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(3) trust as a result only of the individual’s having an interest in shares or | |
obligations of the trust. | |
(4) Chapter 11 of Part 7 of this Act (which deals with the attribution of interests | |
in companies to beneficiaries of employee benefit trusts) applies for the | |
purposes of sub-paragraph (2). | 5 |
(5) In this paragraph “employee benefit trust” has the same meaning as in that | |
Chapter (see sections 550 and 551). | |
Meaning of “associate”: trustees of discretionary trust | |
14 (1) This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of | |
“associate”: trustees of settlement) where— | 10 |
(a) the individual (“the beneficiary”) is one of the objects of a | |
discretionary trust, | |
(b) the property subject to the trust has at any time consisted of, or | |
included, shares or obligations of the company mentioned in | |
paragraph 9(2), | 15 |
(c) the beneficiary has ceased to be eligible to benefit under the trust as | |
a result of— | |
(i) an irrevocable disclaimer or release executed by the | |
beneficiary, or | |
(ii) the irrevocable exercise by the trustees of a power to exclude | 20 |
the beneficiary from the objects of the trust, | |
(d) immediately after the beneficiary ceased to be so eligible, no | |
associate of the beneficiary was interested in the shares or | |
obligations of the company that were subject to the trust, and | |
(e) during the period of 12 months ending with the date on which the | 25 |
beneficiary ceased to be so eligible, neither the beneficiary nor any | |
associate of the beneficiary received any benefit under the trust. | |
(2) The beneficiary is not, as a result only of the matters referred to in sub- | |
paragraph (1)(a) and (b), to be regarded as having been interested in the | |
shares or obligations of the company at any time during that period of 12 | 30 |
months. | |
(3) In sub-paragraph (1) “associate” has the meaning given by paragraph 12(1) | |
but with the omission of paragraph (c). | |
Part 4 | |
Shares to which schemes can apply | 35 |
Requirements relating to shares that may be subject to share options: introduction | |
15 (1) A CSOP scheme must meet the requirements of— | |
paragraph 16 (shares must be ordinary shares of certain companies), | |
paragraph 17 (requirements as to listing), | |
paragraph 18 (shares must be fully paid up and not redeemable), | 40 |
paragraph 19 (only certain kinds of restrictions allowed), and | |
paragraph 20 (requirements as to other shareholdings). | |
(2) In this Part “eligible shares” means shares which may be acquired by the | |
exercise of share options under the scheme. | |
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Shares must be ordinary shares of certain companies | |
16 Eligible shares must form part of the ordinary share capital of— | |
(a) the scheme organiser, | |
(b) a company which has control of the scheme organiser, or | |
(c) a company which either is, or has control of, a company which is a | 5 |
member of a consortium owning either the scheme organiser or a | |
company having control of the scheme organiser. | |
Requirements as to listing | |
17 (1) Eligible shares must be — | |
(a) shares of a class listed on a recognised stock exchange, | 10 |
(b) shares in a company which is not under the control of another | |
company, or | |
(c) shares in a company which is under the control of a listed company. | |
(2) A “listed company” is a company whose shares are listed on a recognised | |
stock exchange, other than— | 15 |
(a) a close company, or | |
(b) a company that would be a close company if resident in the United | |
Kingdom. | |
Shares must be fully paid up and not redeemable | |
18 Eligible shares must be— | 20 |
(a) fully paid up, and | |
(b) not redeemable. | |
Only certain kinds of restriction allowed | |
19 (1) Eligible shares must not be subject to any restrictions (see sub-paragraph (4)) | |
other than— | 25 |
(a) those attaching to all shares of the same class, or | |
(b) those permitted by sub-paragraph (2). | |
(2) If the conditions of sub-paragraph (3) are met, eligible shares may be subject | |
to a restriction imposed by the company’s articles of association— | |
(a) requiring all shares held by directors or employees— | 30 |
(i) of the company, or | |
(ii) of any other company of which it has control, | |
to be disposed of, or offered for sale, on ceasing to be so held, and | |
(b) requiring all shares acquired, as a result of rights or interests | |
obtained by such directors or employees, by persons who— | 35 |
(i) are not such directors or employees, or | |
(ii) have ceased to be such directors or employees, | |
to be disposed of, or offered for sale, when they are acquired. | |
(3) The conditions of this sub-paragraph are— | |
(a) that a disposal required by the restriction will be by way of sale for a | 40 |
consideration in money on terms specified in the articles of | |
association, and | |
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(b) that under general conditions contained in the articles of association | |
anyone disposing of shares of the same class (whether or not held or | |
acquired as mentioned in sub-paragraph (2)) may be required to sell | |
them on terms which are the same as those mentioned in paragraph | |
(a). | 5 |
(4) For the purposes of this paragraph shares are subject to a restriction if there | |
is any contract, agreement, arrangement or condition— | |
(a) by which a person’s freedom to dispose of the shares or of any | |
interest in them or of the proceeds of their sale, or to exercise any | |
right conferred by them, is restricted, or | 10 |
(b) by which such a disposal or exercise may result in any disadvantage | |
to the person or to a person connected with the person. | |
This is subject to sub-paragraphs (5) to (7). | |
(5) Sub-paragraph (4) does not extend to so much of any contract, agreement, | |
