Share Schemes 2005/06: An Overview Please click on the links below to find out more about the different share schemes on offer: Company Share Option Plan ("COSOP") Broadly, under such a Plan, an employee is given the right to acquire, by subscription or purchase, a fixed number of shares in the future, at a price set at the outset. The price to acquire the shares must be the market value of the shares at the date of grant. It is a discretionary scheme so that the Company can choose to whom it grants options under the Scheme provided the employees or directors concerned meet certain criteria. Save As You Earn Scheme ("SAYE") An SAYE scheme is a combination of a savings contract and a tax-efficient share option scheme. An employee is given a right to buy a certain number of shares at a future date at a fixed price (known as a "share option"). The price for shares is fixed at the time the option is given to the employee and can be at a discount of up to 20% of the market value of the shares at that time. The shares may only be bought using amounts the employee has saved under the SAYE savings contract, together with the bonus payable under the savings contract Enterprise Management Incentive Scheme ("EMI") Share Options Enterprise Management Incentives ("EMI") is a tax favoured share option scheme introduced by the Finance Act 2000. Due to its inter-action with CGT taper relief, it is an extremely valuable relief. Share Incentive Plan ("SIP") On 31 October 2001 the Government relaunched its Employee Share Ownership Plan 2000 ("ESOP 2000") under the new name of SIP. The aim of SIP is to provide benefits for employees in the nature of shares (rather than options over shares) in their employer company or that company's ultimate holding company to give them a continuing stake in the company and to allow employees to benefit from the success they have helped to create. Unapproved Share Option Schemes An Unapproved Scheme works in a similar way to a COSOP except that certain statutory requirements which must be complied with for a COSOP to obtain Inland Revenue approval do not apply. For instance, there is no limit as to the aggregate exercise price of the options which can be granted and the employees and directors to whom options are granted will not have to meet the same criteria.
Long-term Incentive Plans ("LTIPS") Under an LTIP, an employee is awarded a deferred right or opportunity to receive shares at no (or only nominal) cost to himself, the absolute rights to which are conditional upon the attainment of performance targets relating to the company's performance and continuous employment over a certain period of time. Employee Priority Offers Where a company makes a public offer of shares it can encourage employees to acquire such shares in two ways. Phantom Share Option Scheme A phantom share option scheme is an arrangement under which an employee is granted a right to call upon his employer to pay him a cash sum calculated as the amount of the difference between the exercise price (usually the market value at the time of grant) and the market value of a fixed number of shares at the time of exercise. Flourishing Shares Schemes A flourishing share scheme is designed to incentivise employees by giving them a share in the equity of the company through the holding of a special class of shares known as "flourishing shares".
Company Share Option Plan ("COSOP") Broadly, under such a Plan, an employee is given the right to acquire, by subscription or purchase, a fixed number of shares in the future, at a price set at the outset. The price to acquire the shares must be the market value of the shares at the date of grant. It is a discretionary scheme so that the Company can choose to whom it grants options under the Scheme provided the employees or directors concerned meet certain criteria. If the value of the shares increases between the time of the grant and the time of the exercise, employees will be able to benefit if shareholders have seen a growth in their investment. The COSOP is likely to be a useful and perhaps essential recruitment tool to attract the best candidates and, to provide an effective lock-in for those executives based on the increasing value of their options. What are the requirements for Inland Revenue approval? the exercise price for each share under option must be equal to the current market value of the Company's shares; options can be granted subject to performance conditions; options can only be granted up to an aggregate exercise price of 30,000 per option holder; options normally lapse if an option holder leaves employment with the Company prior to the exercise of the option (other than in compassionate circumstances); options become exercisable on the occurrence of certain pre-ordained events such as a take-over or a disposal of the part of the business in which the optionholder was employed; and the COSOP permits the granting of options over existing shares so that any such shares held by the trustees of an Employee Share Ownership Plan (ESOP) could be "recycled" under the COSOP, thus enhancing the use of these arrangements. How will the options and shares be taxed? Income tax is not chargeable when an option is granted. On exercise, income tax is not normally chargeable on the increase in value of shares between grant and exercise if the following conditions are satisfied: 3 years have passed between grant and exercise; or less than 3 years have passed between grant and exercise and exercise is following cessation of employment by reason of redundancy, retirement, disability, or injury and exercise is within six months of the date of cessation. If an option is exercised within three years of the date of grant (other than following cessation of employment in the circumstances set out above) then income tax will arise on the difference between the market value of the shares at the date of the exercise and the option exercise price. If, at the time of exercise, the shares are quoted or are otherwise "readily convertible" into cash (meaning broadly that they are subject to any arrangement the effect of which is or will be to enable the employee option holder to sell his shares, although not necessarily immediately) the income tax will be accountable for by way of PAYE and both employee's and employer's national insurance contributions arise ("NICs"). The employer should ensure that the employee has indemnified the employer for this PAYE and NICs (typically under the scheme rules). An employee may legally indemnify his employer in relation to the employer's NIC liability arising on exercise. On disposal of the shares, option holders will be charged to capital gains tax ("CGT") on the difference between the market value on the date of disposal and the exercise price of the shares.
