Quarterly Insights: Key Corporate & Commercial Topics – Q2 2026

Join us for the latest instalment of Clarkslegal’s Corporate and Commercial podcast series, where our expert team unpacks the most topical issues and significant developments from the past quarter.

In this episode, Stuart Mullins, Corporate Partner, is joined by Senior Solicitor Emma Docking to discuss three key areas shaping today’s business landscape:  

• Business Growth and Exits in 2026 – Key strategies for SMEs to maximise enterprise value, including organic and inorganic growth, debt financing, private equity, and governance reforms.
• Enterprise Management Incentive (EMI) Schemes - A clear overview of EMI schemes, their tax benefits, eligibility criteria, and recent changes, with a focus on incentivising key employees and supporting growth.
• Drag Along and Tag Along Rights - Why these shareholder protections are essential for fair and successful company exits.

If you’d like to discuss any of the topics covered in this episode, please contact Stuart Mullins or Emma Docking, who will be happy to assist you.

 Articles featured in this episode:

• Positioning Your Business for Growth and Exit in 2026
• EMI Schemes – following the 2025 Autumn Statement
• Drag-Along & Tag-Along Rights: Why Every Company Needs Them

Transcript

Stuart Mullins   00:05

Welcome everybody. This is the second in our series of podcasts where we review the topics of interest that have arisen and been written about by the Corporate Commercial team at Clarkslegal. I'm Stuart, Stuart Mullins. corporate partner in the team, and I'm joined today by a senior solicitor on my team, Emma Docking. Welcome, Emma. 

Emma Docking   00:29

Thank you very much for having me. 

Stuart Mullins   0:30

Thank you. Yes. So we reviewed or reviewing, as I say, three areas today that we've written about and of course full details of the articles are available on our website.
 And those areas that we've reviewed and will be reviewing are talking about business growth and exits in 2026, exploring EMI schemes following the 25 autumn fiscal statement that was delivered in November, and also exploring drag along and tag along rights and why everybody and every company needs to give some thought to them.  So positioning business for growth and exit. So back in January, we put together an article really drawing on the challenges of SMEs and small enterprises in 25 and identifying a number of key themes that came out of our experiences with clients that were maximising their enterprise value on exits. And as I say, the article is well worth a read, but I just wanted to pick up with Emma a couple of themes in there. We talked about the importance of growth, organic and non-organic and in particular, Emma, we talked about the use of debt, private equity, finance and funding, for enabling growth. Do you want to talk to us a little bit more about those commonly termed concepts, but what exactly we mean by them and what the differences are. 

Emma Docking   02:24

Yeah, absolutely. That's not a problem. So in order to grow a company, you're looking to inject capital into the company in order to look for a long term growth plan and there are various ways that you can do this. There's an inorganic approach, so obtaining debt financing from lenders, banks, alternative third parties. And then there's the organic approach where you're looking towards internally into your company where you can use your employees, incentivise them by growing the company that way going forward. Now, obviously, we've seen in the last 12 months, there has been a gradual reduction of inflation and interest rates. So this has therefore increased deal makers' confidence. It narrows the buyer-seller valuation gaps and then imposing more availability of those financing projections going forward and debt financing. So it's really rebounded that confidence for deal makers going forward and assisted in deal flows in order to assist with the long term strategy. So it has allowed company boards essentially to shift from a more defensive approach where they're trying to protect their investments, to actually a long term investment strategy and approach in order to exit going forward. So the, you know, the debt financing aspect of the inorganic third party growth element, it has remained higher since the 2021, 2022 COVID period that we've gone through. We see there has been an easing of inflationary pressures that have allowed the Bank of England to cut those rates, actually improving affordability of debt. And so going forward, we've seen a more uptake in those finance acquisitions all around and obviously, in today's news, we're hearing a lot of uncertainty around the geopolitical landscape at the moment. So there is a remaining risk factor there and potential renewed cost pressures that people are looking at as well. But in the more organic approach, we're looking at, there has been an uptake in the equity investment. So third party private investors as opposed to lenders in the public sectors. There is obviously a risk where you're surrendering ownership in your company, control of the business, and you're providing that security to third party lenders, where as opposed to your organic growth, where you're looking more internally and the private equity investment, they are more involved in the running of the business, leading to more profitable and organic growth throughout the company itself, leading to more, obviously, a view of an exit for, say, 5 to 10 years is what we're seeing at the moment. 

Stuart Mullins   05:37

Thanks, Emma. So just to recap there, what we've seen in 2025 is a means of maximising growth for businesses of those that have come off the back of an investment in debt funding, which is straightforward loan term debt and also we see we've seen huge activity in the private equity markets where people, rather than just take a percentage coupon on the investment, look to take a share in equity and ownership and then look to realise their investment through an exit, normally three to five years from point of funding. Thank you. Thank you, Emma. That was really clear. Thank you. That was that was very useful. The other the other points just to touch on that we explored in that article are the importance of governance. New companies house regime for reporting, very important to understand what ACSPs mean. What was introduced under the recent Economic Crime and Corporate Corporation transparency legislation and how that impacts you as a business owner or a member of a limited liability partnership. Some very important takeaways there. 

Moving on, Emma, we then talked in February, we, it's a nice lead in really because we just talked about incentivised touching on organic growth, which of course means maximising the efforts of, yeah, your workforce team. And of course, incentivising that team is very important. So we talked. in February, about largely promoted by the increase in inquiries and instructions that we had for setting up what we call EMI option schemes, employee management incentive option schemes. And our notes, as I say, it's available on the website gives a useful overview is to how they work, the tax efficiencies of them and also some important changes to the operation of those option schemes that were introduced in the November fiscal statement.  Emma, EMIs, like a lot of the work that we do, there's lots of jargon. Can you explain what an option is and can you talk us through what an EMI option is? 

