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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 4 Company Share Option Plan (CSOP): Requirements relating to options: Rights issues

Adjustments to reflect rights issues are more difficult and a company or their scheme organiser should normally refer the company’s proposals to SAV for advice on whether the adjustments are acceptable.

The basic principle is that the “necessary” adjustment is one which would adjust the acquisition price per share (which is based on the market value of the shares at the date of grant) and the number of shares, to what it would have been had the new share structure been in place when the options were first granted.

SAV accept that the following formula Word 30KB is acceptable for computing the adjustment to be applied to the original option acquisition price to take account of a rights issue, which if used, will not require SAV approval of the adjustment. This however is not necessarily the only method of adjustment acceptable to SAV.