ESSUM37500 - Approval of schemes: Withdrawal of approval

Paragraph 42 contains the HM Revenue and Customs authority to withdraw approval from schemes in certain circumstances. HM Revenue and Customs has delegated its authority to withdraw approval to the ESSU Manager.

Paragraph 42(1) gives HM Revenue and Customs power to withdraw approval from SAYE share option schemes if a “disqualifying event” occurs in relation to the scheme.

A disqualifying event occurs if:

• any of the requirements of Parts 2 - 7 cease to be met
• an alteration is made to a “key feature” of the scheme without prior approval
• the scheme organiser fails to provide information requested under paragraph 45.

In any of these circumstances HM Revenue and Customs has discretion to withdraw approval from the date of the event or from a later date, or not at all.

The view of the Board's Solicitor (SLR 1888/90 in connection with the ICI and other schemes (which provide for adjustments on a demerger)) is that it would be difficult to contend that a requirement had "ceased" to be satisfied, if it had never been satisfied. If this is right it means that if a scheme is mistakenly approved, there is no statutory basis for correcting the mistake.

The principal relevant requirements covered by paragraph 42(1) which may cease to be satisfied are therefore

• whether all features of the scheme are essential or reasonably incidental (paragraph 5)
• the nature of the shares which may be used in the scheme (paragraphs 18 - 22).

In these circumstances paragraph 42(3) protects the interests of option-holders if approval of the scheme is withdrawn, by providing that an SAYE option scheme can be treated as approved at the time of exercise even though the approval has been withdrawn.