ETASSUM41180 - Schedule 4 Company Share Option Plan (CSOP): General: Limit on value of shares

The requirement of paragraph 6 is that on the date of grant (or an earlier date agreed with ESSU) the aggregate market value (MV) of the shares to be acquired by exercising an option under the scheme or any other Schedule 4 CSOP scheme established by the scheme organiser or associate company must not currently exceed or further exceed £60,000 (£30,000 prior to 6 April 2023). In relation to options granted on or after 17 July 2013, the effect of any restriction on the shares is ignored in calculating their MV.

For the purposes of testing an individual’s participation limit for an intended grant of options, the scheme rules must require all subsisting options held by him which were granted under the Schedule 4 CSOP schemes of certain connected companies to be aggregated.

The options to be aggregated are those subsisting options already granted to the individual under the Schedule 4 CSOP scheme in question and any other Schedule 4 CSOP scheme established by the same company or by a company associated with it.

It is important that the testing of the limit is always in relation to the MV at the date of grant, for example:

1/1/2006 20,000 shares @£2 = £40,000 (MV per share =£2)

1/1/2007 16,000 shares @£1.25 = £20,000 (MV per share =£1.25)

Total MV of all approved options = £60,000

The MV of the share has gone down between the two dates of grant; however there is no re-calculation of the value of the grant for the purposes of testing the statutory limit.

‘Associated company’ is defined in paragraph 35(1). Companies are associated if one of the two has control of the other, or both are under the control of the same person or persons (individuals or companies). An association counts if it exists now, or existed at any time within the previous 12 months.

Options which have been exercised, surrendered or have lapsed do not need to be taken into account for the purposes of the statutory limits on an individual’s participation in paragraph 6. Companies may, however, choose to provide otherwise in their scheme rules - perhaps to meet the requirements of their institutional investors or other shareholders.

It should be noted that unexercised Schedule 4 CSOP options will need to be taken into account for EMI purposes in order to ensure that the EMI limits are not exceeded (see ETASSUM41230).