1 October 2025

PISCES and employee share options: a new era for private company liquidity

Ellie Avni, Senior Director in Employment Tax and Reward at FTI Consulting, explores how the PISCES platform could reshape EMI and share option plans - creating fresh opportunities for flexibility and tax-efficient value realisation.

On 21 July 2025, the UK government published draft legislation allowing existing Enterprise Management Incentive (“EMI”) schemes and Company Share Option Plans (“CSOP”) schemes to be amended to include trading windows on the new Private Intermittent Securities and Capital Exchange System (“PISCES”) to be an event allowing the exercise of options, without losing the tax advantages of participating in a tax advantaged share plan.

PISCES – an overview

PISCES is a new type of trading platform allowing private company shares to be traded periodically. It acts as a bridge between public and private markets and enables shareholders of already issued private company shares to sell these during intermittent trading windows, as determined by the company.

Whilst there are limits on who is eligible to trade on a PISCES platform (for example, most retail investors are prohibited from trading on PISCES, and companies are not able to buy or sell their own shares on PISCES), trustees of employee share schemes and share incentive plans, and employees or officers of participating companies are able to trade shares (including those obtained on the exercise of tax advantaged share options) via PISCES.

PISCES for EMI and CSOP arrangements

EMI and CSOP schemes are tax-efficient employee share option schemes used by qualifying private companies to retain and incentivise key talent. Many employee share option schemes, whether EMI, CSOP, or non tax advantaged options, only realise value in the event of an exit – such as a sale or listing of the company.

Generally, any fundamental change to the terms of an existing CSOP or EMI scheme will be treated as a cancellation of the existing option and a regrant of a new, replacement option. This often results in the complete loss of the generous tax advantages available under the CSOP and EMI schemes. Changes to when an option can be exercised are considered to be a fundamental change and, therefore, treated as a cancellation and regrant.

However, following a slowdown in IPOs and an increase in employees wanting to realise value in their employee share options in other ways, the UK government announced that secondary trading arrangements provided by PISCES will be treated differently. Under the new legislation, if a company with existing EMI or CSOP option holders wishes to make those options exercisable during PISCES trading events, they can now amend the terms of those options to do so and, crucially, without jeopardising the valuable tax benefits EMI and CSOP options deliver to participants, as would otherwise be the case.

This change will be welcome news for many, enabling key talent to realise value from existing EMI and CSOP options in a tax-efficient manner. The success of such arrangements will, however, very much depend on whether any buyers will be found for the shares.

Draft legislation, published on 21 July 2025, will allow existing CSOP and EMI options to vest and become exercisable when the company shares are to be traded on a PISCES platform, provided that:

The option was granted on or before the date of Royal Assent to Finance Bill 2025/26;
The option is varied on or after 15 May 2025 such that it becomes exercisable in whole, or in part, where the shares under option are or become PISCES shares; and;
All shares acquired on exercise of that option are immediately sold on a PISCES platform (rather than retained)

Practical considerations

Any amendment to the terms of existing EMI and CSOP options to incorporate the ability to exercise EMI and CSOP options via PISCES will need to be made via a written agreement with the option holder or notified to the option holder in writing.

The time necessary to obtain written agreement to the proposed variation from option holders should be considered when planning to amend options prior to a PISCES trading event occurring.

Given the retrospective element of this legislation, once enacted, HM Revenue and Customs (“HMRC”) have noted that they will use their care and management powers not to collect tax in respect of CSOP or EMI options that are amended for the purposes of incorporating PISCES arrangements into their terms and conditions and exercised prior to the Finance Bill 2025-26 receiving Royal Assent.

Benefits of using PISCES arrangements

Incorporating PISCES events as an additional and alternative exercisable event will provide more flexibility to employees who can more easily realise value from their share options, particularly where the company strategy regarding exit event or IPO varies;
Share trading via PISCES arrangements are exempt from Stamp Duty and Stamp Duty Reserve Tax;
PISCES arrangements can provide enhanced flexibility for trading private company shares (including those obtained via the exercise of EMI and CSOP options), compared to more traditional private share sales that may only arise on sale or IPO or via asset matching brokers;
There are limited disclosure requirements to public markets;
There is no dilution of existing equity as only already issued shares are eligible to be traded on PISCES;
Companies retain powers to impose restrictions on who can buy shares, allowing them to act in the best commercial interests of the company. A floor and ceiling price for the shares can also be set, allowing of some control on the value of shares being traded.
There are no obligations for PISCES operators to market their shares and platform to all types of eligible investors;
Trading events can be held and aligned with company strategy as and when required.

However, there are also a number of considerations that companies may wish to keep in mind before amending any option agreements to incorporate PISCES trading arrangements, both for EMI and CSOP purposes (and other private company share schemes that may be in place), including:

Past PISCES transactions could be used as a benchmark for determining market value. In particular, if a small minority share holdings are sold and traded on a PISCES platform, there is a risk that HMRC may no longer consider that applying a discount for lack of marketability and minority holdings is appropriate.
Connected party transactions which are not on an arm’s length basis may be used as a basis for HMRC to raise compliance checks to assess whether the price paid via PISCES accurately reflects the market value of a trade made on an arm’s length basis.

FTI thoughts

We welcome the government’s decision that any amendments made to existing EMI and CSOP arrangements to incorporate trading on a PISCES platform as an exercisable event will not result in a cancellation and regrant of existing EMI and CSOP Options, and existing options will instead retain their tax advantages.

PISCES arrangements are beneficial to those companies where value realisation from a sale, listing or other liquidity event may be some time away. Incorporating such flexibility into option arrangements will allow for employees and option holders to more easily realise value from their share options, and can act as an additional tool to help attract and retain talent without necessarily gearing up towards formal liquidity and exit events or jeopardising any tax advantaged status.