Parallel options
Produced in partnership with Will Cookson
Parallel options

The following Share Incentives practice note produced in partnership with Will Cookson provides comprehensive and up to date legal information covering:

  • Parallel options
  • What are parallel options?
  • Tax efficiency
  • Listed companies
  • Private companies
  • UK subsidiaries
  • Underwater options
  • EMI parallel options
  • CSOP parallel options
  • SAYE parallel options
  • More...

The purpose of this note is to outline the main areas where parallel options are typically of use, how they impact upon other share incentive arrangements, the acceptance of such plans by HMRC and the practical implications around implementation.

The prime use of parallel options is around either adding tax efficiency to an unapproved share incentive arrangement or in dealing with issues around existing arrangements such as underwater options.

The practitioner needs to take particular care when implementing parallel options which involve a tax-advantaged scheme such as an enterprise management incentives (EMI) scheme or a company share option plan (CSOP). The key considerations are outlined below (along with HMRC's published views).

What are parallel options?

Parallel options are employee share option arrangements that are linked to another employee share incentive scheme. They will typically be put in place either to enhance another share plan, eg provide tax efficiency, or to help 'fix' issues with the main incentive scheme, eg in the case of underwater options.

Parallel options can relate to either phantom options or options over real shares. The term ‘parallel options’ can also be extended to option plans which are granted in parallel to other share plan arrangements not involving share options, such as certain long-term incentive plans (LTIPs), stock or share appreciation rights (SARs), phantom share awards and restricted stock units (RSUs).

The exercise of parallel options will

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