Emma Docking   08:13

Of course, yeah, absolutely. So EMIs, so short for Enterprise Management Incentive Scheme, is as it says on the tin, an incentive scheme, which is more centred around small medium enterprises. So this is in particular for the SMEs that we're looking for. And it's largely popular due to their tax efficiencies. And if obviously the both the company and the employee are actually qualified as well. So there's requirements that need to be met in order to be a qualified company and employee. They allow for the option holder, so whoever's been granted options over the company, to actually acquire shares in the company on certain qualifying events. So say, for instance, an exit or a specific time period. And that generally very attractive initiatives in order to put this scheme in place and saying it is incentive for most many key employees within the company.

Stuart Mullins   09:19

So what we're talking about here, Emma, I think just for added clarity, we're talking about creating options, options to acquire shares in your business that you are giving to employees and those options will vest or come to life, for want of a better phrase, on certain events. And that can be on an exit, so in the event you decide to sell the business or the assets of the business, or perhaps over a period of time. Now, with options, they are given, granted to employees like anything. There are tax implications of doing so. With the EMI schemes, those tax circumstances are mitigated for both the employee and the company itself. So, so the way in which the way that fundamentally the way in which an EMI scheme is different is that it's liable to a capital gains tax charge as opposed to a general optional benefiting kind which is subject to an income tax charge. And of course, if the employee qualifies for business asset disposal relief, there can be an attractive discounted rate of taxation payable at that stage. Now, the caveat here is that we are not tax advisors and we always work with our clients, accountants, or suitably qualified professionals to support the operation of them.

Thank you, Emma. Thank you for the overview. That leads us on to our final article and notes of the year. And that relates to drag along and tag along rights, why everyone needs them. Emma, over to you. Can you explain what a tag along right is and what a drag along right and what the dangers of not including them are. 

Emma Docking   11:30

Absolutely. So you'll hear them, there'll be, these are familiar terms that you'll hear throughout the course of providing constitutional governments and any companies should have them in place. So essential for all parties involved in a deal, for investors, shareholders, key employees, founders, directors, all alike, and each are insisting in the event of a potential exit going forward. Obviously, you have relationships that are formed at the beginning, you don't believe there's anything that will happen going forward. You don't foresee a potential divorce of that business relationship going forward. Having drag along and tag along will prevent and assist in the event of a dispute going forward if that happens.  So for drag along. What a drag along right is that it allows the majority shareholder to compel remaining minority shareholders to accept an offer to sell the full 100% asking price of all asking amount of the shares in the company on the same terms and conditions. So it protects the majority shareholder when they've received a third party offer to buy, say, 98% of the shares in the company, which say a founder holds. Now there's a 2% that is remaining at the moment that are held by minority shareholders. In the event that there is an offer to the 98% shareholder, the majority shareholder can drag along the minority shareholder who holds the 2% along in the same deal on the same terms and conditions going forward to this third party buyer. 

Stuart Mullins   13:30

And I think the reason for that, you see, is that in our experience, you don't get many buyers of privately owned companies that only want to own a percentage, albeit a substantial majority percentage, they generally want to acquire all of the shares rather than just a majority interest, which means that if you didn't have that right in your articles or other constitutional documentation, that, as you say, Emma, just so I'm clear, is that those minority shareholders could effectively scupper the deal of a majority shareholder who does want to sell for value. 

Emma Docking   14:14

Yeah, absolutely. It could be very disruptive to the whole deal itself. So to have this clause in place and then obviously will come into the tagalong, which is the minority aspect of it. To have this in place is paramount to those founding directors who have had private equity and capital injection into the company. And they've obviously shared a stake in that company to obviously incentivise and bring more capital in. But to have this in place, it's paramount to a potential exit going forward.
 

Stuart Mullins   14:46

Yeah, it could result in minority shareholders holding effectively majority shareholders to ransom and asking for a disproportionate amount of money or consideration to allow the deal to go through. So I think that's really important. So tag rights, Emma, just going back, they're the converse aren't they? 

Emma Docking   15:05

They absolutely are, yeah. So they're designed to protect the minority shareholders. So drag along is for the majority shareholder tag along is for the minority shareholder. And this prevents them from being left behind in the deal. So they have therefore the right to be included within the exit that the 90, going back to the 98%, the 98% shareholder has. It prevents them from or avoids the complicatedness of leaving behind and then having to deal with a new buyer that they don't know. Obviously, their business interests may not align. Having to then sell a 2% minority stake in their company and it's actually quite difficult to find a buyer going forward. 

Stuart Mullins   15:53

I think in isolation that's right. If you didn't have that right and you were 2% or 1% or fraction percentage minority shareholder, there's minority discount rules that can apply and you can devalue the net value of that interest quite significantly, almost up to 80%. So for minority shareholders, those tag rights are very, very important indeed. 

Well, thank you, Emma. Thank you. I think that that brings us to a close on today's general review. Thank you all for listening. As ever, if you do require more information on any of the topics, we've raised today or would like to talk more generally about how we can help your business and governance, please don't hesitate to go to the website, do read the articles, any questions how soever arising, please don't hesitate to reach out and contact us. That just leads me to thank you all very much for listening and we look forward to speaking to you at the start of next quarter about the topics that are going to arise over the next three months. Thank you very much. 

Emma Docking   17:10

Thank you.