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g a z e t t e
j u l y / a u g u s t 1986
will be eligible to participate in the scheme on similar
terms (paragraph: 5(2)). These are minimum provisions
so part-time employees or employees with less than 5
years service may participate.
There may be a variance in the number of shares
appropriated by reference to the levels of remuneration,
length of service or other similar factors. Thus, an
employee with fewer than or more than 5 years service
may participate on similar terms and have a different
quantity of shares appropriated to them. It might be
noted that the wording 'similar factors' is not defined —
thus, for example, attendance record could be used as
an appropriation measure. Further, one might suggest
that the Revenue may only approve objective factors so
that one section of the workforce would not be
unreasonably excluded.
There are certain catagories of individual ineligible to
participate in such schemes, namely:—
- where the individual was not an employee or a
director of the company or a participating
company at the date of appropriation or within
the preceding 18 months (paragraph 9)
- where in any year of assessment if in that year the
individual has had shares appropriated to him
under another approved scheme established by the
company concerned or associated companies
(paragraph 10)
- where the individual has at the date of appropria-
tion (or at any time within the preceding 12
months) a material interest in a close company
which is:—
- the company whose shares are to be appro-
priated; or
- a company which has control of that company
or is a member of a consortium which owns that
company whose shares are to be appropriated.
For the purposes of this legislation 'close company'
and 'material interest' has an altered meaning from the
Corporation Tax Act, 1976 (paragraph 11).
Shares
Part II of the Third Schedule lays down conditions
attaching to such shares. Shares must form part of the
ordinary share capital of:—
- the company concerned
- a company which has control of the company
concerned; or
- a company which either is or has control of a
company which is a member of a consortium
owning either the company concerned or a
company having control of that company and
beneficially owns not less that 3/20th of the
ordinary share capital of the owned company
(paragraph 5).
Ordinary share capital means all the issued share
capital of the company excluding capital which pays
dividends to its holders at a fixed rate who have no other
right to share in the profits (s.50(l)). The shares must
be:—
- shares of a class quoted on a recognised stock
exchange
- shares in a company which is not under the control
of another company; or
- shares in a company which is under the control of
a company (other than a close company — if
resident in the State) whose shares are quoted on
a recognised stock exchange (paragraph 6).
Exchange control approval from the Central Bank
may be necessary if overseas security is involved.
- fully paid up
- not redeemable
- not subject to any restrictions other than those
which attach to all shares of the same class (i.e.,
value at date of appropriation) (paragraph 8).
These rules are formulated in the above form so that
first, the participants should receive shares in a
company with which their employment has some
connection albeit distant in some circumstances and,
secondly, that the participants should share in the
profits and losses of the company whose shares they
own.
Dividends
The trustees receive the dividends on the total of the
shares held by them. The dividend due by each
employee is then transferred to him. The employee
receives a statement containing the amount of dividend
and tax credit. Dividends are taxed in the normal way.
Accordingly, the rate of tax will depend on an
employee's earnings.
Disposal of Shares
Every participant in approved schemes must:—
- permit his shares to remain in the hands of the
trustees throughout the period of retention
(s.52(l)(a)). This is a period of 2 years or an
earlier date if it is due to the employee ceasing
employment due to his:—
- injury, disability or redundancy
- reaching 66 years
- death
- not assign, charge or dispose of his interest in the
shares during the said period (s.52(l)(b))
- not direct the trustees to dispose of his shares
before the release date except by sale for the best
possible price (s.52(l)(d))
- if directing the trustees to transfer the ownership
of his shares before the release date (i.e. 5th
anniversary) pay the trustees before such transfer,
a sum equal to standard rate income tax of the
appropriate percentage (see below), on the locked-
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