ETASSUM36140 - Schedule 3 SAYE option schemes: Exchange of options: Number of shares subject to new options

The requirement of paragraph 39(4)(c) is that the aggregate market value of shares under the old and the new options shall be equivalent at the time the rollover/exchange takes place. This fixes the number of shares under the new options. Where the old options were granted on or after 17 July 2013, the effect of any restrictions on the shares is to be disregarded in calculating their market value.

The aggregate market value of shares under the old and the new options must be determined using a methodology agreed by HMRC. This is a matter about which Shares & Assets Valuation (SAV) must be consulted except when market values are determined in accordance with the following paragraph;

It is acceptable for the offer price to be taken to be the same as the market value for the purposes of paragraph 39(4)(c) where:

  • both the target company and the acquiring company are listed on a recognised stock exchange, and
  • the takeover offer is on a share for share basis (with or without a cash alternative).

This applies whether the exchange takes place while the offer remains open, during the further period when the acquiring company is bound or entitled to acquire the shares of a minority on the offered terms, or subsequently during the periods referred to in paragraph 38(3) (ETASSUM36110). HMRC’s agreement is not required where the company uses this method for determining the market value.

SAV must always consider the company’s proposals where:

  • either or both companies are not listed on a recognised stock exchange (including AIM companies), or
  • there is a mandatory cash element in the offer.

Where the agreement of SAV is required, the need to make multiple applications can be avoided by companies arranging for all exchanges to take place on the same date or within a very limited period.

SAV is normally prepared to agree a value for the exchange based on the value at the date letters are sent to the option-holders advising them of the offer, with this value being held for 21 days. Option holders can then be invited to exchange their options on those terms, all options being exchanged on the one date, based on the agreed market values for that date.