ETASSUM36120 - Schedule 3 SAYE option schemes: Exchange of options: Equivalent options

Paragraph 39(3) requires the new options to be ‘equivalent’ to the old options, but relating to shares in a different company, provided they satisfy paragraph 18(b) or (c). This means that there must remain a ‘control’ link, either directly or through a consortium, between the company which established the scheme and the company into whose shares the options are to be rolled over.

‘Equivalent’ is not defined in the legislation, but paragraph 39(4) provides that the new options will not be equivalent unless the four tests in sub-paragraphs (a) to (d) are satisfied.

  1. Sub-paragraph (a) relates to the nature of the shares that can be the subject of the new options. The new options must be over shares which satisfy paragraphs 18-20 and 22. It may therefore be necessary to examine the Articles of Association of the company whose shares are to be the new scheme shares, particularly if the new shares are in an unlisted company.
  2. Sub-paragraph (b) relates to the exercise provisions of the new options. The new options must be exercisable in the same manner as the old options and in accordance with the rules of the scheme before the rollover took place. In particular this means that the times and triggers for exercising the new options must be the same as applied to the old options, (ETASSUM36130).
  3. Sub-paragraph (c) relates to the number of shares that will be the subject of the new options. The total market value, immediately before the rollover, of the shares subject to the old options must be substantially the same as the market value of the shares subject to the new options at the date the new options are granted in exchange. It is this requirement which enables the number of shares under the new option to be determined, (ETASSUM36140). Where the old options were granted on or after 17 July 2013, the market value of the shares is to be calculated without regard to any restrictions on the shares.
  4. Sub-paragraphs (d) relates to the price at which the new options may be exercised. The total aggregate exercise price to be paid for the shares by an option-holder under the new options must be substantially the same as the aggregate exercise price relating to the shares which were the subject of the old options. As the number of shares under the new options has already been determined under (c), this requirement enables the price at which the shares may be acquired under the new options, to be determined, (ETASSUM36150).