Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Share option definition

What does Share option mean? A share option is a contractual right to buy (and less commonly to sell) shares at a fixed or formula-based exercise price within a stated period or on specified events. In practice it is a call option over shares, granted either by the company (over unissued shares) or by an existing shareholder (over issued shares). The option gives the holder a right, not an obligation, to acquire the shares; if not exercised before expiry it lapses. The term is descriptive rather than defined in statute or case law, although particular employee share option schemes are defined for tax...

CSOP rollovers on takeovers and reorganisations under ITEPA 2003 Schedule 4: eligibility, equivalence, timing and pitfalls (UK)

Published by a LexisNexis Share Incentives expert

Practice notes

The requirements for a company share option plan (CSOP) rollover are intricate and technical. This note will explore:

what a CSOP rollover is
why a CSOP rollover might be used
when a CSOP rollover can be applied
the eligibility tests that must be met for a CSOP rollover
the timing constraints for a CSOP rollover
the consequences of issuing replacement options
how selective and partial rollovers operate
frequent misconceptions and errors around CSOP rollovers

What is a CSOP rollover?

CSOP legislation permits the grant of replacement options to existing optionholders after a takeover of the scheme company (whose shares were under option), in a way that carries across the favourable tax treatment of the original CSOP options into the new awards. The replacement CSOP options must be equivalent to the original awards, but instead relate to shares in the acquiring company. While the expression “rollover” is widely used, the legislation in fact describes a “release” of the old options in return for the grant of new options. Scheme rules should adopt the same terminology and refer to “releases”. See Precedent: CSOP rules...

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Web page updated on 21/05/2026

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