Taxes Consolidation Act 1997 Schedule 12A paragraph 13

Basic requirements for scheme shares

Paragraph 13 of Schedule 12A sets out the requirements that scheme shares must meet in order to qualify for an approved profit sharing scheme, and identifies the only type of restriction on such shares that is permitted beyond those applying to all shares of the same class.

• Scheme shares must be fully paid up, not redeemable, and not subject to any restrictions other than those attaching to all shares of the same class or an authorised restriction under subparagraph (2).
• A restriction in the company's articles of association requiring directors or employees to dispose of their shares on ceasing to hold that position is an authorised restriction and will not disqualify the shares.
• A similar restriction requiring a non-participant (such as a former employee) who acquires scheme shares to dispose of them on acquisition is also permitted.
• These exceptional restrictions are only authorised where the disposal is by way of sale for money on terms set out in the articles, and the articles contain general provisions requiring any person disposing of shares of the same class to sell on the same terms.