Setting up an EMI scheme for your company

1. What the EMI scheme generator does

The generator takes you through five stages, from a blank configuration to a signed, approved scheme that's linked to your cap table:

1. Configure scheme rules — answer a short set of questions about how your scheme should work.

2. Create documentation — Shareflo generates your scheme rules and option agreement.

3. Obtain approvals — circulate the board, shareholder and investor documents for signature. We integrate with SignNow for digital signature execution.

4. Link instrument — connect the approved scheme to an EMI option on your cap table.

5. Issue options — grant options to your employees under the new scheme.

You can move through the stages in one sitting or come back to a scheme in progress — Shareflo remembers which stage you're on.

2. Why set your scheme up in Shareflo?

• Your documents are generated for you. Scheme rules, option agreements and the approval paperwork are produced from your answers — no drafting from scratch.

• Approvals are handled in one place. Board minutes, shareholder resolutions and investor consents can be sent for e-signature without leaving Shareflo.

• The scheme connects to your cap table. Once approved, the scheme links to an EMI option instrument, so grants appear directly in your cap table. And we help you take care of scheme paperwork with your option holders too.

• You can pick it up where you left off. The scheme tracks its own progress through the five stages. You can stop and restart at any point.

3. Before you start

Who can do this. You need to be a company admin to run the EMI scheme generator.

Confirm your eligibility first. Shareflo generates the paperwork, but it doesn't assess whether your company and employees qualify for EMI, and it doesn't handle your HMRC share valuation. Most companies confirm eligibility themselves (or with an adviser) and may seek Advance Assurance before they start. See the our Complete EMI guide (Related articles) for the eligibility rules.

Check your company details are up to date. When you open the generator, Shareflo runs a quick pre-flight check and reminds you to make sure three things are current: your Companies House number, your list of directors, and your list of shareholders. These feed directly into your documents and into who gets asked to approve them, so it's worth getting them right first. You can proceed past the check, or close the generator to go and update your data and come back.

Your HMRC valuation can run in parallel. You don't need your agreed valuation before you begin. A normal sequence is: confirm eligibility, configure and generate your documents, obtain approvals — with your HMRC valuation happening alongside. You only need the agreed HMRC valuation to start awarding options. And this valuation can be updated at any time in Shareflo, not just as part of the EMI setup process.

Set up the underlying share class first. The EMI options will be granted over a particular share class. That share class needs to be set up in Shareflo before you start creating up your EMI scheme documents. See the Creating & editing new share and option classes (Related articles) for how to do this.

4.1 Step 1: Configure your scheme rules

From the Documents > ESOP tab click Create EMI Scheme to launch the process. After confirming you’ve completed the preparation steps you will be able to Configure the scheme rules. The answers you give on this form drive the documents Shareflo generates, so this is the most important step to get right — the rest of this guide walks through each choice.

When you're done, click Save . You can reopen and change your answers at any time before the documents are prepared for signature; re-saving simply updates your configuration.

Document name

A name for the EMI scheme — for example "SaaS Co Ltd – EMI Scheme". This will become the official name of your scheme and will be used to reference it in any legal documents.

Share class

The underlying share class for the options. This is the class an employee ends up owning when they eventually buy their shares. You can override it for any individual grant later, but this sets the default.

You need to have created the share class before you reach this step. Most companies already have an Ordinary share class from incorporation, and for many that's the right choice — it's simple, and employees end up as ordinary shareholders alongside the founders.

Some companies prefer a bespoke class for option holders. A common approach is to create a separate class — for example non-voting, and sometimes non-dividend — specifically for employees exercising options. This keeps voting control concentrated among founders and investors, and keeps the cap table tidy, while still giving employees the growth in value that EMI is designed to deliver. Awarding the options over a share class without voting or dividend rights can also help to justify a lower valuation for those shares, and hence a lower exercise price for the EMI options.

If you do use a bespoke class, keep EMI's requirements in mind. EMI options must be over ordinary share capital, and the shares must be fully paid-up and not redeemable. You can restrict rights such as voting and dividends, but the shares still need to be genuine ordinary shares for EMI purposes. If you're unsure whether a class you've designed qualifies, take advice before granting. You can create the class you need in Shareflo first, then come back and select it here.

