UMV and AMV are terms that are frequently used in the context of valuing the shares in the company for the EMI option scheme. Exercise price is a key term in EMI options. Their meanings are given below.
What is UMV?
UMV means the unrestricted market value of a share. It is the value of a share without taking into account any restrictions that the share may have. Restrictions include pre-emption provisions, leaver provisions, veto on transfers and risk of forfeiture. The UMV is the same or higher than the AMV. The UMV is used to determine the maximum market value of EMI options that can be granted to an employee (ie £250,000 at the time of grant of the EMI options) or for the company as a whole (ie £3 million at the time of grant of the EMI options).
What is AMV?
AMV is the actual market value of a share. It is the value of a share taking into account any restrictions that the share may have. The AMV is the same or lower than the UMV.
Exercise price
The exercise price is the price at which employees can buy the shares using an EMI option.
The exercise price is typically set as the same as the AMV.
If the exercise price for an EMI option is the same as or above the AMV when the EMI option was granted, no income tax nor National Insurance contributions will become due when the EMI option is exercised.
You’ll be guided by experts
Once signed up, you’ll have access to your own personal Dashboard
Please Note: This article contains general information only and Simply Equity is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. This article is not a substitute for professional advice and should not be used as such. Simply Equity does not assume any liability for reliance on the information provided in this article.