Schedule 2 share incentive plan (SIP): Types of award: Dividend shares: Introduction
When a company declares a dividend on a class of shares that includes plan shares, the dividend will be paid to the registered (or legal) owner of those plan shares. Normally, it is the trustees of a Schedule 2 SIP that will receive the dividend on plan shares but plan shares are sometimes registered in the name of a nominee. In either case, the recipient will be obliged to apportion the dividend between the beneficial owners of the shares (including Schedule 2 SIP participants) and distribute it accordingly.
A Schedule 2 SIP must require any distributable cash dividends to be paid over to the participant as soon as practicable (paragraph 69). This requirement is subject to the exception that the Schedule 2 SIP may provide for cash dividends to be used by the trustees to acquire further plan shares on behalf of participants. In the SIP Code this process is known as “reinvestment” and the shares so acquired are referred to as “dividend shares” (paragraph 62(3)).
(The Schedule 2 SIP trustees are also under a more general obligation to pay over to participants any money or money’s worth they receive in respect of participants’ shares but this is considered in relation to the trustees’ obligations at ETASSUM26000).