CSOP—exchange of share options (rollover)

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • CSOP—exchange of share options (rollover)
  • What is a CSOP rollover?
  • The reasons for using a CSOP rollover
  • The circumstances in which a CSOP rollover can be used
  • The eligibility criteria which must be satisfied for a CSOP
  • Equivalency
  • The timing of a CSOP rollover
  • The effect of granting replacement options
  • Selective and partial rollovers
  • Common misunderstandings and mistakes relating to CSOP rollovers
  • More...

CSOP—exchange of share options (rollover)

The requirements for a company share option plan (CSOP) rollover are complex. This note will examine:

  1. what is a CSOP rollover?

  2. the reasons for using a CSOP rollover

  3. the circumstances in which an CSOP rollover can be used

  4. the eligibility criteria which must be satisfied for a CSOP rollover

  5. the timing requirements of a CSOP rollover

  6. the effect of granting replacement options

  7. selective and partial rollovers, and

  8. common misunderstandings and mistakes relating to CSOP rollovers

What is a CSOP rollover?

The CSOP legislation provides the ability for replacement options to be granted to existing option holders following a takeover of the scheme company (whose shares were under option) in a manner which ‘rolls over’ the beneficial tax status of the original CSOP options into the new ones. The replacement CSOP options are 'equivalent' to the original options but are over shares in the acquiring company. Although the term 'rollover' of options is in common use, the legislation refers to a 'release' of old options in consideration of the grant of new options. Scheme rules should refer to 'releases' in the same way. See Precedent: CSOP rules.

The relevant CSOP legislation is contained in Schedule 4, Part 6 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

A rollover of CSOP options can only take place with the agreement of both the option

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