Q&As

If new rights are given to a class of shares in order to assist qualification for entrepreneurs' relief, can there be an impact for enterprise management incentives options?

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Published by a ³ÉÈËÓ°Òô Share Incentives expert
Published on: 16 November 2018
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Background to issue

In Budget 2018, the government introduced two new tests to be met throughout the minimum qualifying period in addition to the existing tests (holding 5% of the ordinary share capital of the company and 5% of the voting rights) in order to qualify for entrepreneurs' relief (ER). The two new tests require the claimant to be:

  1. •

    beneficially entitled to at least 5% of the profits available for distribution to the equity holders of the company, and

  2. •

    beneficially entitled on a winding up of the company to at least 5% of the assets of the company available for distribution to equity holders

However, subsequent to this, on 20 December 2018, the government tabled further amendments in order to add an alternative test under which the claimant must be entitled to 5% of the proceeds in the event of a sale of the whole of the company (see: Share Incentives

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Shares definition
What does Shares mean?

The CA 2006 merely provides that a share is a share in the company's share capital. A company's share capital comprises the number of shares issued by it to investors either on or after incorporation. Those investors then become the shareholders in the company. A shareholder’s shares are their personal property. By contrast, the assets of a company are owned by the company itself. Owning shares does not entitle a shareholder to any property rights in the company's assets.

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