Schedule 4 Company Share Option Plan (CSOP): Requirements relating to options: Company discretion - General
The application of discretion most commonly occurs in the circumstances of leavers (see ETASSUM44390) and potentially impinges on the principles of providing clearly stated rights (see ETASSUM40130), so scheme organisers should carefully consider scheme rules to ensure that where discretion is present it complies with the following:
- that there is a clearly stated right without the application of discretion,
- that the application of discretion can only improve the existing rights, and
- that the discretion will be applied on a fair and reasonable basis.
It is acceptable for scheme rules to include a general discretion clause whereby all applications of discretion contained within the rules will comply with these principles. Alternatively, these principles will need to be stated in each rule where discretion may be applied and impacts on the exercise of share options.