The employee should, however, be able to make use of his CGT annual allowances ( 8,500 for the tax year 2005/06). Only gains in excess of this amount will be subject to capital gains tax. Due to taper relief the employee can also reduce the amount of the gain depending on how long the shares have been held. After holding the shares for two or more years, the employee will pay CGT on only 25% of the gain on sale, or 50% of the gain if shares are held for greater than one year but less than two years.
Save As You Earn Scheme ("SAYE") An SAYE scheme is a combination of a savings contract and a tax-efficient share option scheme. An employee is given a right to buy a certain number of shares at a future date at a fixed price (known as a "share option"). The price for shares is fixed at the time the option is given to the employee and can be at a discount of up to 20% of the market value of the shares at that time. The shares may only be bought using amounts the employee has saved under the SAYE savings contract, together with the bonus payable under the savings contract (see below). The employee does not have to use his option to buy shares. If he does not use his option he can take the proceeds of his SAYE contract in cash. In order to obtain tax advantageous treatment for the employees who receive shares under the SAYE scheme, it is necessary to register the scheme with the Inland Revenue. In order to do so certain requirements must be fulfilled. What are the requirements for Inland Revenue approval? The main requirements which the SAYE scheme must satisfy in order to obtain Inland Revenue approval are as follows:- The scheme must extend to all employees with more than 5 years' service. The company may, if it wishes, also include employees with less than 5 years' service in the scheme. The option granted to an employee must be linked to an SAYE savings contract which is entered into by the employee when the option is granted. The savings contract provides for the employee to save a fixed amount per month for a fixed number of months. At the end of the this time the employee will be entitled to a bonus payment which, in respect of savings prospectuses issued on or after 24 January 2004, will be equivalent to 1.7 monthly contribution in the case of a 36 month option, or 5.4 monthly contributions in the case of a 60 month contract. It is possible to leave the savings in the SAYE account under a 60 month contract for a further 24 months. This will entitle the employee to receive a higher bonus of 10.4 monthly contributions at the end of that period. The shares used in the scheme must have the same rights as other ordinary shares. The employee will not be entitled to receive dividends or be able to vote at company meetings until he has actually exercised the option and bought the shares. The employee will have a 6 month period at the end of his savings contract during which he may exercise his option. If the employee leaves the company which established the scheme, or any company under its control to which the scheme extends, other than in compassionate circumstances, his option will normally no longer be exercisable. However, if he leaves in compassionate circumstances or if the company by which he is employed is taken over (see below) he may exercise his option within 6 months of leaving the company but only to the extent the savings under his savings contract allow. How will the shares be taxed? There will be no tax to pay when the option is granted to an employee under the SAYE scheme. There will be no income tax to pay when the employee receives shares on the exercise of his option. The only circumstances in which he will be taxed are if he exercises his option within 3 years of receiving it in the event of a take-over of the company or because the business in which the employee worked was sold.
The employee will be liable to capital gains tax on the subsequent sale of his shares. This charge will be based on the difference between the market value of the shares at the date of sale and the price paid for the shares by the employee on the exercise of his option. The employee should, however, be able to make use of his capital gains tax annual allowance ( 8,500 for the tax year 2005/06). Only gains in excess of this amount will be subject to capital gains tax. The employee can also reduce the amount of the gain depending on how long the shares have been held. After holding the shares for two or more years the employee will pay CGT on only 25% of the gain on sale, or 50% of the gain if shares are held for greater than one year but less than two years. There is no National Insurance liability in respect of options granted under an Inland Revenue Approved SAYE Scheme.
