SCHEDULES

SCHEDULE 4... CSOP schemes

Part 5Requirements etc. relating to share options

Requirements etc. relating to share options: introduction

21

(1)

A CSOP scheme must meet the requirements of—

  • F1paragraph 21A (general requirements as to terms of option),

  • 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), F2...

  • paragraph 25 (exercise of options: death) F3, or

  • paragraph 25A (exercise of options: company events)

F4General requirements as to terms of option

21A

(1)

The following terms of a share option which is granted under the scheme must be stated at the time the option is granted—

(a)

the price at which shares may be acquired by the exercise of the option,

(b)

the number and description of the shares which may be acquired by the exercise of the option,

(c)

the restrictions to which those shares may be subject,

(d)

the times at which the option may be exercised (in whole or in part), and

(e)

the circumstances under which the option will lapse or be cancelled (in whole or in part), including any conditions to which the exercise of the option is subject (in whole or in part).

(2)

Terms stated as required by sub-paragraph (1) may be varied after the grant of the option, but—

(a)

in the case of the price, only as provided for in paragraph 22,

(b)

in the case of the number or description of shares, only as provided for in paragraph 22 or by way of a mechanism which is stated at the time the option is granted, and

(c)

in any other case, only by way of a mechanism which is stated at the time the option is granted.

(3)

Any mechanism stated for the purposes of sub-paragraph (2)(b) or (c) must be applied in a way that is fair and reasonable.

(4)

Terms stated as required by sub-paragraph (1), and any mechanism stated for the purposes of sub-paragraph (2)(b) or (c), must be notified to the participant as soon as practicable after the grant of the option.

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—

F5(a)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

must not be manifestly less than the market value of shares of the same class at F6the time when the option is granted.

This is subject to sub-paragraphs (2) and (3).

(2)

F7An officer of Revenue and Customs and the scheme organiser may agree in writing that 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,

(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.

F8(3A)

If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a)

that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b)

that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B)

Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.

F9(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10F11(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

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.

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

F12(1)

The scheme may provide that, if a participant dies before exercising the options, they may be exercised on or after the date of death F13....

F14(2)

Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.

F15Exercise of options: company events

25A

(1)

The scheme may provide that share options relating to shares in a company may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2)F16, (6) or (6A).

(2)

The relevant date for the purposes of this sub-paragraph is the date when—

(a)

a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and

(b)

any condition subject to which the offer is made has been satisfied.

(3)

An offer falls within this sub-paragraph if it is—

(a)

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 met, the person making the offer will have control of the company, or

(b)

a general offer to acquire all the shares in the company which are of the same class as the shares to which the option relates.

(4)

In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5)

For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(6)

The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

(a)

all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b)

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in F17a Schedule 4 CSOP scheme.

F18(6A)

The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a)

all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b)

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 4 CSOP scheme,

becomes binding on the shareholders covered by it.

(7)

The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

F19(7A)

Sub-paragraphs (7B) to (7F) apply if the scheme makes provision under sub-paragraph (1) or (7).

(7B)

The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (7) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(7C)

In sub-paragraph (7B) “relevant event” means—

(a)

a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b)

a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (6);

(c)

a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (6A);

(d)

a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7) obtaining control of the company.

(7D)

Provision made under sub-paragraph (7B) may not authorise the exercise of a share option, as the case may be—

(a)

at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b)

at a time not covered by sub-paragraph (7).

(7E)

The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a)

the relevant date for the purposes of sub-paragraph (2), (6) or (6A), or

(b)

the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (7) (as the case may be).

(7F)

If the scheme makes provision under sub-paragraph (7E) it must also provide that if—

(a)

a share option is exercised in reliance on that provision in anticipation of—

(i)

an event mentioned in sub-paragraph (2), (6) or (6A) occurring, or

(ii)

a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7), but

(b)

as the case may be—

(i)

the relevant date for the purposes of sub-paragraph (2), (6) or (6A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii)

the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.

(8)

For the purposes of this paragraph a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.