Exercise Conditions

This sets when an option holder is allowed to exercise — that is, actually buy their shares. There are four options:

• On Company Exit if employed — holders can only exercise on an exit event (such as a sale), and only if they're still employed at that point. The tightest option: leavers who leave the company before an exit event get nothing.

• On Exit (even if no longer employed) — holders can only exercise on an exit, but former employees keep the right to exercise their vested options when that exit happens.

• Within 90 days of departure — holders must exercise within 90 days of leaving. This window matters for tax: EMI's advantages generally fall away 90 days after someone stops qualifying, so it’s not uncommon for EMI schemes to force a decision during this window.

• Hybrid — combines the two. On leaving, an employee can exercise within 90 days, which locks in their tax benefits. If they choose not to, they keep their options until an exit event — but exercising then means they won't get the full tax benefits.

The right answer depends on how generous you want to be to leavers. Ultimately this is a commercial decision for the Board to take.

Our personal preference is the hybrid arrangement. It is the most generous to employees, allowing them to purchase shares within 90 days if they want to benefit from the tax advantage, while also giving them the ability to “wait and see” if they’d rather not part with the cash immediately. We take the view that options are there primarily to recruit, motivate and retain talent. If the scenarios where employees stand to benefit are too restrictive then they lose their impact.

Acceleration Provision

This decides what happens to unvested options if the company is sold (a company Exit event). It is important to understand that, following a sale of the company, the shares which the options purchase will no longer exist (or no longer be available for employees) so it would generally not be possible for the option scheme to continue unchanged after an exit. Instead, one of the following usually occurrs:

• Full acceleration — all unvested options vest immediately on an exit, so the holder benefits from their whole grant.

• Pro-rata acceleration — a proportion of the unvested options vest immediately, based on time served. For example, if the employee has been in role long enough that 1/3 of their options have naturally vested, then a pro-rata acceleration would mean that on exit, an additional 1/3 of the unvested options vest as well (and the rest are cancelled).

• No acceleration — unvested options simply lapse; only what had already vested can be exercised.

• Board discretion — the board decides at the time.

Full acceleration is the most employee-friendly and is common in earlier-stage companies. At this point, an exit event still feels quite remote, and companies often feel that if one were to occur, they want all employees to feel that its a good thing.

As companies grow and an exit becomes more plausible, many companies move away from full acceleration for two reasons.

• First, it can feel unfair that someone who joined just before an exit should benefit from 100% vesting in the same way as someone who’s been with the firm for 4+ years.

• Second, acquirers can be nervous about acquiring a company which results in a big windfall to all employees, since they worry about staff retention.

For this reason it’s more common for mature companies to move away from full vesting to one of the other choices. For example the Board discretion choice is useful because it means that as part of the sale negotiation, the board can construct an accelerated vesting provision which is tied to staff retention (e.g. staff get accelerated vesting if they stay for 12+ months after the sale). But it does of course rely on employees trusting that the Board will create something attractive when the event arrives.

NIC Transfer

This gives the company the right to require an employee to sign a National Insurance joint election, making the employee responsible for any employer's National Insurance that might arise.

This topic is quite nuanced, so we have spelled it out in some detail. There are three points to understand here.

First, In general, so long as no disqualifying event has occurred, then there will be no employer’s NI due on options.

Second, if for some reason a disqualifying event occurred then it is possible that NI could become due. In this case the scheme rules already make this cost the responsibility of the employee. Specifically they allow the company to deduct the cost of the employer NI from payments made to the employe (or to request the employee to reimburse the employer).

However, the NI Transfer goes a step further, making the employee legally responsible for paying the employer’s NI contribution to HMRC. This makes a difference, for example, in a scenario where HMRC retrospectively demand employer NI contributions after the employee has left the company. Without the NI election, the employer would need to pay HMRC and then try to recover from the employee. With the NI election, the employer can simply refer HMRC to the employee.

In our view, a joint NI election is very much a “belt and braces” provision, which is unlikely to be necessary for the vast majority of firms. However, it has become reasonably standard practice to include such an election for share option schemes, so we do recommend including it in yours.