Enterprise Management Incentive Scheme ("EMI") Share Options Enterprise Management Incentives ("EMI") is a tax favoured share option scheme introduced by the Finance Act 2000. Due to its inter-action with CGT taper relief it is an extremely valuable relief. The aim of EMI is to help "small, high-risk" companies attract and retain employees. The salient points to note as regards EMI are as follows. EMI will permit the grant of tax favoured options to eligible employees by "qualifying companies". The overall limit on the market value of shares that can be placed under option is 3 million (market value assessed at the date of grant). An employee will be "eligible" provided he, together with his associates, does not control 30% or more of the ordinary share capital of the company and (in the case of close companies) is not entitled to more than 30% of the assets of the company on a winding-up. The employee must also be employed by the company or group for a least 25 hours a week, or, if less, for at least 75% of his working time. Time spent not working due to injury, ill-health, disability, pregnancy, childbirth, maternity / paternity leave, reasonable holiday entitlement and garden leave is included as committed working time for these purposes. Each option can be over up to 100,000 of shares (valued as at the date of grant). Where, at the time an EMI option is granted to an employee, he holds a current (unexercised) Inland Revenue approved "executive" share option granted by the same employer company or a member of that group of companies, the market value of the shares the subject of that option at its date of grant counts towards the 100,000 threshold. There is no tax charge on the grant, or on the exercise of the option (unless the option exercise price is less than market value as at the date of grant, in which case there is an income tax charge at the time of exercise on the difference between the market value on grant the exercise price). For capital gains tax purposes the employee is treated as having acquired the shares at the date of grant of the option so that taper relief, which effectively reduces the gain which is charged to tax according to the length of time the asset has been held, is available from that date. For disposals of assets acquired on or after 6 April 2002, CGT will be payable on 50% of the gain after one year and 25% after two years. No national insurance contributions will be payable provided options are capable of being exercised and are in fact exercised within ten years of the date of grant. A company will qualify if it satisfies the following conditions: - it is not under "control" of another company, or another company and persons connected with that company, at the time of grant - note that this test can be breached if the company has, say, one minority corporate shareholder which, with one or more other shareholders, "acts together to secure or exercise" 'de facto' control of the company; - it does not have "gross assets" at the time of grant of the options of more than 30 million;
- it is a company carrying on or intending to carry on a trade which is not an excluded trading activity or is the holding company of a trading group which satisfies the various conditions; and - the qualifying trade must be carried on wholly or mainly in the UK. Excluded trades consist broadly of dealing in land or financial instruments, dealing in goods other than for wholesale or retail distribution, banking and finance, leasing or receiving royalties or licence fees (unless they are attributable to the exploitation of intellectual property created by the company), legal and accountancy services, property development, farming, forestry, hotels, nursing homes or the provision of facilities for other business. No advance Inland Revenue approval is necessary. It is possible to seek advance assurance from the Inland Revenue that the company is (on the basis of information supplied) a qualifying company. Advance assurance is not available in relation to other matters, such as whether the individual is an eligible employee. There is, however, a notification procedure and the option will not qualify unless this is complied with. The company must notify the Inland Revenue of the grant of the option within 92 days and supply certain other information. The notification must include a declaration as to its accuracy from the company secretary or one of the company's directors and a declaration from the employee concerning the working time condition. The Inland Revenue then has 12 months from the end of the 92 day period to make enquiries. Once the enquiry is completed the Inland Revenue must issue a "closure notice". If this is negative the company or the employee can appeal against the decision within 30 days. An option can cease to be qualifying if any one of certain disqualifying events occur, such as the company becoming a subsidiary of another company or otherwise coming under the control of another company or the company ceasing to meet the qualifying trade requirement. Where a disqualifying event occurs and the option is not exercised within 40 days of the event an income tax charge arises on exercise based on the increase in value following the disqualifying event. Also, taper relief is restricted. It does not matter if the company's shares are quoted or not.
