ETASSUM31020 - Schedule 3 SAYE Option Scheme: General requirements: Cash features

A feature of a scheme which provides scope for cash to be paid to participants instead of the shares which they have a right to acquire does not comply with the requirements of Schedule 3 ITEPA.

Scheme rules are often silent on the scope for making cash payments. Where offers of cash are made to scheme participants and are referred to in other documents being sent to the scheme participant by the operator, the question arises whether the offer of cash is to be considered to be part of the Schedule 3 SAYE option scheme.

Whether an offer of cash is part of the scheme depends on by whom and to whom it is made:

• An offer of cash to current option-holders, made by the grantor of the option or by any of the companies which participate in the scheme (for example as compensation for not being able to adjust options to the desired extent following a company reorganisation), is a feature of the Schedule 3 SAYE option scheme and unacceptable for the purposes of paragraph 5,
• an offer of cash to current option-holders which comes from outside the scheme (for example, offers of cash made by ‘predator’ companies in a takeover bid in return for the cancellation of options) is not a feature of the Schedule 3 SAYE option scheme for the purposes of paragraph 5 (see below),
• an offer of cash after the options have been exercised (i.e. to ex-participants - perhaps as some form of compensation) is not a feature of the Schedule 3 SAYE option scheme, whoever it is made by, or
• an offer of cash to enable employees to exercise their options would be a feature of the Schedule 3 SAYE option scheme; it would not be an acceptable feature, as the exercise price under such scheme is intended to be met by the repayment of the savings contract.

There is no objection to general documents issued by scheme companies to scheme participants making reference to cash cancellation offers which have been made from outside the scheme. For example, it is a requirement of the City Code on Takeovers and Mergers that target companies in a takeover bid must obtain competent independent advice on the offers or proposals made by the bidder, and make the advice, and the recommendations of the Board of the target company, known to the shareholders and option-holders.