Important note: The optional National Insurance Joint Election is different from the Joint Election under Section 431(1) form. The Section 431 election is included by default in our scheme wording and we do not give any choice about this. That’s because the Section 431 election nearly always makes sense for both employer and employee. See our article on that topic (in Related Articles at the end)

Pool size

When companies wish to award options to their employees, they typically create an option pool. This represents a fixed number of options which the company is allowed to award under the option scheme. Creation of the option pool normally requires approval from the board and consent from the shareholders under a shareholder resolution, and possibly from investors too (see below).

It is important that you obtain the necessary consents before you start awarding options. Why is this important? Company articles may require shareholder permission before you can allot new shares; and they normally give existing shareholders “pre-emption rights” over new shares, meaning that existing shareholders must be offered the chance to buy those shares before they can be offered to anyone else. The shareholder consent effectively results in the shareholders pre-emptively waiving those rights on the option pool shares, so that when the options are subsequently exercised no further consent is needed.

If you have already completed an equity round with external investors, then it’s likely that an option pool will have been created in that round. In that case, you should enter the size of the agreed option pool into this field.

If you do not already have a specified options pool, then you will create one as part of the approval of your EMI option scheme. In this case you should think about how many options you are likely to want to award between now and when you expect to close your next fundraising round, and add a buffer on top. That will be the option pool you request.

It’s worth noting that it’s not the end of the world if you get the size of the option pool wrong. If it’s too high, then you will simply never use it all. If it’s too low then you will need to go back to your board and shareholders to request a new pool once it has been exhausted.

Tracking the pool on your cap table is coming. Shareflo will track your option pool and how much of it you've used, with this feature due for release in Q3 2026. For now, the pool size you enter is documentation only — it isn't yet enforced against your grants.

Shareholder approval required

This asks whether you need shareholder approval to create the option pool. In most cases the answer is Yes — shareholder approval is normally needed unless your pool was already authorised by a shareholder resolution as part of a previous funding round.

If you select Yes, Shareflo drafts a shareholder written resolution for you as part of the document set, and later asks your voting shareholders to sign it. If you select No, that document is skipped.

If you are in any doubt about whether you need shareholder approval then there are a number of things you can do:

1. You could simply request permission anyway to be on the safe side

2. You can review your shareholders agreement and company articles yourself to check whether you need shareholder approval

3. You could also use an LLM to help you with this task. Claude and Chat GPT are generally pretty good at telling you what consents are needed so long as you give them the correct governance documents (normally articles and shareholders agreement)

4. To be completely sure you should seek legal advice. If you want to do this, then Shareflo can connect you with our legal partners who will offer preferential fee rates to support you. Please contact support@shareflo.co.uk for more details

Investor consent

When firms raise money from external investors, it’s very common for those investors to insist that certain decisions must be approved by an investor majority. Those requirements are normally specified in your Shareholders Agreement or your company’s Articles.

Creating an option pool would often be one of the topics requiring investor consent. If that is the case for your company, then you should select Yes for this question. Shareflo will then draft an investor consent document for your investors to sign. If you select No (for example becuase you haven’t raised external investment, or because no such consent is required) that document is skipped.

As with the Shareholder consent topic above, if you are in doubt then review your company’s governance documents or seek legal advice.

Other clauses

A free-text box for any additional terms you want appended to the end of your scheme rules. Most companies leave this blank. It's there for exceptional cases where you want to add something specific that the standard template choices don't cover.

A good approach is to leave it empty to begin with, generate your documents in the next step, read the wording Shareflo has produced, and only come back to add a clause here if you find something genuinely missing that you want to include.

4.2 Step 2: Create your documentation

Once your configuration is saved, move to the Create documentation stage and click Next. Shareflo generates the scheme documents from your answers — your scheme rules and option agreement. Previews appear as each document becomes ready.

This is a good moment to open the generated documents and read them — especially if you're considering adding anything under Other clauses. If you spot something you want to change, go back to Step 1, edit your answers, and regenerate.

