ETASSUM33050 - Schedule 3 SAYE option schemes: Shares to which schemes can apply: Control of the scheme company

The scheme shares may be in:

  • the company which is establishing the scheme (described in the legislation as the ‘scheme organiser’, but referred to in this manual as the ‘scheme company’)- see below,
  • a company which controls the scheme company - see below,
  • a consortium company (see ETASSUM33060).

If the scheme company is under the control of another company it can only use its own shares in the scheme if it is:

  • listed on a recognised stock exchange (paragraph 19(1)(a)), or

  • under the control of a company:

  • whose shares are listed on a recognised stock exchange, and
  • which is not a close company, or would not be a close company if resident in the UK (paragraph 19(1)(c)), or
  • shares in a company, which is subject to an employee-ownership trust (paragraph 19(1)(ba)).

The scheme shares may be in a company which controls the scheme company. ‘Control’ for this purpose is defined as having the meaning given in Section 719 ITEPA. This refers to the definition in section 995 ITA 2007, where ‘control’ means having the power to secure that the affairs of the scheme company are conducted in accordance with its wishes.

Control will not necessarily be obtained simply because of the size of a share holding in the scheme company. Shareholders cannot ordinarily dictate to or overrule the Board of Directors in respect of matters of management entrusted to them. So a necessary element of control is (by voting powers or other powers) to have economic control of the company and the power of a person to secure that the affairs of the company are conducted in accordance with their long term wishes. The ability to determine the composition of the Board, or failing that, to appoint directors who have the power to impose their decisions on directors appointed by any other shareholder are indicators of control.Information about control in accordance with CTA2010/S450, S451 and S1069(3) is at CTM60210.

If the company which controls the scheme company is itself under the control of another company, the shares in the intermediate or ultimate parent companies may be used as scheme shares, provided that the company whose shares are to be scheme shares ‘controls’ the scheme company, within the meaning of Section 719 ITEPA. Shareholdings and voting rights in any company and also powers conferred by documents regulating any company may have to be considered for this purpose.