ACCA Advanced Taxation (ATX) Practice Exam

For the EMI scheme, what is the duration allowed for the exercise of options?

1. Up to 5 years

2. Up to 8 years

3. Up to 10 years

4. It has no time limit

The correct answer is: Up to 10 years

In the context of the Enterprise Management Incentive (EMI) scheme, the correct duration allowed for the exercise of options is up to 10 years. This duration is critical as it provides employees with a reasonable and extended opportunity to exercise their options after they have been granted, aligning their interests with those of the company. The EMI scheme is designed to incentivize employees by allowing them to acquire shares in the company at a predetermined price, which can be beneficial if the company's value increases. The 10-year limit serves as a balance between providing sufficient time for employees to take advantage of their options while also ensuring that the company can manage its equity effectively without indefinite obligations. This 10-year window also reflects the typical life cycle of growth in businesses, allowing employees to realize shares' value once certain performance milestones or market conditions have been met, which is an essential aspect of the EMI scheme's goal to encourage employee participation in company growth.