arrangement or condition as contains provisions similar in purpose and | 15 |
effect to any of the provisions of the Model Code as (for the time being) set | |
out in the listing rules issued by the competent authority for listing in the | |
United Kingdom under section 74(4) of the Financial Services and Markets | |
Act 2000 (c. 8). | |
(6) Sub-paragraph (4) also does not apply to any terms of a loan making | 20 |
provision about how it is to be repaid or the security to be given for it. | |
(7) Any discretion of the directors under the articles of association of the | |
company to refuse to accept the transfer of shares is to be disregarded for the | |
purposes of this paragraph if the directors— | |
(a) have undertaken to the Inland Revenue not to exercise it in such a | 25 |
way as to discriminate against persons participating in the scheme; | |
and | |
(b) have notified all those who are eligible to do so of the existence of the | |
undertaking. | |
(8) In this paragraph “articles of association” includes, in the case of a company | 30 |
incorporated under the law of a country outside the United Kingdom, any | |
equivalent document relating to the company. | |
Requirements as to other shareholdings | |
20 (1) The majority of the issued shares of the same class as the eligible shares must | |
be— | 35 |
(a) employee-control shares, or | |
(b) open market shares, | |
unless the eligible shares are shares in a company whose ordinary share | |
capital consists of shares of one class only. | |
(2) Shares in a company are “employee-control shares” if— | 40 |
(a) the persons holding the shares are, by virtue of their holding, | |
together able to control the company, and | |
(b) those persons are or have been employees or directors of the | |
company or of another company which is under the control of the | |
company. | 45 |
(3) Shares in a company are “open market shares” if the persons holding the | |
shares are not — | |
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(a) persons who acquired their shares as a result of a right conferred on | |
them or an opportunity afforded to them as a director or employee | |
of the scheme organiser or any other company, and not as a result of | |
an offer to the public, or | |
(b) trustees holding shares on behalf of persons who acquired their | 5 |
beneficial interests in the shares as mentioned in paragraph (a), or | |
(c) in the case of shares which— | |
(i) are not of a class listed on a recognised stock exchange, and | |
(ii) are in a company which is under the control of a listed | |
company (as defined by paragraph 17(2)), | 10 |
companies which have control of the company whose shares are in | |
question or of which that company is an associated company. | |
Part 5 | |
Requirements etc. relating to share options | |
Requirements etc. relating to share options: introduction | 15 |
21 (1) A CSOP scheme must meet the requirements of— | |
paragraph 22 (requirements as to price for acquisition of shares), and | |
paragraph 23 (share options may not be transferred). | |
(2) A CSOP scheme may make any provision authorised by— | |
paragraph 24 (exercise of options: ceasing to be director or employee), | 20 |
or | |
paragraph 25 (exercise of options: death). | |
Requirements as to price for acquisition of shares | |
22 (1) The price at which shares may be acquired by the exercise of a share option | |
granted under the scheme— | 25 |
(a) must be stated at the time when the option is granted, and | |
(b) must not be manifestly less than the market value of shares of the | |
same class at that time. | |
This is subject to sub-paragraphs (2) and (3). | |
(2) The Inland Revenue and the scheme organiser may agree in writing that | 30 |
sub-paragraph (1)(b) is to apply as if the reference to the time when the | |
option is granted were to an earlier time or times stated in the agreement. | |
(3) The scheme may provide for one or more of the following— | |
(a) the price at which shares may be acquired by the exercise of a share | |
option granted under the scheme, | 35 |
(b) the number of shares which may be so acquired, or | |
(c) the description of shares which may be so acquired, | |
to be varied so far as necessary to take account of a variation in the share | |
capital of which the shares form part. | |
(4) But the scheme must provide that no such variation is to be made without | 40 |
the prior approval of the Inland Revenue. | |
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Share options must not be transferable | |
23 (1) The scheme must ensure that share options granted to a participant are not | |
capable of being transferred by the participant. | |
(2) Paragraph 25 provides for the exercise of the options where the participant | |
has died. | 5 |
Exercise of options: ceasing to be director or employee | |
24 (1) The scheme may provide that an individual may exercise share options | |
under it after ceasing to be a full-time director or qualifying employee. | |
(2) “Qualifying employee” has the same meaning as in paragraph 8 (the | |
employment requirement). | 10 |
Exercise of options: death | |
25 The scheme may provide that, if a participant dies before exercising the | |
options, they may be exercised on or after the date of death but not later than | |
12 months after that date. | |
Part 6 | 15 |
Exchange of share options | |
Exchange of options on company reorganisation | |
26 (1) A CSOP scheme may provide that if— | |
(a) there is a company reorganisation affecting a scheme company (that | |
is, a company whose shares may be acquired by the exercise of share | 20 |
options obtained under the scheme: see paragraph 16), and | |
(b) a participant has obtained share options under the scheme which are | |
to acquire shares of the scheme company (“the old options”), | |
the participant may agree with the acquiring company to release the old | |
options in consideration of the participant being granted new share options. | 25 |
