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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

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HM Revenue & Customs
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Schedule 3 SAYE option schemes: Exchange of options: Exercise provisions of new options

To ensure that the new options will be subject to the same provisions as the old options (paragraph 39(4)(b)), care should be taken to prevent wholesale amendments to the existing scheme by substituting the acquiring company into the scheme whenever a reference is made to the scheme organiser company. The scheme organiser company (the company which established the scheme) never changes. Following a rollover the scheme remains that of the original scheme organiser company, which remains responsible for its operation. It is only the shares subject to the options which change, (See ETASSUM36120).

Scheme provisions which centre on a particular company (i.e. the scheme organiser company), rather than the shares used in the scheme, should be drafted specifically to set out what is to happen in the event of a takeover, whether or not the options are rolled over. Such provisions will therefore be terms of the old options from the outset and will apply equivalently to the new options. The provisions of Schedule 3 SAYE option schemes are tightly regulated by the legislation, in particular the scope for early exercise.

Provisions which centre on the shares themselves can be drafted so that they also centre on the shares in the new company following the rollover. This will include provisions relating to adjustments on a variation of share capital (paragraph 28) and provision for rollover on subsequent takeovers.

The rights to exercise, or the lapse of, the new options received by a rollover, should not be triggered by the takeover which provoked the rollover. The exchange document can make this clear by stating that the new options are issued subject to the rules of the existing scheme, which should be read so that references to the old company in the relevant provisions become references to the new company.