The following Share Incentives practice note provides comprehensive and up to date legal information covering:
Company share option plans (CSOPs) are discretionary share option plans which can be operated on an all-employee basis but which are usually used on a selective basis.
If the statutory provisions are met, favourable treatment can result.
The CSOP regime is prescriptive and sets out numerous requirements that must be met at the time the options are granted and at the time the options are exercised, including in relation to:
the company granting the options
the employees being granted the options, and
the shares being placed under option
This Practice Note focuses on the CSOP eligibility conditions that must be met by the company and the shares being placed under option. These conditions are described in the context of the income tax relief provided for in sections 521–526 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). It is imperative that a company is comfortable with whether it satisfies these requirements as the onus of responsibility for ensuring that the scheme does fulfil the statutory requirements lies with the applicant. See Practice Note: CSOP—self-certification, registration and filing requirements.
In respect of tax-favoured CSOPs, the scheme shares must meet the relevant requirements at the date of grant and the date of exercise of all options. In practice this normally means that the shares have to satisfy the relevant requirements throughout the life of an option scheme.
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