The relevant legislation permits schemes to provide for the
option exercise price to be varied to take account of a variation
in the share capital of which the scheme shares form part.
It is essential that The Employee Shares and Securities
Unit (ESSU) considers allrequests for agreement of adjustment of options.
Your advice as to the amount of that adjustment will not be
expected to take into account whether or not that particular
adjustment is permitted under the scheme rules. ESSU will consult
you for advice if there is any doubt about the nature of the event
giving rise to the potential adjustment.
CSOP and SAYE schemes normally reflect the variations allowed by
the relevant legislation by providing that the adjustment to be
made to the option exercise price is that which the auditors
confirm to be fair and reasonable. This is subject to the
requirement that no adjustment shall be made without the prior
approval of HMRC. ESSU gives that approval based on the advice of
SAV on the particular adjustments proposed.
ESSU normally approve provisions that permit adjustments to
the
number of shares as well as the option exercise
price, provided they require the prior approval of HMRC before
adjustments can be made.
In practice, adjusting only the option exercise price will
usually be inadequate. It will normally be necessary, if an
equitable result is to be achieved, for the number and even the
description (but not the
class - there is no authority for this) of shares
subject to an option to be varied also. In SAYE schemes, in
particular, where the aggregate exercise price must equate as
nearly as possible to the expected final repayment under the
savings contract, you will need to adjust the number of shares if
the option exercise price is being adjusted.
You need to be aware that you cannot agree an exercise price
which is less than nominal value.
Adjustments to reflect bonus issues are normally straightforward and will not usually be referred to SAV.
| Additional Guidance: SVM150000 |
