EMI vs growth shares: how the 15-year window changes things

For years, one of the strongest arguments in favour of growth shares over Enterprise Management Incentive (EMI) options was flexibility.

Growth shares could remain in place indefinitely, without the time constraints associated with EMI's 10-year exercise limit. For companies expecting a long journey to liquidity, that flexibility often made growth shares an attractive alternative.

With the government's decision to extend the EMI exercise window from 10 years to 15 years, that equation may be changing.

The reform doesn't eliminate the differences between EMI options and growth shares. But it does remove one of the historic limitations of EMI and prompts an important question for growing businesses:

Does a 15-year EMI exercise window make EMI the default choice for more companies?

Why companies have traditionally chosen growth shares 

Growth shares have become a popular alternative to EMI for several reasons. 

Unlike EMI, they are not subject to:

• Individual option value limits.
• Company size restrictions.
• Trading activity requirements.
• Employee working time tests.

For larger businesses, businesses approaching EMI eligibility limits, or companies looking to incentivise international employees, growth shares can offer a useful alternative. 

Growth shares can also be attractive where companies want participants to become shareholders immediately rather than holding an option that may be exercised in the future.

Perhaps most importantly, growth shares have historically offered flexibility around timing. There has been no equivalent 10-year deadline creating pressure to exercise awards before a liquidity event occurs.

For businesses expecting a lengthy growth trajectory, that flexibility has often formed part of the rationale for selecting growth shares over EMI.

Download our Beginner's Guide to Growth Shares for a deep dive.

The traditional weakness of EMI

EMI has long been regarded as one of the UK's most generous employee share schemes, and we agree. 

The combination of favourable tax treatment, relatively straightforward administration and broad employee appeal has made it the preferred choice for many scaling businesses. 

However, the 10-year exercise limit created challenges. 

Many modern private companies remain independent for longer than previous generations of growth businesses. Employees could find themselves holding valuable options while waiting for an exit event, secondary liquidity opportunity or other route to realise value. 

Although companies could manage this through plan design and exercise triggers, the fixed timeframe inevitably introduced an element of uncertainty.

In practice, the growth timelines of successful private companies were increasingly becoming misaligned with the rules governing EMI.

What changes with a 15-year exercise window? 

The extension of the EMI exercise window to 15 years is significant because it brings EMI closer to the realities of modern private company ownership.

Many companies may now also be considering how these changes could reshape previous growth plans around equity.

Employees can potentially retain access to EMI's tax advantages over a much longer period, while companies gain additional flexibility in how they structure liquidity opportunities and exercise events.

For businesses comparing EMI and growth shares, this narrows one of the most frequently cited differences between the two structures.

A company that previously expected a 12-to-15-year journey before a meaningful liquidity event may no longer view the exercise window as a constraint when considering EMI.

In other words, one of growth shares' historic advantages has become less pronounced.

Does this mean EMI will replace growth shares? 

Not necessarily.

The decision between EMI and growth shares has never been determined by a single factor.

Growth shares remain valuable where: 

• The company does not qualify for EMI.
• Participants do not meet EMI eligibility requirements.
• The business wants employees to become shareholders immediately.
• International participation is a key consideration.
• Award values exceed EMI limits.
• Commercial objectives favour direct equity ownership.

Likewise, many businesses use both structures simultaneously.

It is increasingly common to see EMI used for qualifying UK employees, with growth shares or alternative arrangements used for founders, executives, overseas employees or individuals who fall outside EMI eligibility requirements.

The extension of the exercise window and larger eligibility criteria does not change these considerations.

What it does change is the weight given to flexibility as a deciding factor.

The real question: What's your path to liquidity?

The more interesting strategic question is not whether EMI is "better" than growth shares.

It is whether your chosen structure reflects the way employees are likely to realise value.

Historically, many employee share plans were designed around a relatively simple assumption: grant options, grow the company, sell the business.

Today, employee ownership is becoming more sophisticated.
Companies are increasingly exploring:

• Secondary transactions such as future PISCES-enabled liquidity events.
• Structured liquidity programmes.
• Internal share trading opportunities.
• Multiple value-realisation opportunities before an eventual exit.

The extension of the EMI exercise window reflects this shift. It gives more companies more flexibility to align employee participation with a wider range of future liquidity scenarios. 

For many businesses, that may reduce the need to move away from EMI purely because of concerns about timing. 

A good time to revisit existing plans  

For companies currently operating growth share arrangements, the reform may provide a useful opportunity to reassess whether the original rationale still applies.

For businesses considering new employee ownership structures, it may also change how EMI and growth shares are evaluated during the design phase.

The answer will not be the same for every company. Tax, legal, commercial and cultural considerations all remain important.

What is clear, however, is that the extension from 10 years to 15 years has strengthened EMI's position as a long-term incentive vehicle and narrowed one of the historic distinctions between EMI options and growth shares.

How Vestd can help 

Choosing between EMI options and growth shares has always required businesses to balance tax efficiency, flexibility, administration and long-term objectives.

As the employee ownership landscape evolves, companies may also need to consider future liquidity opportunities, including secondary transactions and PISCES-compatible structures.

Vestd helps companies design, implement and manage both EMI and growth share arrangements, ensuring schemes remain aligned with company objectives, employee expectations and an increasingly flexible approach to liquidity and ownership.

If you are considering EMI vs growth shares, book a free no-obligation EMI consultation today.