Finance Act, 1986
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SECOND SCHEDULE Approved Share Option Schemes | ||
Interpretation | ||
1.—(1) In this Schedule— | ||
“associated company” has the same meaning as in section 102 of the Corporation Tax Act, 1976 ; | ||
“control” has the same meaning as in section 158 of the Corporation Tax Act, 1976 ; | ||
“full-time director” has the same meaning as in section 8 of the Finance Act, 1978 ; | ||
“grantor” has the meaning given by paragraph 2 (1); | ||
“group scheme” and, in relation to such a scheme, “participating company” have the meanings given by paragraph 2; | ||
“market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ; | ||
“qualifying employee” in relation to a company, means an employee of the company (other than one who is a director of the company or, in the case of a group scheme, of a participating company) who is required, under the terms of his employment, to work for the company for at least twenty hours a week; | ||
“scheme shares” has the meaning given by paragraph 6; and | ||
“shares” includes stock. | ||
(2) Subsection (3) of section 103 of the Corporation Tax Act, 1976 , shall have effect in a case where the scheme is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection. | ||
(3) Section 157 of the Corporation Tax Act, 1976 , shall apply for the purposes of this Schedule. | ||
(4) For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than three-quarters of the other company's ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital. | ||
Approval of schemes | ||
2.—(1) On the application of a body corporate (in this Schedule referred to as “the grantor”) which has established a share option scheme, the Revenue Commissioners shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule, but shall not approve it if it appears to them that there are features of the scheme which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares. | ||
(2) An application under subparagraph (1) shall be made in writing and contain such particulars and be supported by such evidence as the Revenue Commissioners may require. | ||
(3) Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a “group scheme”. | ||
(4) In relation to a group scheme “participating company” means the grantor or any other company to which for the time being the scheme is expressed to extend. | ||
3.—(1) If, at any time after the Revenue Commissioners have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Revenue Commissioners under paragraph 14, the Revenue Commissioners may withdraw the approval with effect from that time or such later time as the Revenue Commissioners may specify. | ||
(2) If an alteration is made in the scheme at any time after the Revenue Commissioners have approved the scheme, the approval shall not have effect after the date of the alteration unless the Revenue Commissioners have approved the alteration. | ||
4. If the grantor is aggrieved by— | ||
(a) the failure of the Revenue Commissioners to approve the scheme or to approve an alteration in the scheme, or | ||
(b) the withdrawal of approval, | ||
it may, by notice in writing given to the Revenue Commissioners within thirty days from the date on which it is notified of the Revenue Commissioners’ decision, require the matter to be determined by the Appeal Commissioners, and the Appeal Commissioners shall hear and determine the matter in like manner as an appeal made to them against an assessment and all the provisions of the Income Tax Acts relating to such an appeal (including the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law) shall apply accordingly with any necessary modifications. | ||
Eligibility | ||
5.—(1) The scheme shall not provide for any person to be eligible to participate in it, that is to say, to obtain and exercise rights under it— | ||
(a) unless he is a full-time director or a qualifying employee of the grantor or, in the case of a group scheme, of a participating company; | ||
(b) at any time when he has, or has within the preceding twelve months had, a material interest in a close company within the meaning of Part X of the Corporation Tax Act, 1976 , which is— | ||
(i) a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme; or | ||
(ii) a company which has control of such a company or is a member of a consortium which owns such a company. | ||
(2) Notwithstanding subparagraph (1) (a) the scheme may provide that a person may exercise rights obtained under it despite having ceased to be a full-time director or a qualifying employee. | ||
(3) In determining whether a company is a close company for the purposes of subparagraph (1), sections 94 (1) (a) and 95 of the Corporation Tax Act, 1976 , shall be disregarded. | ||
(4) In determining for the purposes of this paragraph whether a person has or has had a material interest in a company, subsection (6) of section 97 of the Corporation Tax Act, 1976 , and paragraph (ii) of the proviso to section 103 (3) of that Act shall have effect with the substitution for the references in those provisions to 5 per cent. of references to 10 per cent. | ||
Scheme shares | ||
6. The scheme shall provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as “scheme shares”) which satisfy the requirements of paragraphs 7 to 11. | ||
7. Scheme shares shall from part of the ordinary share capital of— | ||
(a) the grantor; or | ||
(b) a company which has control of the grantor; or | ||
(c) a company which either is, or has control of, a company which— | ||
(i) is a member of a consortium owning either the grantor or a company having control of the grantor; and | ||
(ii) beneficially owns not less than three-twentieths of the ordinary share capital of the company so owned. | ||
8. Scheme shares shall be— | ||
(a) shares of a class quoted on a stock exchange; or | ||
(b) shares in a company which is not under the control of another company; or | ||
(c) shares in a company which is under the control of a company (other than a company which is, or would if resident in the State be, a close company within the meaning of section 94 of the Corporation Tax Act, 1976 ) whose shares are quoted on a stock exchange. | ||
9. Scheme shares shall be— | ||
(a) fully paid up; | ||
(b) not redeemable; and | ||
(c) not subject to any restrictions other than restrictions which attach to all shares of the same class. | ||
10.—(1) In determining for the purposes of paragraph 9 (c) whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him. | ||
(2) Subparagraph (1) does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the authority of the Council of the Stock Exchange in November, 1984. | ||
11.—Except where scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class shall be held by person other than— | ||
(a) persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the grantor or any other company and not in pursuance of an offer to the public; | ||
(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a); and | ||
(c) in a case where the shares fall within paragraph 8 (c) and do not fall within paragraph 8 (a), companies which have control of the company whose shares are in question or of which that company is an associated company. | ||
Transfer of rights | ||
12.— The scheme shall not permit any person obtaining rights under it to transfer any of them but may provide that if such a person dies before exercising them, they may be exercised after, but not later than one year after, the date of his death. | ||
Share price | ||
13.— The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme shall be stated at the time the right is obtained and shall not be less than the market value of shares of the same class at that time or, if the Revenue Commissioners and the grantor agree in writing, at such earlier time or times as may be provided in the agreement, but the scheme— | ||
(a) may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part, and | ||
(b) shall provide that, if it subsequently transpires that the price so stated is less than the market value of the shares of the same class at that time, the said price shall be increased to that market value. | ||
Information | ||
14.— The Revenue Commissioners may by notice in writing require any person to furnish them, within such time as the Revenue Commissioners may direct (not being less than thirty days), with such information as the Revenue Commissioners think necessary for the performance of their functions under this Schedule, and as the person to whom the notice is addressed has or can reasonably obtain, including in particular information— | ||
(a) to enable the Revenue Commissioners to determine— | ||
(i) whether to approve a scheme or withdraw an approval already given; or | ||
(ii) the liability to tax, including capital gains tax, of any person who has participated in a scheme; and | ||
(b) in relation to the administration of a scheme and any alternation of the terms of a scheme. |