Income Tax (Earnings and Pensions) Act 2003 section Schedule 4 paragraph 26

Exchange of options on company reorganisation

Section Schedule 4 paragraph 26 allows a CSOP scheme to provide for participants to exchange their existing share options for new options when a company reorganisation results in another company acquiring control of the scheme company.

• When an acquiring company takes control of a scheme company, participants can agree to release their old share options in exchange for new ones granted by the acquiring company
• Control can be obtained through a general takeover offer, a court-sanctioned compromise or arrangement, a binding non-UK reorganisation arrangement, or compulsory acquisition rights under the Companies Act 2006
• Shares already held by the person making the offer, or a person connected with them, are excluded when determining whether a general offer covers the whole share capital or all shares of a class
• The agreement to exchange options must be made within specified time limits, generally six months from the date control is obtained or the relevant event occurs, depending on the method by which control was acquired