| Financial Benefits to Encourage Employee Participation |
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which did not apply when one class of shares was converted into another. The charge on conversion survives even though the growth in value charge does not. |
The condition for the charge to arise is that the person has acquired employment related securities,51 and the securities carry a right or a possible entitlement to convert them into securities of a different description.52 The charge no longer arises simply on conversion. Instead it arises first—under section 439(3)(a)—where on the conversion the beneficial entitlement to the new securities accrues to an associated person. Other parts of section 439 apply to the disposal of the securities by an associated person otherwise than to another associated person, the release of the right to convert or the receipt by an associated person of any benefit in money or money’s worth other than the new securities. Remembering the definition of associated person in section 421C one can see that the charge arises whether the person is the person who acquired the employment relates securities in the first place, the employee or any relevant linked person.53 |
The charge is on the market value of the new securities following conversion less any deductible amounts.54 There is, however, an exception for the entire conversion of shares of one class only (‘the original class’) into shares of other class only (‘the new class’).55 In order to take advantage of this exception the company must be employee-controlled by virtue of these shares immediately before the conversion. Alternatively, the majority of the company’s shares of the original class must at that time have been held otherwise than by or for the benefit of directors or employees of the company.56 There is a further exception from |