ETASSUM36030 - Schedule 3 SAYE option schemes: Exchange of options: Rollover of options

Paragraph 38 provides a facility to ‘roll over’ tax advantaged options when a company whose shares are being used in a Schedule 3 SAYE option scheme is taken over by another company whose shares satisfy paragraphs 18-20 and 22. Had the new corporate structure been in place when the scheme was first approved or when it was initially registered as a Schedule 3 SAYE option scheme, it would have been possible for such shares in the new ‘parent’ company to have been used as scheme shares under paragraph 18(b).

The provisions of paragraph 38 will not apply, or be applied, in all takeover situations. For example they:

  • will not apply if either the participant or the acquiring company does not agree to the release of the old options (e.g. a listed acquiring company may decide that the target company’s shares should continue to be used if they still satisfy paragraphs 18-20 and 22),
  • cannot be applied if the shares of the acquiring company do not themselves satisfy paragraphs 18-20 and 22.

An exchange of options must always be by agreement, so a mandatory exchange of options is not acceptable, for example in the circumstances of an internal reorganisation where the majority of shareholders are the same in both the scheme company and the acquiring company. It would be acceptable for ‘old options’ to lapse in these circumstances if the participant chose not to accept the proposed exchange.

The effect of the provisions is that:

  • the old options over the shares in the company which is the target in the takeover, are exchanged for “equivalent” options over shares in the new ‘parent’ company,
  • for the purposes of Section 519 the new options are regarded as having been granted when the old options were granted,
  • the original share option scheme remains in being, continuing to be operated by the original scheme organiser (the company which established the original scheme) which is still responsible for completing the annual returns for the scheme,
  • all that changes is the shares which are the subject of the options granted under the original scheme.

There is no need for the acquiring company to have a Schedule 3 SAYE option scheme of its own.