Section 516
1 (1) This Schedule makes provision for the approval of SAYE option schemes by the Inland Revenue.
(2) Parts 2 to 7 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 schemes can apply (see Part 4),
the existence of a linked savings scheme (see Part 5),
the share options that may be granted under the scheme (see Part 6), and
the exchange of share options (see Part 7).
(4) Part 8 of this Schedule deals with the approval of schemes and the withdrawal of approval.
2 (1) In the SAYE code an “SAYE option scheme” means (in accordance with section 516(4)) a scheme established by a company which provides—
(a) for share options to be granted to employees and directors, and
(b) for the shares acquired by the exercise of the share options to be paid for in the way mentioned in paragraph 24 (payments for shares to be linked to approved savings schemes).
(2) In the SAYE code, in relation to an SAYE option 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.
3 (1) An SAYE option 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 SAYE code an SAYE option 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 46 deals with jointly owned companies and companies controlled by them.
4 An SAYE option scheme must meet the requirements of—
paragraph 5 (general restriction on contents of scheme),
paragraph 6 (all-employee nature of scheme),
paragraph 7 (participation on similar terms), and
paragraph 8 (no preferential treatment for directors and senior employees).
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.
6 (1) The scheme must provide that every person who meets the conditions in sub-paragraph (2) is eligible to participate in the scheme.
(2) A person (“E”) meets the conditions in this sub-paragraph if—
(a) E is an employee or a full-time director of the scheme organiser or (in the case of a group scheme) of a constituent company,
(b) E has been such an employee or director at all times during a qualifying period of not more than 5 years,
(c) E’s earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 or 21 applies (earnings for year when employee resident and ordinarily resident in the UK), and
(d) E is not ineligible under paragraph 11 (the “no material interest” requirement).
(3) The scheme must not contain any feature which has or is likely to have the effect of discouraging any description of persons who—
(a) meet the conditions in sub-paragraph (2), or
(b) met those conditions before ceasing to be persons within sub-paragraph (2)(a),
from actually participating in the scheme.
(4) Sub-paragraph (3) does not apply to any provision required or authorised by a provision of this Schedule.
7 (1) The requirements of this paragraph are—
(a) that every person who meets the conditions in paragraph 6(2) (all-employee nature of scheme) must be eligible to participate in the scheme on similar terms, and
(b) that every person who participates in the scheme must actually do so on similar terms.
(2) The requirements of this paragraph are not infringed by the fact that the rights of those participating in the scheme to obtain and exercise share options vary according to—
(a) the levels of their remuneration,
(b) the length of their service, or
(c) any similar factors.
8 (1) The requirement of this paragraph is that, if the scheme organiser is a member of a group of companies, the scheme does not and is not likely to have the effect of conferring benefits wholly or mainly—
(a) on directors of companies in the group, or
(b) on employees of companies in the group who receive the higher or highest levels of remuneration.
(2) “A group of companies” means a company and any other companies of which it has control.
9 An SAYE option scheme must meet the requirements of—
paragraph 10 (the employment requirement), and
paragraph 11 (the “no material interest” requirement).
10 (1) The scheme must ensure that an individual is not eligible to participate in the scheme at a particular time unless the individual is then a director or employee of—
(a) the scheme organiser, or
(b) in the case of a group scheme, a constituent company.
(2) The requirement of this paragraph is not infringed by a provision of the scheme required or authorised by a provision of this Schedule.
11 (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 ending with 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 12 and 13, and
(b) as regards the meaning of “associate”, by paragraph 14 (read with paragraphs 15 and 16).
(4) In this paragraph and paragraph 12 “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).
12 (1) In paragraph 11 (the “no material interest” requirement) references to a “material interest” 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 25% 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 25% 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 13 (material interest: options etc.).
13 (1) For the purposes of paragraph 12 (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 12 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 25% 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 12(2) (material interest in share capital), and
(b) in accordance with paragraph 11(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 25% of the company’s ordinary share capital.
(5) In applying paragraph 12 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.
14 (1) In paragraph 11(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 11(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 15 and 16 (which relate to employee benefit trusts and discretionary trusts).
(3) In this paragraph—
“relative” means—
spouse,
parent, child or remoter relation in the direct line, or
brother or sister;
“settlor” and “settlement” have the same meaning as in Chapter 1A of Part 15 of ICTA (see section 660G(1) and (2)).
15 (1) This paragraph applies for the purposes of paragraph 14(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 11(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 25% of the ordinary share capital of the company.
(3) In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 14(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).
16 (1) This paragraph applies for the purposes of paragraph 14(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 11(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 14(1) but with the omission of paragraph (c).
17 (1) An SAYE option scheme must meet the requirements of—
paragraph 18 (shares must be ordinary shares of certain companies),
paragraph 19 (requirements as to listing),
paragraph 20 (shares must be fully paid up and not redeemable),
paragraph 21 (only certain kinds of restrictions allowed), and
paragraph 22 (requirements as to other shareholdings).
