Income Tax (Earnings and Pensions) Act 2003 section 538

Share conversions excluded for purposes of section 536

Section 538 sets out when a conversion of shares under an EMI option does not count as a disqualifying event for the purposes of section 536.

• A share conversion is not a disqualifying event if it converts all shares of one class into one other class and meets one of two additional conditions.
• The first condition is that the majority of the original class shares were not held by or for the benefit of directors, employees, or associated companies immediately before the conversion.
• The second condition is that the company was employee-controlled through holdings of the original class shares immediately before the conversion.
• Definitions of director and employee are broad, covering current, prospective, and former holders of those roles.