ETASSUM57110 - Enterprise Management Incentives (EMI): Taxation of EMI options: Disqualifying events – alterations of share capital
Sections 536 & 537 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)
An alteration to the share capital of the company whose shares are under option is a disqualifying event if it:
- affects (or would but for some other event affect) the value of the shares, and
-
consists of or includes:
- the creation, variation or removal of a right relating to any shares in the company,
- the imposition of a restriction on any of these shares, or
- the variation or removal of a restriction to which these shares are subject,
and whose effect is that the requirements of Schedule 5 would no longer be met in relation to the options. (section 536(1)(b) ITEPA)
There will also be a disqualifying event if the alteration to the share capital of the company whose shares are under option
- affects (or would but for some other event affect) the value of the shares, and
-
consists of or includes:
- the creation, variation or removal of a right relating to any shares in the company,
- the imposition of a restriction on any of these shares, or
- the variation or removal of a restriction to which these shares are subject,
and
- the change increases the value of the shares, and
- is not made for commercial reasons, or
- is made for the purpose of increasing (or one of the main purposes is to increase) the market value of the shares that are subject to the option (section 536(1)(c) ITEPA).