SAYE—when can options be exercised?
Produced in partnership with Ian Murphie of Share Plan Partners Ltd
SAYE—when can options be exercised?

The following Share Incentives practice note produced in partnership with Ian Murphie of Share Plan Partners Ltd provides comprehensive and up to date legal information covering:

  • SAYE—when can options be exercised?
  • Transferability
  • Option exercise
  • Bonus date
  • Termination of scheme-related employment—death
  • Termination of scheme-related employment—good leavers
  • Termination more than three years before the termination date
  • Termination three years or less before the termination date
  • Company events
  • US taxpayers—section 409A of the US Internal Revenue Code

SAYE—when can options be exercised?

The right to exercise save as you earn (SAYE) options is subject to statutory requirements under Schedule 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

This legislation regulates the circumstances in which the option holder must have a right to exercise the option and the circumstances when the option holder may be given the right to exercise the option provided the rules of the SAYE scheme allow it.

The SAYE legislation prohibits any exercise of an SAYE option before the bonus date unless the option holder:

  1. dies

  2. is a specified ‘good leaver’, or

  3. is permitted to exercise the option under the rules of the SAYE scheme in the event of certain permitted corporate transactions affecting the company which operates the SAYE scheme

The right to exercise SAYE share options in all cases applies for up to six months after the bonus date (or termination date if earlier), or 12 months in the case of death (as detailed further below).

The tax consequences relating to the option exercise in each such case is discussed in more detail in Practice Notes: SAYE—income tax and NIC treatment of options and SAYE—capital gains tax treatment of options.

Transferability

Options granted under an SAYE scheme must not be transferable except to the participant’s personal representatives on death.

It is quite normal for the rules of the scheme to

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