Share Incentive Plan ("SIP") On 31 October 2001 the Government relaunched its Employee Share Ownership Plan 2000 ("ESOP 2000") under the new name of SIP. The aim of SIP is to provide benefits for employees in the nature of shares in their employer company or that company's ultimate holding company to give them a continuing take in the company and to allow employees to benefit from the success they have helped to create. The key features of the SIP are as follows: Employers are able to give, without any tax (income tax or NIC) charge arising, free shares to employees up to a value of 3,000 each year. Employers offering free shares will have to offer a minimum amount of free shares to each employee on "similar terms" but between that minimum amount and the scheme maximum sum some or all of the shares can be awarded to employees for reaching performance targets. Employees may also be given the right to acquire, out of pre-tax salary, shares ("partnership shares") up to a maximum of 1,500 a year or 10% of salary (whichever is lower). When calculating "salary" for these purposes, employers can decide whether all or part of an employee's "salary" will be used. Employers can match, without any tax (income tax or NIC) charge arising, partnership shares by giving employees up to two free shares for each partnership share that the employees buy. In addition, the plan may provide that up to 1,500 of dividends received in respect of plan shares may be reinvested in shares, tax free, each year. All shares acquired under this scheme will have to be held in trust for five years to obtain the full benefits. While shares are held in trust, any income or gains arising, such as dividends, will be free of tax if used by the trustees to acquire additional shares. Where an employee takes any shares out of the trust within 3 years, the employee will be chargeable to income tax on the amount equal to the market value of those shares at the date they come out of the trust. Where the shares can be readily converted to cash, the employer will be obliged to operate PAYE and account for NIC's. Where an employee takes out of the trust shares which have been held there for 3 years or more but less than 5 years the tax charge is by reference to (where appropriate) the lower of the salary used to buy the shares and their market value. Where the shares can be readily converted into cash, the employer will have to operate PAYE and account for NIC's. Where an employee takes out of the trust shares which have been held there for 5 years or more there will be no charge to income tax or NICs For CGT purposes shares will be treated as having been acquired by the employee at market value on removal from the trust which will also form the start date for CGT taper relief purposes. In any subsequent disposal by the employee the normal CGT rules will apply. For disposals after 6 April 2002, CGT will be payable on 50% of the gain after one year and 25% after two years. Companies will get corporation tax relief for the costs they incur in providing shares for employees to buy to the extent that such costs exceed the employee's contributions. For further information on share incentive plans please see the Inland Revenue website page by clicking here.
Unapproved Share Option Schemes An Unapproved Scheme works in a similar way to a COSOP except that certain statutory requirements which must be complied with for a COSOP to obtain Inland Revenue approval do not apply. For instance, there is no limit as to the aggregate exercise price of the options which can be granted and the employees and directors to whom options are granted will not have to meet the same criteria. How are options taxed? Employees Grant of option There is no income (or other) tax charge on grant provided exercise cannot be more than 10 years after the date of grant. This is the case irrespective of (i.e., however low) the option price. NB this only applies to Case 1 (i.e. UK resident and ordinarily resident) employees - a tax charge does arise on grant if the employee is not both resident and ordinarily resident for the tax year of grant if and to the extent that the option has a value on grant (this is more likely, but not exclusively, the case if the option exercise price is lower than market value at grant). Exercise of option On exercise income tax will be charged on the difference between the market value of the shares at the date of exercise of the option and the option exercise price. Again, this applies only to Case 1 employees. If, at the time of exercise, the shares are quoted or are otherwise "readily convertible" into cash (meaning, broadly, that they are subject to any arrangement the effect of which is or will be to enable the employee option holder to sell his shares, although not necessarily immediately) the income tax will be accountable for by way of PAYE and both employee's and employer's national insurance contributions arise ("NICs"). The employer should ensure that the employee has indemnified the employer for this PAYE and NICs (typically under the scheme rules). An employee may now legally indemnify his employer in relation to the employer's NIC liability arising on exercise. Where an employee was not both resident and ordinarily resident for the tax year of grant, so that the Case 1 rules do not apply, on exercise of the option a charge to income tax may nevertheless arise if the employee is resident or ordinarily resident in the tax year of exercise. The charge which may arise will be on the difference between the then market value and the exercise price of the option (section 162 ICTA). However, it is arguable that such a charge does not properly arise. Sale of shares On the sale of shares there will be a charge to CGT (for individuals who are resident or ordinarily resident in the UK in the tax year of disposal) on the difference between the price received for the sale of the shares and the market value on the date of exercise of the option. However, the option holder may on sale have the benefit of his (and possibly his spouse's) annual exemption (currently the individual's first 8,500 of gains - for tax years commencing 6 April 2005) and "taper relief" (CGT is payable on 50% of the gain if the shares are held for between one and two years and 25% of the gain if they are held for two years or greater) and may be able to "roll-over" his gain into certain unquoted shares. The shares are "readily convertible into cash" (see above), national insurance contributions ("NICs") will be payable on exercise by reference to the difference between the then value of the shares and the option exercise price.
