Unapproved share options

Unapproved share options give recipients the right to buy shares in the company at a fixed price in the future.

Unlike EMI, they don't require HMRC approval and can be granted to almost anyone, including employees, contractors, advisors, NEDs and international team members.

They offer considerable flexibility compared to approved schemes, though they don't carry the same tax advantages.

Unapproved options are well-suited to situations where EMI isn't available or applicable.

For example, where the company doesn't meet EMI qualifying criteria, where the intention is to reward non-employees, or where options need to be extended to international team members.

They are also commonly used alongside EMI schemes to cover individuals who fall outside the EMI eligibility rules.

There are no statutory restrictions.

Unapproved options can be granted to employees, directors, consultants, freelancers, NEDs, advisors and international team members.

There are also no limits on the number of options that can be issued to an individual or in total.

No formal valuation is required at grant for employees or directors.

However, a valuation is advisable for non-employees (where options below market value may create a VAT liability), international recipients (where local tax rules may apply at grant) and for your annual HMRC notification.

Vestd share scheme plans included a valuation prepared by our in-house specialists.

Tax treatment depends on individual circumstances, so it’s a good idea to consult a tax professional.

Generally speaking:

UK employees and directors pay Income Tax on the difference between the exercise price and market value when they exercise their options.

National Insurance may also apply if shares are readily convertible to cash at exercise. Non-employees may face additional liabilities if options are granted below market value.

International recipients are subject to their local tax rules. 

Conditions are fully configurable. You can set time-based vesting, milestone or performance criteria, or a combination. You'll find some ideas here.

Vestd lets you design individual agreements for each recipient for full customisation. You can also save your scheme design and conditions to use again for future grants to other individuals.

Most companies set a one-year cliff followed by proportional vesting over three to five years.

Vestd supports monthly, quarterly or annual vesting frequencies, and schedules can be front or back-loaded.

Once configured, schedules can be duplicated for new grants, reducing administration as your scheme grows.

The two main approaches are exercise on exit only or exercise after vesting within a defined exercise period.

Based on Vestd data, around 62% of companies opt for exit-only schemes, with the remainder setting a specific exercise window. Speak to our team to discuss the best approach for yours.

Once a recipient exercises their options, they become a legal shareholder. Buyback rights will then operate in accordance with your Articles of Association, which typically give existing shareholders first rights.

Standard model articles are usually sufficient for exit-only unapproved options.

If you want options exercisable before an exit event, your articles should include drag and tag provisions.

If they don't, you can adopt Vestd's standard articles for free, drafted to handle dilution and exits correctly.

Unapproved options granted to UK employees or directors must be included in an annual ERS (Employment Related Securities) notification to HMRC.

Vestd supports this process directly from the platform, syncing with Companies House to keep your records structured and submission-ready.

Vestd is purpose-built for share schemes and equity management for UK companies of all sizes.

It's a complete end-to-end solution with specialist guidance at every step.

Vestd is FCA-regulated; in other words, we play by the rules and protect consumer interests.

Our two-way integration with Companies House massively simplifies share scheme administration.

Vestd is also ISO-certified and a registered B Corp. We’re dedicated to evolving and improving, and mission-led.