Unapproved share options
Unapproved share options

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • Unapproved share options
  • What are unapproved share options?
  • Advantages of unapproved share options
  • Disadvantages of unapproved share options
  • Why use share options rather than shares?
  • When unapproved share options are generally used?
  • Taxation of unapproved share options
  • Taxation on grant
  • Taxation on exercise of an unapproved share option
  • Assignment or release of an unapproved option
  • More...

What are unapproved share options?

Share options are rights to acquire shares which can be exercised when certain conditions have been met (such as the passing of a time period or the occurrence of an event), provided that the option holder pays a specified amount to acquire those shares at that time. See Q&A: What is the difference between a share and a share option?

The term 'unapproved option' is used to refer to any share option which was not granted under any of the statutory tax-advantaged schemes (being a company share option plan (CSOP), an enterprise management incentives (EMI) scheme or a save as you earn scheme (SAYE)), and originates from when the tax-advantaged schemes normally had to be formally approved by HMRC before they could receive the associated statutory tax reliefs. For now, the term continues to be used—despite the fact that, since April 2014, it is no longer necessary to obtain HMRC approval to a statutory tax-advantaged scheme. Unapproved share options can take the form of a standalone unapproved option scheme or form part of an unapproved share option scheme, EMI scheme or CSOP. For example precedent standalone unapproved share option agreements, see Precedents:

  1. Unapproved share option agreement—standalone deed for employee, and

  2. Standalone unapproved share option agreement for non-employee

For precedent unapproved shares scheme rules and accompanying share option agreement, see Precedents:

  1. Unapproved share

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