ETASSUM35340 - Schedule 3 SAYE option schemes: Requirements relating to share options: Exercise rights: Death of an option holder
If the option-holder dies before the bonus date, exercise must be permitted at any time within 12 months of death and rights unexercised at the twelve month point must lapse.
If the option-holder dies in the six months after the bonus date the scheme rules must provide a right of exercise only in the twelve months following the bonus date.
The length of the option exercise period is a fixed 12 month minimum period regardless of any other option exercise provision in the scheme, except (i) where the other exercise provision relates to the company passing a resolution for voluntary winding-up, in which case a 12 month option exercise period may be impossible to provide and (ii) where the option holder is a US taxpayer.
When a participant ceases employment before the bonus date the option will normally lapse unless cessation is for a ‘good leaver’ reason (ETASSUM35370), a cash takeover (ETASSUM35500), or for a transfer of employment out of the group (ETASSUM35420). Where the option has not lapsed and the participant dies during the six month period allowed for exercise, the scheme must provide that the option exercise period does not end until 12 months after:
- the date of death, if the employee died before the bonus date, or
- the bonus date, if the employee died after the bonus date.
It is not permitted for personal representatives to make further contributions under the savings contract before the option is exercised.
The following table sets out what happens in the various circumstances where a participant dies:
| Employment status | Death occurs | Exercise provision |
|---|---|---|
| As employee | Before bonus date | 12 months from date of death |
| As employee | Within 6 months of bonus date | 12 months from bonus date |
| Ceased for ‘good leaver’ reason | Before bonus date & within 6 months of cessation | 12 months from date of death |
| Ceased by reason of cash takeover | Before bonus date & within 6 months of cessation | 12 months from date of death |
| Ceased by reason of transfer out of group | Before bonus date & within 6 months of cessation | 12 months from date of death |
| Ceased before death for ‘good leaver’ reason | After bonus date & within 6 months of cessation | 12 months from bonus date |
| Ceased by reason of cash takeover | After bonus date & within 6 months of cessation | 12 months from bonus date |
| Ceased by reason of transfer out of group | After bonus date & within 6 months of cessation | 12 months from bonus date |
| Ceased for any other reason | After cessation | Options would normally lapse on cessation so then there would be no right to exercise |