Long-term Incentive Plans ("LTIPS") Under an LTIP, an employee is awarded a deferred right or opportunity to receive shares at no (or only nominal) cost to himself, the absolute rights to which are conditional upon the attainment of performance targets relating to the company's performance and continuous employment over a certain period of time. The shares in the company would initially be acquired and retained by the trustees of an employee trust for the benefit of certain selected participants and released accordingly, usually between a time period of three and five years, depending on satisfaction of the performance targets. When the shares are ultimately transferred to the executive, he then receives the full value of those shares, not merely, as in the case of share options, the growth in value over the option period. What is the tax treatment of awards made under an LTIP? The tax treatment of awards made and benefits derived under an LTIP are determined according to the general rules of income and capital gains tax. The general tax position in relation to awards made to Case 1 (i.e. UK resident and ordinarily resident) employees is as follows: There is no income (or other) tax charge on the employee when the initial award is made. When the executive acquires the shares from the trustee (i.e. when the award or right becomes unconditional) an income tax charge will arise. PAYE and NICs will be payable in the normal way, provided that the shares are ''readily convertible into cash''. There will be no further charge to income tax on any future growth in value of the shares and when the employee sells the shares the normal CGT rules will apply. Points to Note LTIPs are less dilutative than share options. Less shares are needed to give an employee the same level of gain. However, the value of the shares must be written off through the company's profit and loss account over the restricted period). A corporation tax deduction may be available in respect of accounting periods commencing 1 January 2003
Employee Priority Offers Where a company makes a public offer of shares it can encourage employees to acquire such shares in two ways. It can arrange for priority to be given to employees in the allocation of shares among applicants. This is normally achieved by allowing employees to receive the full number of shares for which they have applied even though the offer is over subscribed or, where the numbers of shares applied for are scaled down, by allowing an employee to receive more than a member of the public who has applied for the same number. The company can also offer shares for sale to employees at a discount to the price at which they could be purchased by members of the public. What is the tax treatment of such priority offers? There is an exemption from income tax on the benefit which a director or employee receives by being entitled to an allocation of shares in priority to members of the public. The exemption only applies where there is an "offer to the public" and where the priority allocation does not exceed 10% of the class of shares subject to the public offer. For capital gains tax purposes, if the shares are acquired on a priority application at the same price as that paid by members of the public, then a director or employee is treated as acquiring them with a base cost which is equal to the price paid. If the shares are purchased at a discount then the base cost of the shares is the price the employee or director pays for them plus the amount of the discount chargeable to income tax.
Phantom Share Option Scheme A phantom share option scheme is an arrangement under which an employee is granted a right to call upon his employer to pay him a cash sum calculated as the amount of the difference between the exercise price (usually the market value at the time of grant) and the market value of a fixed number of shares at the time of exercise. The cash sum paid forms part of the employee's emoluments and is charged to income tax and national insurance contributions. The employer must account to the Revenue for income tax on the sum due when the employee first becomes entitled to receive it and not, if later, when it is actually paid. A phantom share option scheme will usually provide that the employee has no entitlement to receive the payment unless and until he serves a notice of exercise at a time when the phantom option is capable of being exercised. Shareholder Approval Companies listed on the London Stock Exchange Shareholder approval is needed to implement a phantom share option scheme providing one or more directors of the company is eligible to participate. ABI guidelines on shareholder approval apply to phantom share option schemes as they do to other share incentive schemes. Unlisted companies It is unlikely that shareholder approval is needed although the company's articles of association and any shareholders' agreement may provide otherwise. What are the accounting and cashflow implications? The employing company will need to accrue through its profit and loss account against its liability under options granted under a phantom share option scheme on an annual basis. In addition, the exercise of a phantom option will hit the Company's cashflow in a way that an option to acquire shares will not. It is not possible to pass the employer's national insurance liability to the phantom option holder as is now the case with share options.
