SCHEDULES
SCHEDULE 4Approved CSOP schemes
Part 1Introduction
Approval of CSOP schemes
1
1
This Schedule makes provision for the approval of CSOP schemes by F16an officer of Revenue and Customs .
2
Parts 2 to 6 of this Schedule contain requirements that have to be met in order for schemes to be approved under this Schedule.
3
The requirements consist of general requirements (see Part 2) and requirements as to—
the eligibility of individuals to participate in a scheme (see Part 3),
the shares to which a scheme can apply (see Part 4),
the share options which may be granted under a scheme (see Part 5), and
the exchange of share options (see Part 6).
4
Part 7 of this Schedule deals with the approval of schemes and the withdrawal of approval.
CSOP schemes
2
1
In the CSOP code a “CSOP scheme” means (in accordance with section 521(4)) a scheme which—
a
is established by a company,
b
provides for share options to be granted to employees and directors, and
c
is not an SAYE option scheme (within the meaning of the SAYE code: see section 516(4)).
2
In the CSOP code, in relation to a CSOP scheme—
“participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);
“participate” means obtain and exercise share options under the scheme;
“the scheme organiser” means the company which has established the scheme.
Group schemes
3
1
A CSOP scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies.
2
In the CSOP code a CSOP scheme established by a parent scheme company which so extends is called a “group scheme”.
3
In relation to a group scheme a “constituent company” means—
a
the parent scheme company, or
b
any other company to which for the time being the scheme is expressed to extend.
4
Paragraph 34 deals with jointly owned companies and companies controlled by them.
Part 2General requirements for approval
General requirements for approval: introduction
4
A CSOP scheme must meet the requirements of—
paragraph 5 (general restriction on contents of scheme), and
paragraph 6 (limit on value of shares subject to options).
General restriction on contents of scheme
5
The scheme must not contain features which are neither essential nor reasonably incidental to the purpose of providing benefits for employees and directors in the nature of share options.
Part 3Eligibility of individuals to participate in scheme
Requirements relating to the eligibility of individuals: introduction
7
A CSOP scheme must meet the requirements of—
paragraph 8 (the employment requirement), and
paragraph 9 (the “no material interest” requirement).
The employment requirement
8
1
The scheme must ensure that an individual is not eligible to be granted share options under the scheme at a particular time unless the individual is then a full-time director or a qualifying employee of—
a
the scheme organiser, or
b
in the case of a group scheme, a constituent company.
2
A “qualifying employee”, in relation to a company, means an employee of the company other than one who is a director of—
a
the company, or
b
in the case of a group scheme, a constituent company.
The “no material interest” requirement
9
1
The scheme must ensure that an individual is not eligible to participate in the scheme on any date if the individual has on that date, or has had within the 12 months preceding that date, a material interest in a close company—
a
whose shares may be acquired as a result of exercising share options granted under the scheme, or
b
which has control of a company whose shares may be acquired as a result of exercising share options granted under the scheme, or
c
which is a member of a consortium which owns a company within paragraph (b).
2
For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—
a
the individual, or
b
the individual together with one or more of the individual’s associates, or
c
any such associate, with or without any other such associates,
has a material interest in the company.
3
This paragraph is supplemented—
a
as regards the meaning of “material interest”, by paragraphs 10 and 11, and
b
as regards the meaning of “associate”, by paragraph 12 (read with paragraphs 13 and 14).
4
In this paragraph and paragraph 10 “close company” includes a company that would be a close company but for—
a
section 414(1)(a) of ICTA (exclusion of companies not resident in the United Kingdom), or
b
section 415 of ICTA (exclusion of certain quoted companies).
Meaning of “material interest”
10
1
In paragraph 9 (the “no material interest” requirement) references to a “material interes” in a company are to—
a
a material interest in the share capital of the company, or
b
a material interest in its assets.
2
A material interest in the share capital of a company means—
a
beneficial ownership of, or
b
the ability to control (directly or through the medium of other companies or by any other indirect means),
more than F325% of the ordinary share capital of the company.
3
A material interest in the assets of a company means—
a
possession of, or
b
an entitlement to acquire,
such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than F425% of the assets that would then be available for distribution among the participators.
