Share schemes implications of introducing a new parent holding company
Produced in partnership with Sarah Cohen of Lewis Silkin
Share schemes implications of introducing a new parent holding company

The following Share Incentives guidance note Produced in partnership with Sarah Cohen of Lewis Silkin provides comprehensive and up to date legal information covering:

  • Share schemes implications of introducing a new parent holding company
  • Why do companies have reorganisations?
  • Common types of reorganisation
  • Why share plans use parent’s shares
  • Effect of interposing a new parent company
  • Option rollover
  • Implications of a change of control for awards where the participant beneficially owns the shares
  • How are plan rules structured to ensure such interposition of a new parent company has limited effect?

Why do companies have reorganisations?

Groups of companies undertake reorganisations for many and varied reasons. Reorganisations will often have an impact on existing share plans and other employee equity arrangements. In some cases the impact will be commercial in nature. Examples of this are where:

  1. the reorganisation causes early vesting, exercise and/or lapse of awards as the relevant share plan provisions dealing with change of control of the parent company or termination of the participant’s employment have been triggered, and

  2. there is a need for awards over shares in an existing parent company to be exchanged for awards over shares in a new parent company

In other cases, if the appropriate action isn’t taken within a specified time, valuable tax advantages can be lost.

Common types of reorganisation

The most common types of reorganisation are:

  1. putting a new group holding or parent company on top of an existing company or group, usually to facilitate an initial public offering (IPO) or a new third party investment, without any immediate change to the ultimate ownership of the group

  2. transferring the business of one group company to another group company, often as a consequence of an acquisition or in order to facilitate a sale of a particular part of a company's business and assets

  3. transferring the shares of one subsidiary to another