ETASSUM25110 - Schedule 2 Share Incentive Plan (SIP): Company reconstructions: Practical issues

Requests for approval or clearance

There is no statutory provision or requirement for HMRC to approve the terms of transactions affecting plan shares. ESSU will not comment on whether a particular transaction falls within the scope of paragraph 86 and whether any new holding can be treated as plan shares in accordance with paragraph 87. Companies and their advisers must form their own view on the applicability of those provisions and treat the ‘new’ securities accordingly.

Plan shares exchanged for other securities

A company reconstruction can involve the surrender of all shares of a particular class, including plan shares, and their replacement by new shares in the same or a different company. This can be achieved in a number of ways both under UK company law or overseas law depending on the country of registration of both the company whose shares are being replaced and of any acquiring company.

For example, in the UK, there can be:

• a scheme of arrangement under section 899 Companies Act 2006,
• a general offer to existing shareholders to acquire all their shares or all shares of a particular class which will give the offeror control of the company,
• an internal re-organisation whereby shareholders are invited to approve a share-for-share exchange, or
• a demerger whereby shareholders are invited to approve the exchange of their existing ordinary shares for a new denomination of ordinary shares plus shares in the newly-created company which is to be demerged.