ESSUM38400 - Supplementary & Defined terms: Group schemes

Schemes can be extended to include subsidiary companies under the control of the company which established the scheme. These are known as “group schemes”. There is no statutory authority for extending a scheme to other companies (CIR v Reed International plc - see ESSUM47960).The scheme organiser company and nominated subsidiaries are referred to as “constituent companies” (paragraph 3(3)).

A list of the constituent companies should be submitted at the time the scheme is approved, and subsequent additions or withdrawals notified to the Employee Shares and Securities Unit by the company which established the scheme. A company’s introduction as a constituent company in a group scheme cannot be backdated to a date before it was formally admitted.

A scheme which is established by a company which is itself a subsidiary company, cannot include as constituent companies its own parent company or fellow subsidiaries.

“Control” has the meaning given in Section 719 ITEPA 2003 and will normally include companies in which the grantor owns more than 50% of the shares. Scheme advisors may accept schemes which also define subsidiary companies by reference to Section 1159 of the Companies Act 2006.