Income Tax (Earnings and Pensions) Act 2003 section 42

Period within which replacement option must be granted

Section 42 sets out the time limits within which a new share option must be granted in order to qualify as a replacement option following a company reorganisation.

• A new option must be granted within a specified period to qualify as a replacement option, with the deadline depending on the type of company reorganisation involved.
• Where control is obtained through a takeover offer, the replacement option must be granted within six months of the offeror gaining control and any conditions of the offer being satisfied.
• Where an acquiring company obtains control through other means (such as a share exchange or scheme of arrangement becoming unconditional), the replacement option must be granted within six months of the acquiring company obtaining control of the company whose shares are subject to the old option.
• Where the reorganisation involves a compulsory acquisition and the acquiring company is bound or entitled to acquire shares, the replacement option must be granted during the period for which that obligation or entitlement continues.