Income Tax (Earnings and Pensions) Act 2003 section 37

Holding period: power of participant to direct trustees to accept general offers etc.

Section 37 sets out the circumstances in which a participant in a Schedule 2 Share Incentive Plan may instruct the plan trustees to deal with their free shares during the holding period, particularly in relation to takeovers, corporate reorganisations and general offers.

• A participant may direct the trustees to accept an offer for their free shares where the acceptance results in a new holding that is treated as the same asset for capital gains tax purposes
• A participant may direct the trustees to agree to a transaction affecting their free shares if it arises from a compromise, arrangement or scheme applying to all ordinary shares (or all shares of the relevant class) in the company, or to shares held by a class of shareholders not defined by their employment or SIP participation
• A participant may direct the trustees to accept an offer of cash, other assets or qualifying corporate bonds for their free shares, provided the offer is a general offer made to holders of shares of the same class or in the same company and is conditional on the offeror gaining control of the company
• Where a takeover offer triggers a right under section 983 of the Companies Act 2006 to require the offeror to buy the participant's free shares, the participant may direct the trustees to exercise that right