SIPs—corporate events
Produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard
SIPs—corporate events

The following Share Incentives practice note produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard provides comprehensive and up to date legal information covering:

  • SIPs—corporate events
  • Company reconstructions
  • What is a company reconstruction?
  • Effect of a company reconstruction
  • Takeovers
  • Tax treatment
  • Demergers
  • Rights issues
  • What is a rights issue?
  • Effect of rights issue
  • More...

SIPs—corporate events

The impact of capital reorganisations, takeovers and demergers on awards made under a share incentive plan (SIP) is more complex than other tax-advantaged plans as participants hold shares (through the SIP trustees) rather than options over shares.

In the case of option plans, a share capital reorganisation (not involving a takeover) either has no material effect on outstanding options (as the impact of the reorganisation on the company’s share price is minimal) or the value of participants’ rights can be preserved through an adjustment to the number of shares subject to the option and the exercise price.

However, in the case of SIP awards, the SIP trustees will usually need to take some action and that may require instructions from the participants. In addition, there are specific rules regarding the assets that can be held in the SIP following a reorganisation and therefore the decisions taken can affect a participant’s tax treatment.

How takeovers affect SIP awards will depend how the transaction is structured and the terms of the awards. As a result of recommendations from the Office of Tax Simplification, the Finance Act 2013 included measures to extend tax reliefs for SIP awards on certain cash takeovers. For further details, see: Share incentive plans—income tax and NICs treatment of awards and see: Takeovers, below.

This Practice Note examines the treatment of SIP awards in the event

Popular documents