The option pool is a key concept in the context of EMI options. It is the proportion of a company’s shares that could be issued to employees if all the EMI options are exercised in full. Those shares in the option pool being available to motivate and reward employees who contribute to company growth.
Option pool also gives the extent of dilution by issue of the EMI options
The option pool also gives the percentage by which existing shareholdings in the company can be diluted by the EMI options. It is calculated as a percentage by dividing the shares that can be issued if all the EMI options are exercised in full, by the total number of shares in the company including the shares that can be issued if all the EMI options are exercised in full.
Size of the option pool for an EMI option scheme
A typical size range of the option pool for an EMI option scheme is 5% to 20%. Often the number of shares that can be issued on exercise of EMI options starts at the lower end and increases as the company awards more EMI options to employees over time.
Shares may need to be subdivided for an EMI option scheme
In order to make sure that the right percentage can be given, establishing an option pool typically requires at least 10,000 shares with a nominal value of £0.01 or below. The existing shares in the company may need to be sub-divided to achieve this, which we can assist you with as part of setting up the EMI option scheme.
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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