Part 5: Requirements relating to options
Paragraph 34: Requirements relating to options: introduction
3526.This paragraph is introductory and derives from paragraph 37 of Schedule 14 to FA 2000.
Paragraph 35: Type of shares that may be acquired
3527.This paragraph sets out the requirement that, to qualify, an option may only be capable of being exercised to acquire shares that are:
part of the ordinary share capital of the company in question;
fully paid-up; and
not redeemable.
3528.This paragraph derives from paragraph 38 of Schedule 14 to FA 2000.
Paragraph 36: Option to be capable of exercise within 10 years
3529.This paragraph sets out the requirement that, in order to qualify under EMI, the option must be capable of being exercised within ten years. There is no minimum exercise period. This paragraph derives from paragraph 39 of Schedule 14 to FA 2000.
Paragraph 37: Terms of option to be agreed in writing
3530.This paragraph sets out the requirement that the option must take the form of a written agreement between the grantor of the option and the employee. It goes on to elaborate on the specific types of terms that have to be covered in that agreement. It derives from paragraph 40 of Schedule 14 to FA 2000.
Paragraph 38: Non-assignability of rights
3531.This paragraph explains that in order to qualify under EMI an option must not include any transferable rights. If the option includes a right for it to be exercised after the employee’s death, the right may not extend for more than one year after the employee’s death. It is not clear from the source legislation whether the one-year period includes any part or indeed the whole of the day on which the employee died. Sub-paragraph (b) clarifies this by referring to “one year after the date of the death” so if, for example, the employee dies at 2 pm on 1 May 2003, the option must be exercised before 2 May 2004.
3532.This paragraph derives from paragraph 41 of Schedule 14 to FA 2000.
