Finance Act 1980

Section 47.

SCHEDULE 10 Savings-Related Share Option Schemes

PART I Approval Of Schemes

1 (1) On the application of a body corporate (in this Schedule referred to as “the company concerned”) which has established a savings-related share option scheme, the Board shall approve the scheme—

(a) if they are satisfied that the scheme fulfils the conditions specified in Part II of this Schedule; and

(b) unless it appears to them that there are features of the scheme which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares.

(2) An application under sub-paragraph (1) above shall be made in writing and contain such particulars and be supported by such evidence as the Board may require.

(3) Where the company concerned has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a “group scheme ” and in relation to a group scheme, the expression “participating company ” means the company concerned or a company of which the company concerned has control and to which for the time being the scheme is expressed to extend.

2 If, at the time the application is pending, the Board have no evidence that the condition set out in paragraph 14 of Part II of this Schedule is satisfied, then, if the other conditions are satisfied, the Board may approve the scheme subject to the remaining condition being satisfied ; and if that condition is not satisfied the approval shall be of no effect.

3 (1) If, at any time after the Board have approved a scheme, any of the conditions mentioned in paragraph 1 above ceases to be satisfied or the company concerned fails to provide information requested by the Board under paragraph 25 below the Board may withdraw the approval with effect from that time or from such later time as the Board may specify but where rights obtained under a scheme before the withdrawal of approval from the scheme under this paragraph are exercised after the withdrawal, section 47(1 )(b) above shall apply in respect of the exercise as if the scheme were still approved.

(2) If an alteration is made in the scheme at any time after the Board have approved it, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration.

4 If the company concerned is aggrieved by—

(a) the failure of the Board—

(i) to approve the scheme,

(ii) to decide that a condition subject to which the approval has been given is satisfied, or

(iii) to approve an alteration in the scheme ; or

(b) the withdrawal of approval,

it may, by notice in writing given to the Board within thirty days from the date on which it is notified of the Board's decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall hear and determine the matter in like manner as an appeal.

PART II Conditions as to Schemes

General conditions

5 - The scheme must provide—

(a) for directors and employees to obtain rights to acquire shares (in this Schedule referred to as “scheme shares ”) which fulfil the conditions specified in paragraphs 15 to 19 below; and

(b) for the scheme shares to be paid for with monies not exceeding the amount of repayments made and any interest paid to them under a certified contractual savings scheme, within the meaning of section 415 of the Taxes Act, which has been approved by the Board for the purposes of this Schedule.

6 Subject to paragraphs 7 to 10 below, the rights obtained under the scheme must not be capable of being exercised before the bonus date, that is to say the date on which repayments under the certified contractual savings scheme are due ; and for the purposes of this paragraph and paragraph 5 above—

(a) repayments under a certified contractual savings scheme may be taken as including or as not including a bonus;

(b) the time when repayments are due shall be, where repayments are taken as including the maximum bonus, the earliest date on which the maximum bonus is payable and, in any other case, the earliest date on which a bonus is payable under the scheme ; and

(c) the question what is to be taken as so included must be required to be determined at the time when rights under the scheme are obtained.

7 The scheme must provide that if a person who has obtained rights under the scheme dies before the bonus date the rights must be exercised, if at all, within twelve months after the date of his death and if he dies within six months after the bonus date the rights may be exercised within twelve months after the bonus date

8 The scheme must also provide that if a person who has obtained rights under it ceases to hold the office or employment by virtue of which he is eligible to participate in the scheme by reason of injury, disability, redundancy within the meaning of the [1978 c. 46.] Employment Protection (Consolidation) Act 1978 or retirement on reaching pensionable age within the meaning of Schedule 20 to the [1975 c. 14.] Social Security Act 1975 or any other age at which he is bound to retire in accordance with the terms of his contract of employment, then the rights must be exercised, if at all, within six months of his so ceasing and, if he so ceases for any other reason within three years of obtaining the rights, they may not be exercised at all; and in relation to the case where he so ceases for any other reason more than three years after obtaining the rights the scheme must either provide that the rights may not be exercised or that they must be exercised, if at all, within six months of his so ceasing.

