solution. There are notification requirements, you have to do reporting – and also you have to make sure that the individuals and the company qualify for EMI in the first place.
Well, thank you for bearing with me this far on a gloomy day in London.