Varying EMI (and CSOP) Options in Light of PISCES – Opportunities and Risks

The UK Government is set to introduce PISCES – the Private Intermittent Securities and Capital Exchange System – a new trading mechanism for private company shares. The aim is to provide more flexibility for shareholders in private companies to buy and sell shares, without a full public market listing.

As part of this development, draft legislation for the Finance Bill 2026 includes specific provisions allowing certain amendments to existing Enterprise Management Incentive (EMI) and Company Share Option Plan (CSOP) option agreements so they can be exercised in connection with a PISCES trading event.

While this represents a welcome relaxation of the rules for pre-Finance Bill 2026 options, the scope of the concession is narrow and there are still significant risks to be aware of when varying EMI or CSOP option agreements. This article summarises the new proposals, the limits of the changes, and the pitfalls that can arise when amending tax-advantaged share option schemes.

The New PISCES Amendment Concession

For EMI and CSOP options granted before the Finance Bill 2026 receives Royal Assent, it will be possible to amend option agreements to allow for the exercise of options when the underlying shares have become PISCES shares – but only if:

• The shares acquired on exercise are immediately sold on PISCES – the option holder cannot simply retain them post-exercise under this trigger.
• The only change to the agreement is to add this new PISCES trigger – no other substantive amendments are permitted as part of the same variation.
• The amendment is documented either by written agreement with the option holder or by a written notification to the option holder.

Importantly, the legislation provides that such an amendment will be treated as if it had been included in the option agreement from the outset. This means it will not jeopardise the EMI or CSOP’s qualifying status.

Limits on the Concession

It is essential to note that the concession is time-limited and narrow in scope.

• For options granted after Royal Assent, if you want a PISCES trading event to be an exercise trigger, this must be expressly written into the option terms from the outset – post-grant amendments will not benefit from the concession.
• Any amendments beyond the specific PISCES trigger scenario will need to comply with existing EMI and CSOP rules, which impose strict limits on variations.

Risks with Other Amendments to EMI and CSOP Options

Amending tax-advantaged options is a complex area. Certain changes can be automatically disqualifying under EMI rules, while others can be treated as a surrender and re-grant of the option – a process that can inadvertently strip away accrued tax benefits.

Even amendments considered more than “de minimis” by HMRC can be problematic. Where HMRC treats a change as a re-grant, the company must notify the new option and may need to agree a fresh market valuation. Failure to do so risks the loss of EMI or CSOP status entirely – sometimes only discovered at the point of exit, when it’s too late to fix.

Board Discretions – Helpful but Risky

Many option agreements contain board discretion clauses, which can provide useful flexibility. However, using these powers can also cause a deemed surrender and re-grant if they change the circumstances in which an option can be exercised.

For example:

• High risk – Where directors allow an “exit only” option to be exercised in circumstances that do not meet the defined exit event in the option agreement. HMRC’s view is that this creates a new option, which may lose EMI/CSOP tax status.
• Generally safe – Allowing a leaver to retain an option (even though leaving is an EMI disqualifying event), or allowing the exercise of both vested and unvested shares upon an exit event. These typically do not trigger re-grant treatment, provided the discretion was written into the agreement from the outset.

Given the fine distinctions, companies should always seek legal advice before exercising discretion under an EMI or CSOP plan.

Our View – Proceed with Caution

The introduction of PISCES offers exciting opportunities for private company shareholders and employees with share options, but the new legislative concession for amending EMI and CSOP agreements is both narrow and temporary.

Even with the concession, care must be taken to ensure amendments are compliant, documented correctly, and limited to the permitted scope. For any other changes, detailed legal and tax advice is essential to avoid accidentally disqualifying an option or triggering unwanted tax consequences.

At The Jonathan Lea Network, our corporate and tax specialists regularly advise on the design, amendment, and exercise of EMI and CSOP options. We can help you assess whether a variation is permissible, draft compliant documentation, and liaise with HMRC where necessary to safeguard the tax-advantaged status of your scheme.