9 The scheme must also provide that where a person who has obtained rights under it continues to hold the office or employment by virtue of which he is eligible to participate in the scheme after the date on which he reaches pensionable age within the meaning of Schedule 20 to the Social Security Act 1975, he may exercise the rights within six months of that date.

10 (1) The scheme may also provide that—

(a) if any person obtains control of a company whose shares are scheme shares as a result of making—

(i) a general offer to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that if it is satisfied the person making the offer will have control of the company, or

(ii) a general offer to acquire all the shares in the company which are of the same class as the scheme shares, rights obtained under the scheme to acquire shares in the company may be exercised within six months of the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made has been satisfied ;

(b) if under section 206 of the [1948 c. 38.] Companies Act 1948 or section 197 of the [1960 c. 22 (N.I.).] Companies Act (Northern Ireland) 1960 (power to compromise with creditors and members) the court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of a company whose shares are scheme shares or its amalgamation with any other company or companies, rights obtained under the share option scheme to acquire shares in the company may be exercised within six months of the court sanctioning the compromise or arrangement;

(c) if any person becomes bound or entitled to acquire shares in a company whose shares are scheme shares under section 209 of the said Act of 1948 or section 200 of the said Act of 1960 (power to acquire shares of shareholders dissenting from schemes or contract approved by majority), rights obtained under the scheme to acquire shares in the company may be exercised at any time when that person remains so bound or entitled ; and

(d) if a company whose shares are scheme shares passes a resolution for voluntary winding up, rights obtained under a scheme to acquire shares in the company may be exercised within six months of the passing of the resolution.

(2) For the purposes of this paragraph a person shall be deemed to have obtained control of a company if he and others acting in concert with him have together obtained control of it.

11 Except as provided in paragraph 7 above, rights obtained by a person under the scheme must not be capable—

(a) of being transferred by him, or

(b) of being exercised later than six months after the bonus date.

12 No person shall be treated for the purposes of paragraph 8 above as ceasing to hold an office or employment by virtue of which he is eligible to participate in the scheme until he ceases to hold an office or employment in the company concerned or any associated company or company of which the company concerned has control.

13 The scheme must provide for a person's contributions under the certified contractual savings scheme to be of such amounts (not exceeding £50 monthly) as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained by him under the scheme ; and for this purpose the amount of repayment under the contractual savings scheme shall be determined as mentioned in paragraph 6 above.

14 The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme must be stated at the time the right is obtained and must not be manifestly less than 90 per cent, of the market value of shares of the same class at that time or, if the Board and the company agree in writing, at such earlier time or times as may be provided in the agreement, but the scheme may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part.

Conditions as to scheme shares

15 The scheme shares must form part of the ordinary share capital of—

(a) the company concerned ; or

(b) a company which has control of the company concerned ; or

(c) a company which either is or has control of a company which—

(i) is a member of a consortium owning either the company concerned or a company having control of that company; and

(ii) beneficially owns not less than three-twentieths of the ordinary share capital of the company so owned.

16 The scheme shares must be—

(a) shares of a class quoted on a recognised stock exchange ; or

(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 company (other than a company which is or would if resident in the United Kingdom be a close company within the meaning of section 282 of the Taxes Act) whose shares are quoted on a recognised stock exchange.

17 The scheme shares must be—

(a) fully paid up ; and

(b) not redeemable ; and

(c) not subject to any restrictions other than restrictions which attach to all shares of the same class.

18 In determining for the purposes of paragraph 17(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his 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 by which such a disposal or exercise may result in any disadvantages to him or a person connected with him.

19 Except where the scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class must be held by persons other than—

(a) persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the company concerned or any other company and not in pursuance of an offer to the public ;

(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a) above ; and

(c) in a case where the shares fall within sub-paragraph (c) and do not fall within sub-paragraph (a) of paragraph 16 above, companies which have control of the company whose shares are in question or of which that company is an associated company.

Conditions as to persons eligible to participate

20 (1) Subject to paragraphs 22 and 23 below every person who—

(a) is a full-time employee or full-time director of the company concerned or, in the case of a group scheme, a participating company, and

(b) has been such an employee or director at all times during a qualifying period, not exceeding five years, and

(c) is chargeable to tax in respect of his office or employment under Case I of Schedule E,

must be eligible to participate in the scheme, that is to say to obtain and exercise rights under it, on similar terms.

