Income Tax (Earnings and Pensions) Act 2003

19 (1) Eligible shares must not be subject to any restrictions (see sub-paragraph (4)) other than— U.K.

(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—

(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—

(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 consideration in money on terms specified in the articles of association, and

(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).

(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

(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 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 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 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 incorporated under the law of a country outside the United Kingdom, any equivalent document relating to the company.