Income Tax (Earnings and Pensions) Act 2003 section 537

Alterations of share capital for purposes of section 536

Section 537 defines the types of share capital alteration that count as disqualifying events under the Enterprise Management Incentives (EMI) scheme, potentially affecting the tax-advantaged status of EMI share options.

• An alteration that affects (or would affect) the value of option shares — through creating, varying or removing rights, or imposing, varying or removing restrictions on shares — is a disqualifying event.
• An alteration that increases the market value of the option shares is also a disqualifying event if it is not made for genuine commercial reasons, or if boosting the share value is a main purpose of making it.
• References to restrictions or rights relating to shares cover those imposed or conferred by any contract, arrangement, or in any other way.
• These rules apply specifically for the purposes of section 536(1)(b) and (c), which deal with disqualifying events arising from changes to a relevant company's share capital.