ETASSUM22110 - Schedule 2 Share Incentive Plan (SIP): Eligibility: Time of eligibility to participate

The rules of a Schedule 2 SIP must provide that an employee may participate in an award under the plan only if he or she is eligible to do so at the appropriate time which is;

  • In the case of free shares, at the time of the award of free shares (paragraph 14(2)).

  • In the case of partnership and matching shares, either:

  • at the time the partnership share money is deducted from salary (pay day), where there is no accumulation period (paragraph 14(3)), or
  • at the time of the first salary deduction (pay day), where there is an accumulation period (paragraph 14(4)).
  • An employee who ceases to satisfy one or more of the eligibility requirements after the appropriate time but nevertheless remains in relevant employment will be entitled to participate in the award of partnership shares.
  • If there is an accumulation period and the employee transfers from a constituent company (see ETASSUM20120) to another associated company (see ETASSUM28120) which is not a constituent company, deductions of partnership share money must stop. Partnership shares will be acquired in due course using partnership share money accumulated up to the transfer of employment.

In order to be ‘eligible to participate’ an employee must also meet the plan requirements in relation to:

  • employment: (see ETASSUM22120),

  • with the establishing company or

  • in the case of a group plan, a constituent company (paragraph 15) (see ETASSUM20120);

  • not participating simultaneously in connected Schedule 2 SIPs (paragraph 18), (see ETASSUM22150) and successive participation in connected Schedule 2 SIPs (paragraph 18A), (see ETASSUM22160).

The employee may also be required to satisfy certain authorised conditions - in the case of free shares, for example, performance allowances may need to be achieved (see ETASSUM24150).