4.3 Step 3: Obtain approvals

With your documents generated, move to the Obtain approvals stage .

The scheme rules and option agreement should be reviewed and approved in a board meeting. In principle this should be a genuine board meeting, but in practice some companies choose to do this over email.

Shareflo automatically generates a Board minute to document the board’s approval of the scheme. You will need to provide the date when that meeting took place.

Depending on your answers in Step 1, Shareflo may also generate a Shareholder written resolution and an Investor majority consent document.

There are two ways you can take care of getting these documents executed.

Handle myself

Each document has a Download button that gives you a Word version. Populate the signature blocks, circulate, sign and store however you like. When everything's done outside Shareflo, use Mark everything signed to record the approvals as complete and move on.

Send via Shareflo

Shareflo sends each document for e-signature. For each approval document you'll see:

• A signatory list — pre-filled with the relevant people, where Shareflo has the information. You can add or remove recipients and enter/edit the email addresses of the signatories.

• Covering Email subject and message — You can adapt the covering email before sending if you wish.

Click the send button to email everyone their signature request. After sending, the list becomes read-only and shows each person's status — sent, signed, or cancelled — which you can refresh. For each recipient you can Resend the invite, Replace them (swap in a different email), or Cancel their invite.

Closing signing. A shareholder resolution often passes once enough shareholders have signed, rather than waiting for every single person. When you're satisfied the necessary approvals are in, use Close signing to finalise the document — Shareflo stores the latest signed copy and marks it complete. Once all your approval documents are signed or closed, the scheme advances to the next stage.

4.4 Step 4: Link your scheme to an instrument

With approvals complete, move to the Link instrument stage. This connects your approved scheme to a Shareflo EMI option Instrument on your cap table so you can start granting. You have two choices:

• Create for me — Shareflo creates a new EMI option instrument. You provide a name, the exercise currency and exercise price, and the default cliff and vesting period (both in months).

• Link existing — if you already have a suitable option instrument, pick it from the list.

Setting the exercise price: You will normally want to set the exercise price of your EMI options to be equal to the share valuation you have agreed with HMRC. If you don’t know that yet, then you can just enter a placeholder at this stage.

You can update the price later, and that's normal. Each new batch of grants usually has its own freshly-agreed HMRC valuation, so it's expected that you'll revisit the instrument's exercise price over time. Setting it now doesn't lock it forever, you can always change it by editing the Instrument in Shareflo later.

Once linked, the instrument is attached to your scheme rules and option agreement, and the scheme moves to the final stage.

4.5 Step 5: Issue options

At this point you are all done, and you are ready to start awarding options to your employees.

To grant options to your employees, go to Manage Equity → Manage Options → Award New Options and pick the Option instrument you linked in Step 4 from the dropdown.

What happens now

• Your scheme documents are stored against your company, with their approval status recorded.

• Your EMI option instrument is on your cap table, ready for grants.

• You can grant options to eligible employees whenever you're ready, using the linked instrument.

• If you later agree a new HMRC valuation, update the instrument's exercise price before your next batch of grants.

Troubleshooting

I don't have my HMRC valuation yet — can I still start? Yes. You only need the agreed exercise price (the AMV) before you start granting options. Most companies configure and generate documents while their valuation is being agreed in parallel, and update the default exercise price for the Instrument once they receive a new valuation.

My shareholder resolution or investor consent document disappeared. If you changed the corresponding answer in the configuration from Yes to No, Shareflo removes that document automatically because it's no longer needed. Switch the answer back to Yes if you need it.

Can I change my answers after generating documents? You can edit your scheme documents right up to the point where you first send out any documents for signature. Once any of the scheme documents has been sent for signature, the documents will be locked. If you want to make changes to the documents after that point, you will need to start again.

Still stuck? If something isn't behaving as described here, contact Shareflo support and we'll help you get your scheme set up.

❇️ Flo

Setting up an EMI scheme is a guided, multi-step process that you complete yourself in the generator — it can't be run for you through Flo or the Claude plugin. That said, Flo knows this process well. If you get stuck on any of the choices above while you're in the generator, open the chat icon and ask — Flo can talk you through what each option means for your scheme.