(2) For the purposes of this paragraph there is a company reorganisation | |
affecting a scheme company if another company (“the acquiring | |
company”)— | |
(a) obtains control of the scheme company— | |
(i) as a result of making a general offer to acquire the whole of | 30 |
the issued ordinary share capital of the scheme company | |
which is made on a condition such that, if it is met, the person | |
making the offer will have control of that company, or | |
(ii) as a result of making a general offer to acquire all the shares | |
in the scheme company which are of the same class as those | 35 |
subject to the old options; | |
(b) obtains control of the scheme company as a result of a compromise | |
or arrangement sanctioned by the court under— | |
(i) section 425 of the Companies Act 1985 (c. 6) (power to | |
compromise with creditors and members), or | 40 |
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(ii) Article 418 of the Companies (Northern Ireland) Order 1986 | |
(S.I. 1986/1032 (N.I.6)) (corresponding provision for | |
Northern Ireland); or | |
(c) becomes bound or entitled to acquire shares in the scheme company | |
under— | 5 |
(i) sections 428 to 430 of that Act (power to acquire shares of | |
shareholders dissenting from schemes or contract approved | |
by majority), or | |
(ii) Articles 421 to 423 of that Order (corresponding provision for | |
Northern Ireland). | 10 |
(3) A scheme that makes provision under sub-paragraph (1) must require the | |
agreement referred to in that sub-paragraph to be made— | |
(a) where control is obtained in the way set out in sub-paragraph | |
(2)(a)(i) or (ii), within the period of 6 months beginning with the time | |
when the acquiring company obtains control and any condition | 15 |
subject to which the offer is made is met, | |
(b) where control is obtained in the way set out in sub-paragraph (2)(b), | |
within the period of 6 months beginning with the time when the | |
court sanctions the compromise or arrangement, and | |
(c) where sub-paragraph (2)(c) applies, within the period during which | 20 |
the acquiring company remains bound or entitled as mentioned in | |
that provision. | |
Requirements about share options granted in exchange | |
27 (1) This paragraph applies to a scheme that makes provision under paragraph | |
26 (exchange of options on company reorganisation). | 25 |
(2) The scheme must require the new share options to relate to shares in a | |
company which— | |
(a) is different from the company whose shares are subject to the old | |
options, and | |
(b) is either the acquiring company itself or some other company within | 30 |
sub-paragraph (b) or (c) of paragraph 16 (shares must be ordinary | |
shares of certain companies), namely— | |
(i) a company which has control of the scheme organiser, or | |
(ii) a company which is, or has control of a company which is, a | |
member of a consortium owning either the scheme organiser | 35 |
or a company having control of the scheme organiser. | |
For this purpose the control in question may be through the medium | |
of the acquiring company. | |
(3) The scheme must also require the new share options to be equivalent to the | |
old options. | 40 |
(4) For the new options to be regarded as equivalent to the old options— | |
(a) the shares to which they relate must meet the conditions in | |
paragraphs 16 to 20 (types of share that may be used), | |
(b) they must be exercisable in the same manner as the old options and | |
subject to the provisions of the scheme as it had effect immediately | 45 |
before the release of the old options, | |
(c) the total market value of the shares subject to the old options | |
immediately before the release of those options by the participant | |
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(c) must equal the total market value, immediately after the grant of the | |
new options to the participant, of the shares subject to those options, | |
and | |
(d) the total amount payable by the participant for the acquisition of | |
shares under the new options must be equal to the total amount that | 5 |
would have been so payable under the old options. | |
(5) For the purposes of the CSOP code, new share options granted under the | |
terms of a provision included in a scheme under paragraph 26 are to be | |
treated as having been granted at the time when the corresponding old | |
options were granted. | 10 |
(6) This also applies for the purposes of the provisions of the scheme in their | |
operation, after the grant of the new options, by virtue of a condition | |
complying with sub-paragraph (4)(b). | |
Part 7 | |
Approval of schemes | 15 |
Application for approval | |
28 (1) Where— | |
(a) a CSOP scheme has been established, and | |
(b) the scheme organiser makes an application to the Inland Revenue for | |
approval of the scheme, | 20 |
the Inland Revenue must approve the scheme if they are satisfied that it | |
meets the requirements of Parts 2 to 6 of this Schedule. | |
(2) An application for approval — | |
(a) must be in writing, and | |
(b) must contain such particulars and be supported by such evidence as | 25 |
the Inland Revenue may require. | |
(3) Once the Inland Revenue have decided whether or not to approve the | |
scheme, they must give notice of their decision to the scheme organiser. | |
Appeal against refusal of approval | |
29 (1) If the Inland Revenue refuse to approve the scheme, the scheme organiser | 30 |
may appeal to the Special Commissioners. | |
(2) The notice of appeal must be given to the Inland Revenue within 30 days | |
after the date on which notice of their decision was given to the scheme | |
organiser. | |
(3) If the Special Commissioners allow the appeal, they may direct the Inland | 35 |
Revenue to approve the scheme with effect from a date specified by the | |
Commissioners. | |
(4) The date so specified must not be earlier than that of the application for | |
approval. | |
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