4
In this paragraph “participator” has the meaning given by section 417(1) of ICTA.
5
This paragraph is supplemented by paragraph 11 (material interest: options etc.).
Material interest: options and interests in SIPs
11
1
For the purposes of paragraph 10 (meaning of “material interest”) a right to acquire shares (however arising) is to be treated as a right to control them.
2
Sub-paragraph (3) also applies for the purposes of paragraph 10 in a case where—
a
the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and
b
the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.
3
In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds F525% of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (2)(b).
4
The references in sub-paragraphs (2) and (3) to the shares to be attributed to an individual are to the shares which—
a
for the purposes of paragraph 10(2) (material interest in share capital), and
b
in accordance with paragraph 9(2) (material interest can consist of or include that of individual’s associates),
fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds F625% of the company’s ordinary share capital.
5
In applying paragraph 10 the following are to be disregarded—
a
the interest of the trustees of any approved SIP (within the meaning of the SIP code: see section 488(4)) in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and
b
any rights exercisable by the trustees as a result of that interest.
Meaning of “associate”
12
1
In paragraph 9(2) (the “no material interest” requirement) “associate”, in relation to an individual, means—
a
any relative or partner of that individual,
b
the trustee or trustees of any settlement in relation to which that individual, or any of the individual’s relatives (living or dead), is or was a settlor, or
c
where that individual is interested in any shares or obligations of the company mentioned in paragraph 9(2) which are subject to any trust or are part of the estate of a deceased person—
i
the trustee or trustees of the settlement concerned, or
ii
the personal representatives of the deceased,
as the case may be.
2
Sub-paragraph (1)(c) needs to be read with paragraphs 13 and 14 (which relate to employee benefit trusts and discretionary trusts).
3
In this paragraph—
Meaning of “associate”: trustees of employee benefit trust
13
1
This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 9(2).
2
The trustees of the employee benefit trust are not to be regarded as associates of the individual as a result only of the individual’s being so interested if neither—
a
the individual, nor
b
the individual together with one or more of the individual’s associates, nor
c
any such associate, with or without any other such associates,
has at any time after 13th March 1989 been the beneficial owner of, or been able (directly or through the medium of other companies or by any other indirect means) to control, more than F725% of the ordinary share capital of the company.
3
In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 12(1), but does not include the trustees of an employee benefit 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
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—
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),
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 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 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 months.
3
In sub-paragraph (1) “associate” has the meaning given by paragraph 12(1) but with the omission of paragraph (c).
Part 4Shares to which schemes can apply
Requirements as to listing
17
1
Eligible shares must be —
a
shares of a class listed on a recognised stock exchange,
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—
a
a close company, or
b
a company that would be a close company if resident in the United Kingdom.
Only certain kinds of restriction allowed
19
1
Eligible shares must not be subject to any restrictions (see sub-paragraph (4)) other than—
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 F16an officer of Revenue and Customs 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.
Part 5Requirements etc. relating to share options
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).
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 6Exchange 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 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.
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 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 subject to the old options;
F41b
obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement);
F40c
becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder).
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 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 the acquiring company remains bound or entitled as mentioned in that provision.
Part 7Approval of schemes
Application for approval
28
1
Where—
a
a CSOP scheme has been established, and
b
the scheme organiser makes an application to F16an officer of Revenue and Customs for approval of the scheme,
2
An application for approval—
a
must be in writing, and
b
must contain such particulars and be supported by such evidence as F16an officer of Revenue and Customs may require.
3
Appeal against refusal of approval
29
1
2
3
4
The date so specified must not be earlier than that of the application for approval.
Withdrawal of approval
30
1
If any disqualifying event occurs in connection with an approved CSOP scheme, F16an officer of Revenue and Customs may by a notice given to the scheme organiser withdraw the approval with effect from—
a
the time at which the disqualifying event occurred, or
b
a later time specified by F16an officer of Revenue and Customs in the notice.
