CTM81090 | Groups & consortia: groups - entitlement to profits or assets available for distribution: option arrangements

CTA10/S173 and S174

The J Sainsbury decision mentioned in CTM81085 established that arrangements affecting the ownership of shares were not within CTA10/S171. CTA10/S174 brought such arrangements within Part 5 Chapter 6. The provision refers to arrangements affecting the ownership of shares as ‘option arrangements’.

It ensures that, if at any time in the relevant accounting period (CTM81005) ‘option arrangements’ exist, the rights and obligations of the equity holders are calculated as though ‘option rights’ became effective at that time (CTM81095).

Option arrangements

‘Option arrangements’ mean arrangements of any kind, whether or not in writing,

• by virtue of which there could be a variation in the percentage entitlements of any of the equity holders in a company to profits or assets in a winding-up, and

• which could result from the exercise of option rights.Option rights

  ‘Option rights’ means:

• rights to acquire shares or securities in the company, or

• rights to require a person to acquire shares or securities in the company.For the purpose of option rights, shares or securities:

• exclude restricted preference shares and normal commercial loans (CTM81010),

• include any other shares or securities in the company whether or not issued before the arrangements came into existence.