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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

From
HM Revenue & Customs
Updated
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Enterprise Management Incentives (EMI): Taxation of EMI options: Disqualifying events – share conversions

If the shares under option are converted from one type of share to another it is a disqualifying event unless:

  • the conversion is a conversion of shares of one class only (the original class) into shares of one other class only (a new class),
  • all shares of the original class are converted into shares of the new class, and
  • immediately before the conversion one of the following conditions is fulfilled

The conditions are:

Either

  • the relevant company is employee-controlled by virtue of holdings of shares of the original class (see ERSM20290),

or

  • the majority of the company’s shares of the original class are not held by or for the benefit of:

 

  • directors or employees of the relevant company,
  • an associated company of the relevant company, or
  • directors or employees of such an associated company (Section 536(1)(d) ITEPA).