A brief explanation of Actual Market Value(AMV), and Unrestricted Market Value(UMV)
These are two abbreviations that you will see crop up all the time when talking about EMI, especially at the Valuation stage.
Calculating them is a little more complicated, but what they are is actually fairly simple:
- Unrestricted Market Value (UMV), which values all the shares as if they had no restrictions and could easily be bought and sold at the prevailing worth of the company at the time. This figure is used to calculate the maximum amount of options allowable to be granted to an individual (£250,000 within a three year period) or by the company (£3m).
- Actual Market Value (AMV), which will not be higher than the UMV, but may be significantly lower as (for example) any shares offered via EMI will make up a small proportion of the company's total equity, and may not be readily saleable on exercise. The AMV is used to set the income tax point for the shares when they are exercised.
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