Part 4: Shares to which schemes can apply
Paragraph 17: Requirements relating to shares that may be subject to share options: introduction
3293.This is the introductory paragraph to this Part derived from but also elaborating on paragraph 9 of Schedule 9 to ICTA. These requirements relate to the type of shares that can be subject to approved options within the scheme.
3294.In sub-paragraph (2), a new label is attached to these shares, “eligible” shares. The shares are those “which may be acquired by the exercise of” the options. This is in line with the reference to acquisition in paragraph (9)(1) of Schedule 9 to ICTA, (and the SIP definition of eligible shares).
Paragraph 18: Shares must be ordinary shares of certain companies
3295.This paragraph provides that eligible shares must form part of the ordinary share capital of a company with characteristics specified in this paragraph. The paragraph derives from paragraph 10 of Schedule 9 to ICTA.
Paragraph 19: Requirements as to listing
3296.This follows paragraph 11 of Schedule 9 to ICTA, but the interpretation of paragraph 11(c) is assisted by its division into sub-paragraph (1)(c) and (2) which introduces a new label, “a listed company”.
3297.Eligible shares have to be in a listed company, a company under the control of a listed company or in an independent company.
Paragraph 20: Shares must be fully paid up and not redeemable
3298.This paragraph provides that eligible shares must be fully paid up and not redeemable. It derives from part of paragraph 12(1) of Schedule 9 to ICTA.
Paragraph 21: Only certain kinds of restriction allowed
3299.This paragraph takes the material from the rest of paragraph 12 of Schedule 9 to ICTA and covers the rules about the kind of restrictions permitted for eligible shares.
3300.Broadly restrictions are not allowed unless they apply to all shares in the same class. There is an exception. This is contained in sub-paragraphs (2) and (3) and derives from sub-paragraphs (2) and (3) of paragraph 12 of Schedule 9 to ICTA. This allows companies to require ex-employees to dispose of their shares; this will usually be to the existing shareholders.
3301.In sub-paragraph (2)(a) and (b) “or offered for sale” covers the situation in which employees cannot actually secure the sale of their shares. See Change 168 in Annex 1.
3302.In sub-paragraph (5) a reference to section 74(4) of the Financial Services and Markets Act 2000 has been inserted to update the reference to the Model Code issued by the Stock Exchange, in paragraph 13(2) of Schedule 9 to ICTA. See also Change 168 in Annex 1.
3303.Sub-paragraph (6) enacts the contents of a Revenue Press Release, concerning the “directors veto”, issued on 11 June 1985. See also Change 168 in Annex 1.
3304.There is a new sub-paragraph (7), which gives statutory effect to the Inland Revenue’s interpretation of the reference in paragraph 12 of Schedule 9 to ICTA to “articles of association”. See also Change 168 in Annex 1, which refers to Note 44 in Annex 2.
Paragraph 22: Requirements as to other shareholdings
3305.This paragraph imposes a requirement relating to the majority of the issued share capital of the same class as the eligible shares. The paragraph derives from paragraph 14(1) and (3) of Schedule 9 to ICTA. Its purpose is to prevent the manipulation of a company’s share capital.
3306.This paragraph provides that the majority of the shares in the same class as the eligible shares must be either “employee-control shares” or “open market shares”. The label “open market shares” is new, and has been introduced to help understanding. Paragraph 14(2) has not been rewritten as it is concerned with APS.
