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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): Types of award: Dividend shares: Compulsory purchase of dividend shares

Dividend shares may be subject to provisions requiring dividend shares acquired on behalf of an employee to be offered for sale in circumstances where certain conditions are met. This includes employee pre-emption provisions, general pre-emption provisions and ‘drag along’ provisions whereby once one shareholder holds a specified proportion of the share capital, that shareholder can compulsorily acquire the remaining shares (paragraph 65(2)), although this list is not exhaustive.

Dividend shares may be subject to such provisions only where the participant receives in return for the shares an amount equal to the price paid for the shares or, if lower, the unrestricted market value of those shares at the date they are offered for sale (paragraph 65(3)). This is subject to the general requirement in paragraph 9 that the provisions apply to all Schedule 2 SIP participants on the same terms.