2
A “disqualifying event” occurs in connection with a scheme if—
a
any of the requirements of Parts 2 to 6 of this Schedule ceases to be met;
F9aa
an alteration is made in a key feature of the scheme without the approval of F16an officer of Revenue and Customs ; or
b
the scheme organiser fails to provide information requested by F16an officer of Revenue and Customs under paragraph 33.
F83
4
For the purposes of that sub-paragraph a “key feature” of a scheme is a provision of the scheme which is necessary in order to meet the requirements of this Schedule.
F2Notice of decision about alteration
31
Where F16an officer of Revenue and Customs —
a
F19has been requested to approve any alteration in a CSOP scheme that has been approved, and
b
F19has decided whether or not to approve the alteration,
Appeal against withdrawal of approval etc.
32
1
This paragraph applies if a CSOP scheme has been approved by F16an officer of Revenue and Customs and F20the officer —
a
F21decides to withdraw approval of the scheme under paragraph 30, or
2
The scheme organiser may appeal against the decision F47....
3
Part 8Supplementary provisions
Power to require information
33
1
F16An officer of Revenue and Customs may by notice require any person to provide F23the officer with any information—
a
b
which the person to whom the notice is addressed has or can reasonably obtain.
2
The power conferred by this paragraph extends, in particular, to—
a
information to enable F16an officer of Revenue and Customs —
i
to decide whether to approve a CSOP scheme or to withdraw an approval already given, or
ii
to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme, and
b
information about the administration of a scheme and any alteration of the terms of a scheme.
3
The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.
Jointly owned companies
34
1
This paragraph applies for the purposes of the provisions of the CSOP code relating to group schemes.
2
Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).
3
The companies within this sub-paragraph are—
a
the jointly owned company, and
b
any company controlled by that company.
4
However, no company within sub-paragraph (3) may be—
a
a constituent company in more than one group scheme, or
b
a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.
5
In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—
a
of which 50% of the issued share capital is owned by one person and 50% by another, or
b
which is otherwise controlled by two persons taken together.
6
In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).
Meaning of “associated company”
35
1
For the purposes of the CSOP code one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously—
a
one has control of the other, or
b
both are under the control of the same person or persons.
2
For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with section 416(2) to (6) of ICTA.
F1Retirement age
Sch. 4 para. 35A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 15(2)
35A
A retirement age specified in a CSOP scheme—
a
must be the same for men and women, and
b
must not be less than 55.
Minor definitions
36
1
In the CSOP code—
“company” means a body corporate;
“market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.
2
For the purposes of the CSOP code a company is a member of a consortium owning another company if it is one of a number of companies—
a
which between them beneficially own not less than 75% of the other company’s ordinary share capital, and
b
each of which beneficially owns not less than 5% of that capital.
Index of defined expressions
37
In the CSOP code the following expressions are defined or otherwise explained by the provisions indicated below:
approved | section 521(4) |
associated company | paragraph 35(1) |
child | F32section 721(6) |
close company | F33section 989 of ITA 2007, (and see paragraph 9(4)) |
company | paragraph 36(1) |
connected person | section 718 |
constituent company | paragraph 3(3) |
control | section 719 (and see paragraph 35(2)) |
the CSOP code | section 521(3) |
CSOP scheme | section 521(4) |
distribution | F34section 989 of ITA 2007 |
eligible shares (in Part 4 of this Schedule) | paragraph 15(2) |
employee and employment | section 4 |
group scheme | paragraph 3(2) (and see paragraph 34) |
F30. . . | F30. . . |
market value | paragraph 36(1) |
member of a consortium | paragraph 36(2) |
notice | F35section 989 of ITA 2007 |
the options (in relation to a participant) | paragraph 2(2) |
ordinary share capital | F36section 989 of ITA 2007 |
participant | paragraph 2(2) |
participate | paragraph 2(2) |
personal representatives | F37section 989 of ITA 2007 |
recognised stock exchange | F38section 1005 of ITA 2007 |
the scheme organiser | paragraph 2(2) |
share option | section 521(4) |
shares | section 521(4) |
F46tribunal | section 989 of ITA 2007 |
F45. . . | F45. . . |
F39. . . | F39. . . |
Sch. 4 para. 31 and crossheading substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 17(4)