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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: Adjusted price less than nominal value

If new shares are to be issued when the options are exercised, the scheme rules may prohibit subscription prices (original or adjusted) to be less than nominal value of the shares. Section 580 Companies Act 2006 prohibits a company from issuing shares at less than nominal value. In such schemes the nominal value of the shares will be the limit of the adjusted acquisition price to take account of a variation of share capital.

Where a fully-adjusted subscription price would fall below nominal value, companies may be prepared to fund the difference to allow their option-holders to maintain rights over the same proportion of the company’s share capital and at the fully adjusted price. This is usually done by capitalising the reserves of the company and applying them to pay up the difference when the options are exercised. This is acceptable provided the scheme rules and the option-holders rights are clear in this respect.