Flourishing Shares Schemes A flourishing share scheme is designed to incentivise employees by giving them a share in the equity of the company through the holding of a special class of shares known as "flourishing shares". The arrangement is structured so that employees can take advantage of the extremely favourable capital gains tax regime for gains made in respect of private companies. Under this arrangement the selected employees are invited to participate in the scheme to subscribe for the flourishing shares at a fixed price. The fixed price will usually be what is considered to be market value for the shares. The market value will reflect the limited initial rights attaching to the shares and the fact they are a minority shareholding in a private company. As stated above, the flourishing shares initially carry very limited rights, usually no more than a right to receive a payment on a winding up once the other shareholders have received over a fixed amount. However, once the shares "flourish" they will enjoy enhanced rights (i.e. such that they rank equally with the ordinary shares) and therefore become more valuable. The shares will only flourish when performance conditions attached to the shares are fulfilled and, in some cases, if the employee pays an additional sum of money. This additional amount (if applicable) will be specified in the articles of association and may be increased yearly. What are the tax implications? On initial subscription for the shares and on the flourishing of rights Provided that when the employee subscribes for the shares he pays market value for them, no income tax will be payable at that point or when the shares flourish. If the employee subscribes at a price that is less than market value, the discounted element will be subject to income tax at the time of subscription. There should be no tax consequences when (and if) the employee pays any additional required sum upon fulfilment of the relevant performance conditions so that the shares flourish. There should be no national insurance liability for either the employee or the employer in respect of the flourishing shares provided that, broadly, there is no "market" for the shares at the date of subscription. On the disposal of shares Upon disposal of the flourishing shares, the employees will have a liability to tax which should be to capital gains tax ("CGT") rather than income tax. This will be charged on an amount equal to the difference between the proceeds (or deemed proceeds) received upon sale of the shares and the price paid for them (which will be the total of the price paid upon subscription and any additional amount paid in order for the shares to flourish). For the purposes of CGT, the employee should be able to make use of his unutilised annual exemption ( 8,500 for the tax year 2005/2006). Business asset taper relief should also be available to reduce the amount of CGT payable. For disposals on or after 6 April 2002, the employee will pay CGT on only 25% of the gain on sale if the shares have been held for two years or more (i.e. for a higher rate tax-payer this effectively reduces his tax burden from 40% to 10%), or 50% of the gain if the shares have been held for greater than one year and less than two years. The holding period commences on the date of subscription for the flourishing shares as opposed to any subsequent date when the shares flourish.
What are the requirements of institutional shareholders for approval of share incentive schemes? Companies listed on the London Stock Exchange are required, in most circumstances, to obtain shareholders' approval prior to the adoption of an employee share scheme or a longterm incentive scheme. When deciding whether to approve a scheme, institutional shareholders are likely to take into account guidelines produced by Institutional Investor bodies, most notably those produced by the Association of British Insurers (the "ABI"). The ABI represents the collective interests of the UK's insurance industry and its member companies account for more than 20 per cent of investments in the London Stock Market. The ABI guidelines promote the following key principles: Challenging performance conditions should govern the vesting of awards or the exercise of options under any form of long term share-based incentive scheme (including a phantom share option scheme). They should be measured relative to an appropriate defined peer group or other relevant benchmark. The chosen criteria should demonstrate the achievement of a level of performance which is demanding in the context of the prospects for the company and the prevailing economic environment in which it operates. The criteria should be disclosed and the reasons for selecting these, together with the overall policy for granting conditional share or share option incentives, should be fully explained to shareholders. Institutional shareholders generally expect the participation under incentive schemes (including cash schemes) to be phased, with awards being made on an annual or otherwise regular basis. The cost of share incentive schemes should be disclosed in order that shareholders can assess the likely benefits of the proposed scheme against the cost. Information on the potential value of awards due to individual scheme participants on full vesting and the expected value of the award at the outset, bearing in mind the probability of achieving the stipulated performance criteria, should be given. The ABI promotes a three year performance measurement period. It also recommends that options should not be exercisable within three years from the date of grant nor later than ten years after grant. Where a scheme provides that entitlements may be satisfied by the issue of new shares, then the scheme rules should provide that, when aggregated with awards under all of the other company's schemes, commitments to issue new shares should not exceed 10% (or 5% if it is an executive (discretionary) scheme) of the issued ordinary share capital of the company in any rolling 10 year period.