(2) In this Part “eligible shares” means shares which may be acquired by the exercise of share options under the scheme.
18 Eligible shares must form part of the ordinary share capital of—
(a) the scheme organiser,
(b) a company which has control of the scheme organiser, or
(c) a company which either is, or has control of, a company which is a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.
19 (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.
20 Eligible shares must be—
(a) fully paid up, and
(b) not redeemable.
21 (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) and (6).
(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) 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.
(7) 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.
22 (1) The majority of the issued shares of the same class as the eligible shares must be—
(a) employee-control shares, or
(b) open market shares,
unless the eligible shares are shares in a company whose ordinary share capital consists of shares of one class only.
(2) Shares in a company are “employee-control shares” if—
(a) the persons holding the shares are, by virtue of their holding, together able to control the company, and
(b) those persons are or have been employees or directors of the company or of another company which is under the control of the company.
(3) Shares in a company are “open market shares” if the persons holding the shares are not—
(a) persons who acquired their shares as a result of a right conferred on them or an opportunity afforded to them as a director or employee of the scheme organiser or any other company, and not as a result of an offer to the public, or
(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a), or
(c) in the case of shares which—
(i) are not of a class listed on a recognised stock exchange, and
(ii) are in a company which is under the control of a listed company (as defined by paragraph 19(2)),
companies which have control of the company whose shares are in question or of which that company is an associated company.
23 An SAYE option scheme must meet the requirements of—
paragraph 24 (payments for shares to be linked to approved savings schemes), and
paragraph 25 (requirements as to contributions to savings schemes).
24 (1) The scheme must provide for shares acquired by the exercise of share options granted under the scheme to be paid for with money not exceeding the amount of repayments made and any interest paid under a CCS scheme which has been approved by the Inland Revenue for the purposes of this Schedule (“the CCS scheme”).
(2) In the SAYE code “CCS scheme” means certified contractual savings scheme.
25 (1) The scheme must provide for a person’s contributions under the CCS scheme to be of an amount that will secure, as nearly as possible, repayment of an amount equal to the option price.
(2) The “option price” means the amount payable, on exercising share options granted under the scheme, in order to acquire the maximum number of shares that may be acquired under them (see paragraph 28).
(3) The scheme must neither—
(a) permit the aggregate amount of a person’s contributions under CCS schemes linked to approved SAYE schemes to exceed £250 per month, nor
(b) impose a minimum on the amount of a person’s contributions which exceeds £10 per month.
(4) The Treasury may by order amend sub-paragraph (3) by substituting for any amount for the time being specified there an amount specified in the order.
26 (1) For the purposes of this Schedule repayments under a CCS scheme may be taken as including, or as not including, a bonus.
(2) The bonus may either be the maximum bonus under that scheme or a lesser bonus.
(3) An SAYE option scheme must require the question whether repayments are to be taken as including bonuses to be determined at the time when share options are granted.
27 (1) An SAYE option scheme must meet the requirements of—
paragraph 28 (requirements as to price for acquisition of shares),
paragraph 29 (share options must not be transferable),
paragraph 30 (time for exercising options: general),
paragraph 31 (requirement to have a “specified age”),
paragraph 32 (exercise of options: death),
paragraph 33 (exercise of options: reaching specified age without retiring), and
paragraph 34 (exercise of options: scheme-related employment ends).
(2) An SAYE option scheme may make any provision authorised by—
paragraph 36 (exercise of options: employment in associated company at bonus date), and
paragraph 37 (exercise of options: company events).
28 (1) The price at which shares may be acquired by the exercise of a share option granted under the scheme—
(a) must be stated at the time when the option is granted, and
(b) must not be manifestly less than 80% of the market value of shares of the same class at that time.
This is subject to sub-paragraphs (2) and (3).
(2) The Inland Revenue 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.
(4) But the scheme must provide that no such variation is to be made without the prior approval of the Inland Revenue.
29 (1) The scheme must ensure that share options granted to a participant are not capable of being transferred by the participant.
(2) Paragraph 32 provides for the exercise of the options where the participant has died.
30 (1) The scheme must ensure that share options granted under it must not be capable of being exercised—
(a) before the bonus date, or
(b) later than 6 months after that date.
(2) However, in sub-paragraph (1)—
(a) paragraph (a) is subject to paragraphs 32 to 34 and 37 (exercise of options in the event of death, reaching the specified age without retiring, scheme-related employment ending or certain events occurring in relation to the company), and
(b) paragraph (b) is subject to paragraph 32.
(3) In the SAYE code “the bonus date” means the date on which repayments under the CCS scheme are due.
(4) For this purpose repayments are to be regarded as due as follows—
(a) if the repayments are to be taken as including the maximum bonus (see paragraph 26(2)), on the earliest date on which that bonus is payable, and
(b) in any other case, on the earliest date on which a bonus is payable.