(2) For the purposes of sub-paragraph (1) above, the fact that the rights to be obtained by the persons participating in a scheme vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms.

21 Except as provided in paragraph 8 above, a person must not be eligible to participate in the scheme at any time unless he is at that time a director or employee of the company concerned or, if the scheme is a group scheme, a participating company.

22 A person must not be eligible to participate in the scheme in any year of assessment if in that year rights have been obtained by him under another scheme approved under this Schedule and established by the company concerned or by—

(a) a company which controls or is controlled by that company or which is controlled by a company which also controls that company, or

(b) a company which is a member of a consortium owning that company or which is owned in part by that company as a member of a consortium.

23 (1) A person must not be eligible to participate in the scheme at any time if at that time he has, or at any time within the preceding twelve months he has had, a material interest in a close company within the meaning of section 282 of the Taxes Act, which is—

(a) a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme ; or

(b) a company which has control of such a company or is a member of a consortium which owns such a company.

(2) In determining whether a company is a close company for the purpose of sub-paragraph (1) above, paragraph (a) of subsection (1) of section 282 of the Taxes Act (exclusion of companies not resident in the United Kingdom) and section 283 of the Taxes Act (exclusion of certain companies with quoted shares) shall be disregarded.

Transitional arrangements

24 (1) This paragraph shall apply in any case where the Board are satisfied that—

(a) a person has entered into a certified contractual savings scheme within the meaning of section 415 of the Taxes Act before the day appointed for the coming into force of this Schedule ; and

(b) he has obtained rights under a scheme established before that day to acquire shares in a company of which he is an employee or director (or a company of which such a company has control) using repayments made under the certified contractual savings scheme.

(2) Subject to sub-paragraph (3) below, where this paragraph applies repayments and interest paid under the certified contractual savings scheme shall be treated as repayments and interest paid under a scheme approved by the Board for the purposes of this Schedule under paragraph 5(b) above and accordingly may be used for the purchase of shares under a savings-related share option scheme approved under this Schedule.

(3) The repayments and interest to which sub-paragraph (2) above applies shall not exceed the repayments and interest to which the participant would have been entitled if the terms of the scheme had corresponded to those of a scheme approved by the Board for the purposes of this Schedule under paragraph 5(b) above ; and for the purposes of this paragraph the amount of repayments under the certified contractual savings scheme shall be determined as mentioned in paragraph 6 above.

PART III Supplementary

Information

25 The Board may by notice in writing require any person to furnish them, within such time as the Board may direct (not being less than thirty days), with such information as the Board think necessary for the performance of their functions under this Schedule, and as the person to whom the notice is addressed has or can reasonably obtain, including in particular—

(a) information to enable the Board to determine whether to approve a scheme or withdraw an approval already given;

(b) information in relation to the administration of a scheme and any alteration of the terms of a scheme ; and

(c) information to enable the Board to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme.

Interpretation

26 (1) In this Schedule—

• “associated company ” has the same meaning as in section 302 of the Taxes Act;

• “bonus date ” has the meaning assigned by paragraph 6 above ;

• “the company concerned ” has the meaning assigned by paragraph 1(1) above ;

• “control ” has the same meaning as in section 534 of the Taxes Act;

• “group scheme ” and, in relation to such a scheme, “participating company ” have the meaning assigned by paragraph 1 above ;

• “market value ” has the same meaning as in Part VIII of the [1979 c. 14.] Capital Gains Tax Act 1979 ;

• “scheme shares ” has the meaning assigned by paragraph 5(a) above ;

• “shares ” includes stock.

(2) Subsection (6) of section 285 of the Taxes Act (interest paid to directors and directors' associates) shall have effect, with the substitution of a reference to 25 per cent, for any reference therein to 5 per cent., for the purpose of determining whether a person has or had a material interest in a company.

(3) Section 303(3) of the Taxes Act (meaning of “associate ”) shall have effect—

(a) in a case where the scheme in question is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection, and

(b) with the substitution of a reference to 25 per cent, for the reference in that paragraph to 5 per cent.

(4) Section 533 of the Taxes Act (connected persons) shall apply for the purposes of this Schedule.

(5) For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of not more than five companies which between them beneficially own not less than three-quarters of the other company's ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.