Schedule 4 Company Share Option Plan (CSOP): General requirements: Establishing a scheme
A Schedule 4 CSOP scheme consists of any of the below that are relevant to meeting the requirements of Parts 2-6 of Schedule 4 of ITEPA: -
- The Schedule 4 CSOP scheme/plan rules. Where there is a wider non-Schedule 4 CSOP main plan with a Schedule 4 CSOP sub-plan or schedule(s), the plan to which the legislation refers is the Schedule 4 CSOP sub-plan;
- The ancillary documents to be used in operating the scheme, i.e. share option application form, invitation letter, deed of grant of options (agreement to grant options for non-UK companies), option certificate and notice of exercise;
- The company resolution establishing the scheme and any resolution amending it;
- The company’s Articles of Association;
- The option/shareholder agreement and any schedule of performance conditions;
- Any side agreement or other documents whatsoever that cover arrangements made between the scheme operators and the scheme participants.
See ETASSUM46140 – Alterations.
The scheme organiser
Paragraph 2(2) refers to the ‘scheme organiser’ as the company which established the scheme. This does not mean that this company must grant the options.
Although options may be granted other than by the company which established the scheme, they must be granted under the scheme established by that company (and not by a private arrangement i.e. by a trustee). The decisions on who should be granted options should also be taken by the company which established the scheme.
Schemes can be extended to include any or all subsidiary companies of which the company which established the scheme has control. These are known as ‘group schemes’. The scheme organiser and any nominated subsidiaries are referred to as ‘constituent companies’ (paragraph 3(3)).
Details of the constituent companies should be notified in the CSOP annual return (refer to ETASSUM41130). A company’s introduction as a constituent company in a group scheme cannot be backdated to a date before it was formally admitted.
A scheme which is established by a company which is itself a subsidiary company, cannot include as constituent companies its own parent company or fellow subsidiaries.
‘Control’ has the meaning given in Section 719 ITEPA and will normally include companies in which the grantor owns more than 50% of the shares. Section 1159 of the Companies Act 2006 contains an acceptable definition of “subsidiary company” and many schemes refer to Section 1159 to determine which companies can be constituent companies.